Selecting a Locale for Global Outsourcing

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Globalization is the integration of markets through the cooperation of internalization, federal, and state governments with corporate companies to provide low-cost products. Subsequently, outsourcing is an essential part of this globalization. However, what exactly is outsourcing? In its broadest sense, outsourcing is simply contracting out functions that had been done in-house—a longtime U.S. practice (“Globalization: Threat or Opportunity”). When a U.S. manufacture product, and buys material from an intermediate supplier from out of the country rather than producing them in-house, that is what is called outsourcing. Also, when U.S. corporation hires outside contractor out-of-the-country to do U.S. call center services for less labor cost that is outsourcing. When a company deals out its operational task, such as payroll, accounting, and software operations that is outsourcing. To get the clear understanding of outsourcing, I have interviewed IKEA’s U.S. Deputy Retail Country Manager Rob Olson about outsourcing—Swedish goods. Olson stated that IKEA’s outsourcing utilizes the unique talents of different countries and their labor markets to increase trade, which helps better allocate resources in their own countries while getting goods cheaper from others.

The dawn of the outsourcing era. Many large U.S. corporations cultivates outsourcing faster than we can imagine. The trend that began in the late 1970 and picked up speed in the 1900s with the opening trade with China, India, and Eastern Europe (“Outsourcing: What’s the true Impact”). In its broadest sense, outsourcing is simply contracting out functions that had been done in-house—a longtime U.S. practice (“Globalization: Threat or Opportunity”). Subsequently, outsourcing is an essential part of globalization; and it is the combination of markets through the cooperation of internalization, federal, and state governments with corporate companies to produce products on a reduce production cost, and offer services on lower labor cost. When a U.S. manufacture product, and buys material from an intermediate supplier from out of the country rather than producing them in-house, that is what is called outsourcing. Also, when U.S. corporation hires outside contractor out-of-the-country to do U.S. call center services for less labor cost that is outsourcing. When a company deals out its operational task, such as payroll, accounting, and software operations that is outsourcing. Obviously, all of these examples seem to benefit and in favor of the corporations. To get the clear understanding of outsourcing for major corporation perspective, I have interviewed IKEA’s U.S. Deputy Retail Country Manager Rob Olson about outsourcing—Swedish

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Off-shoring is the establishment of business operations outside national boundaries. The process of moving business outside these boundaries is to garner an advantage either through tax breaks, lower wages, lower transportation cost and/or relaxed regulations ("Offshore definition," 2014). Many firms either branch out as a horizontal multinational or vertical multinational. Horizontal multinational’s produce the same good or services as abroad. This foreign direct investment (FDI) is done to strategically place production closer to the target market. Doing this provides advantages surrounding transportation cost while enhancing learning associated with local needs. A vertical multinational is one that fragments a portion of its

At the time of development of globalization there were many concerns about its benefits. However, it has brought significant changes in all segments of human life and International business is one area in which it contributed heavily (Reich, 1998). Companies all over the world are currently formulating their business strategies mainly after considering the trends in global market instead of domestic market. Outsourcing and offshoring are some of the new business principles emerged in this world after the implementation of globalization (Samimi and Jentabad, 2014). The core of these new business concepts is to exploit the business opportunities in overseas countries as much as possible (Samimi and Jentabad, 2014).

The process of globalization has numerous significant effects on countries, organizations, and individuals. These effects can be observed in the quality of products, in their prices, but also in their availability. Because of globalization, numerous companies prefer to expand their business on international level. Some of them outsource some of their processes and activities to cheaper destinations that allow them to reduce their investments.

Abstract This paper will discuss offshore outsourcing and the effects it has on the American worker in a technology environment. We begin with the scope of the problem and how it has changed the economy for better and for worst. Various figures representing miscellaneous data about off shoring will be represented. The topics include the background and nature of offshore outsourcing, reasons for outsourcing, why trading promotes gain, current economic standing from outsourcing, and finally how outsourcing affects wages and employment. In the summary various solutions and ideas are given to propose a change to the industry in hopes that the American worker will be more prosperous from an economic standpoint.Introduction

The ease of offshoring and the benefits it provides makes the idea of global expansion very attractive, but there are still aspects of offshoring that make the concept undesirable to others. There is large opposition to the idea of outsourcing jobs to foreign countries when there is such a high level of unemployment here in America. By 2015 the number of American jobs expected to be lost to outsourcing since 2000 is 3.3 million according to a recent report by Forrester Research (“Outsourcing, PBS”).

The problem of outsourcing is not new, but is still a keen business problem for today’s economy. Both manufacturing and services are able to be sent overseas. Our company is deciding whether or not to outsource, and if so what and how much we should outsource.

In choosing the location to outsource services, the political, educational and economic culture backgrounds should be considered and looked at. Determining a location, even if it is simply a small company with nearly dozen clients service representatives, in another investment that needs to be consider the laws for employment of the individual country where the outsourced employees are localized. Working hours and days may be more limited than in the United States. Conversely, employment laws in some places are less harsh and employees may presume to put in up to 16 hours per day give or take. There are then ethical issues in the time employees are expected to work, the number of break times they are allowed and the working conditions they may work in.

Information and communication technologies are of paramount importance in the process of international outsourcing primarily through the technological advancement surge and demand in recent years. Through the rise of Information technology in recent years, the importance of international outsourcing rose significantly. Outsourcing is the contracting of the management and/or execution of a business function to an outside third-party contractor or subcontractor. Outsourcing typically refers to the contracting of services to an offshore, rather than domestic, company. While outsourcing has been an accepted business practice for

Outsourcing is a technique for companies to reassign specific responsibilities to external entities. There are several motivations for outsourcing including organizational, improvement, cost, and revenue advantages (Ghodeswar & Vaidyanathan, 2008).

Here researchers examined the selected countries like India, china, Brazil and Russia. He mainly found that there is continuous rise in outsourcing revenue for global sourcing, and he found that the BPO will overtake ITO within five years. The latest trend is multi-sourcing. They also found that India is still holding the clear lead as the preferred destination for outsourced services both BPO and IPO. The dollar value of the Chinese industry itself is twice that of India’s (Carmel et al, 2008). The captive centers are wholly owned by subsidiaries located in offshore location that that perform work for parent companies. The captive center use the strategies to change the way of offshore assets are utilized. One of the strategy used by captive center is pursuing a hybrid strategy here the captive outsource units of work to a local service provider. These captive centers still work for the parent companies but they outsource their work or insource the work. By doing these the captive centers can focus on the value adding services and their core services by doing these reduction in the cost can be done. There is also risk associated with these type strategy like non completion of contract, reduction in quality of service or goods

By this contemporary time, outsourcing has become an inevitable trend in the global business and most of multinationals and entrepreneurs are attracted by its privileges. It has been contributing in global transformation of business as a new business strategy and jumped in international popularity since a decade. Although it is a broad phenomenon the objective of this essay is to describe the scope of outsourcing with its major advantages and disadvantages.