| Outsourcing: How bad is it? Question by Ignatius. |
| Hello Ignatius, Thank you for your question. Economics asks this fundamental question: "Do you have money?" The key words in this question are money (an accepted medium of exchange in financial transactions) and you (individuals, businesses and government). If the answer to this question is "no", a follow up question might be "why?" If the answer is "yes", a follow up question might be "how do you get the money?" The you that is of primary concern are businesses. Businesses in general conduct their businesses inorder to be profitable because it is from their proits that they get their money. As the market for goods and services has become increasingly competitive and global, it has become necessary for businesses to adopt sound labor strategies inorder to remain profitable because the cost of the labor (the human energy) used to produce the goods and services sold by the businesses, is one of the three main components in the profit equation (the other components are natural resources and capital). What then is the best labor strategy for a business? There is no one -size-fits-all labor strategy. Each business must examine its own labor needs and determine the best strategy that meets those needs. However, if there were to be a generic labor strategy it will be this: The best labor strategy is the strategy that optimizes the cost-benefit analysis of labor. Such an analysis takes into acount the fact that the marketplace for goods, services and |
| labor is increasingly a globalmarketplace (a marketplace without boundaries). Multinational corporations (businesses that operate or and have investments in mny countries)
and transnational corporations (businesses that see themselves as operating in a globalmarketplace) were the first to emgrace this fact and have used it to their advantage since the 1970s. Today many other businesses now embrace the notion of a global labor marketplace.
Outsourcing ( the word now used to represent the geographic re-location of some of the operations of a business inorder to take advantage of lower labor costs) is not entirely a modern phenomenon. In ancient times, empiresoten outsource jobs to various territories in their empire. The desire for efficient commercial operations was the rationale for ancient outsourcing of jobs. Today, the desire for efficiency through lower labor costs remains the single most important reason why businesses outsource jobs. The outsourcing of jobs does not have to be offshore eventhough the term is often used in the context of offshore job relocation. For example, many consultancies exist because of outsourced jobs. Usually, a business decides to outsource jobs after carefully conducting a cost-benefit analysis of labor. The expectation is that in a globalmarketplace where competition is keen, the benefits of reduced labor cost will enable the business to efficiently carryout its operations profitably. By and large, outsourcing of jobs is good for businesses, consumers, the economy of the |
| country where the businesses are domiciled and the economy of the countries to which jobs have been relocated.
Consumers are able to have qulity products and services at favorable prices. Most of the regions that benefit from offshore outsourcing are in developing countries where unemployment is woefully high even among educated workers. The infusion of jobs into many of these regions is always very much appreciated and the goodwill, lasting.
Unfortunately, some workers loose their jobs as a result of outsourcing. Many of these workers can later find employment in a robust economy especially after re-training.
In many scenarios in life, there are innocent victims. Outsourcing is no exception. When examined from a broad business perspertive, outsourcing is not a bad thing. |
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| Let us use our environment respectfully so that future generations would not label us"prodigal ancestors" |
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