{"id":2830,"date":"2023-02-19T16:10:53","date_gmt":"2023-02-19T16:10:53","guid":{"rendered":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/chapter\/learn-it-3-2-2-participating-in-the-global-marketplace\/"},"modified":"2025-05-19T21:14:11","modified_gmt":"2025-05-19T21:14:11","slug":"learn-it-3-2-2-participating-in-the-global-marketplace","status":"publish","type":"chapter","link":"https:\/\/content.one.lumenlearning.com\/introductiontobusiness\/chapter\/learn-it-3-2-2-participating-in-the-global-marketplace\/","title":{"raw":"Learn It 3.2.2: Participating in the Global Marketplace","rendered":"Learn It 3.2.2: Participating in the Global Marketplace"},"content":{"raw":"

Outsourcing and Offshoring<\/strong><\/h2>\r\n

Outsourcing and offshoring are two additional strategies\u00a0that a business can use in order to take advantage of the global market.<\/p>\r\n

\r\n

outsourcing<\/h3>\r\n

Outsourcing<\/strong>\u00a0happens when a business makes an agreement to have an outside party complete part of their business process.<\/p>\r\n<\/section>\r\n

You may be familiar with outsourcing if your college has outsourced the bookstore to a national chain, such as Barnes & Noble or Follett, or if food services are provided by a company such as Marriott or Aramark. Although the employees work on your college campus, they are employed by the external company.<\/p>\r\n

\r\n

offshoring<\/h3>\r\n

Offshoring<\/strong>\u00a0is the actual relocation of a business process from one country to another\u2014typically it's an operational process, such as manufacturing, or sometimes a supporting process, such as accounting.<\/p>\r\n<\/section>\r\n\r\n[caption id=\"attachment_6467\" align=\"alignright\" width=\"350\"]\"Workers Figure 1. The fashion industry in the U.S. commonly outsources manufacturing clothes to places such as this garment factory in Jiaxing, China[\/caption]\r\n\r\n

In the case of offshoring, the employees still work for the company that's offshoring its operations, but instead of working in a facility within the United States, they are located in a foreign country. In general, outsourcing and offshoring are strategies that companies use to try to lower their costs.<\/span><\/p>\r\n

If a business chooses\u00a0outsourcing as a way to engage with the global market, it\u00a0might have a single component part manufactured in, say, Mexico, and then shipped back to South Carolina where the factory workers would use the outsourced part in the assembly of the final product. The business would have a contract with the company making the component part at an agreed-upon price, but it would not have an employer-employee relationship with the workers in Mexico. On the other hand, if the business wants to take advantage of offshoring,<\/em>\u00a0it would move the entire plant from South Carolina to Mexico and hire workers in Mexico who would work directly for the business.<\/p>\r\n

Advantages of Outsourcing and Offshoring<\/strong><\/h3>\r\n

Offshoring and outsourcing are\u00a0both the subject of ongoing heated public debate\u2014both in the U.S. and in other countries. Those in favor assert that these strategies benefit both sides of the arrangement: free trade is enhanced, the destination country gains jobs, and the origin country gets cheaper goods and services.\u00a0Some supporters go further and assert\u00a0that outsourcing and offshoring raise\u00a0the gross domestic product (GDP) and increase the total number of jobs domestically,\u00a0too.\u00a0This claim\u00a0is based on the theory that workers\u00a0who lose their jobs will move to higher-paying jobs in industries where the origin country has a comparative advantage.<\/p>\r\n

Disadvantages of Outsourcing and Offshoring<\/strong><\/h3>\r\n

On the other hand, job losses and wage erosion \"at home\"\u00a0have sparked opposition to offshoring and outsourcing. Many argue that the jobs that are shipped overseas are not replaced by better, higher-paying ones. And it's not just low-skilled workers who are feeling the pain. Increasingly, critics say, even highly trained workers (such as software engineers) with high-paying jobs are finding themselves replaced by cheaper workers in India and China. Some firms, while\u00a0realizing financial gains from lowering their production costs, are finding that offshoring and outsourcing are very costly\u00a0in terms of lack of control over product quality, working conditions, and labor relations. For example, companies like Nike and Apple have come under fire by human rights organizations and consumers over\u00a0reports of worker abuse, dangerous working conditions, and ridiculously low wages. We will explore some of the ethical issues\u00a0raised by offshoring and outsourcing later in the course in the business ethics module.<\/p>\r\n

[ohm2_question height=\"375\"]3815[\/ohm2_question]<\/section>","rendered":"

Outsourcing and Offshoring<\/strong><\/h2>\n

Outsourcing and offshoring are two additional strategies\u00a0that a business can use in order to take advantage of the global market.<\/p>\n

\n

outsourcing<\/h3>\n

Outsourcing<\/strong>\u00a0happens when a business makes an agreement to have an outside party complete part of their business process.<\/p>\n<\/section>\n

You may be familiar with outsourcing if your college has outsourced the bookstore to a national chain, such as Barnes & Noble or Follett, or if food services are provided by a company such as Marriott or Aramark. Although the employees work on your college campus, they are employed by the external company.<\/p>\n

\n

offshoring<\/h3>\n

Offshoring<\/strong>\u00a0is the actual relocation of a business process from one country to another\u2014typically it’s an operational process, such as manufacturing, or sometimes a supporting process, such as accounting.<\/p>\n<\/section>\n

\"Workers
Figure 1. The fashion industry in the U.S. commonly outsources manufacturing clothes to places such as this garment factory in Jiaxing, China<\/figcaption><\/figure>\n

In the case of offshoring, the employees still work for the company that’s offshoring its operations, but instead of working in a facility within the United States, they are located in a foreign country. In general, outsourcing and offshoring are strategies that companies use to try to lower their costs.<\/span><\/p>\n

If a business chooses\u00a0outsourcing as a way to engage with the global market, it\u00a0might have a single component part manufactured in, say, Mexico, and then shipped back to South Carolina where the factory workers would use the outsourced part in the assembly of the final product. The business would have a contract with the company making the component part at an agreed-upon price, but it would not have an employer-employee relationship with the workers in Mexico. On the other hand, if the business wants to take advantage of offshoring,<\/em>\u00a0it would move the entire plant from South Carolina to Mexico and hire workers in Mexico who would work directly for the business.<\/p>\n

Advantages of Outsourcing and Offshoring<\/strong><\/h3>\n

Offshoring and outsourcing are\u00a0both the subject of ongoing heated public debate\u2014both in the U.S. and in other countries. Those in favor assert that these strategies benefit both sides of the arrangement: free trade is enhanced, the destination country gains jobs, and the origin country gets cheaper goods and services.\u00a0Some supporters go further and assert\u00a0that outsourcing and offshoring raise\u00a0the gross domestic product (GDP) and increase the total number of jobs domestically,\u00a0too.\u00a0This claim\u00a0is based on the theory that workers\u00a0who lose their jobs will move to higher-paying jobs in industries where the origin country has a comparative advantage.<\/p>\n

Disadvantages of Outsourcing and Offshoring<\/strong><\/h3>\n

On the other hand, job losses and wage erosion “at home”\u00a0have sparked opposition to offshoring and outsourcing. Many argue that the jobs that are shipped overseas are not replaced by better, higher-paying ones. And it’s not just low-skilled workers who are feeling the pain. Increasingly, critics say, even highly trained workers (such as software engineers) with high-paying jobs are finding themselves replaced by cheaper workers in India and China. Some firms, while\u00a0realizing financial gains from lowering their production costs, are finding that offshoring and outsourcing are very costly\u00a0in terms of lack of control over product quality, working conditions, and labor relations. For example, companies like Nike and Apple have come under fire by human rights organizations and consumers over\u00a0reports of worker abuse, dangerous working conditions, and ridiculously low wages. We will explore some of the ethical issues\u00a0raised by offshoring and outsourcing later in the course in the business ethics module.<\/p>\n