Global Outsourcing of Jobs. Pros and Cons

Academic Paper , 2018 , 11 Pages , Grade: 1

Business economics - Business Management, Corporate Governance

Global outsourcing of jobs is one of the most debated topics in management studies over the years because of the increasing concerns on economics perspective, technological perspective, organizational perspective, political perspective, and strategic perspective. Research shows that the labour market abroad has been increasing over the years thus posing an economic challenge at home, and this is the reason why most of the firms both large and small outsource jobs for instance, professional services in the less expensive labour markets abroad. Most of the leading firms across the globe outsource most of the jobs for instance, professional services so as to achieve a competitive advantage. However, most of these firms are faced with the need to examine the long-term impacts on the business and the society (both pros and cons of global outsourcing of jobs) for competitive advantages.

From an economic perspective, it is argued that cost consideration is the most prominent decision making factor in any organization as most of the managers aim at minimizing the cost of operation so as to achieve a competitive edge in the global market because the goods and services are made competitive in the global market. However, there are those who argue that global outsourcing of jobs results into permanent job loss home, and this has an impact on the society where these firms operate. That said, global outsourcing of jobs needs to be analyzed in details in order to examine the benefits and costs associated with it before making outsourcing options. The research paper will, therefore, analyze some of the pros and cons of global outsourcing of jobs which can be used by managers as they make their outsourcing options for competitive advantage in the global market.

PROS AND CONS OF GLOBAL OUTSOURCING OF JOBS

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TableofContents

Introduction ... 3

Pros of Global Outsourcing of Jobs ... 4

Cons of Global Outsourcing of Jobs ... 6

Conclusion ... 9

References ... 11

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PROS AND CONS OF GLOBAL OUTSOURCING OF JOBS

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Introduction

Global outsourcing of jobs is one of the most debated topics in management studies

over the years because of the increasing concerns on economics perspective, technological

perspective, organizational perspective, political perspective, and strategic perspective.

Research shows that the labour market abroad has been increasing over the years thus posing

an economic challenge at home, and this is the reason why most of the firms both large and

small outsource jobs for instance, professional services in the less expensive labour markets

abroad. Most of the leading firms across the globe outsource most of the jobs for instance,

professional services so as to achieve a competitive advantage. However, most of these firms

are faced with the need to examine the long-term impacts on the business and the society

(both pros and cons of global outsourcing of jobs) for competitive advantage (Ramkishen &

Sadhana, 2010).

From an economic perspective, it is argued that cost consideration is the most

prominent decision making factor in any organization as most of the managers aim at

minimizing the cost of operation so as to achieve a competitive edge in the global market

because the goods and services are made competitive in the global market. However, there are

those who argue that global outsourcing of jobs results into permanent job loss home, and this

has an impact on the society where these firms operate. That said, global outsourcing of jobs

needs to be analyzed in details in order to examine the benefits and costs associated with it

before making outsourcing options (Ramkishen & Sadhana, 2010). The research paper will,

therefore, analyze some of the pros and cons of global outsourcing of jobs which can be used

by managers as they make their outsourcing options for competitive advantage in the global

market.

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PROS AND CONS OF GLOBAL OUTSOURCING OF JOBS

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ProsofGlobalOutsourcingofJobs

The economic benefits of global outsourcing of jobs has been linked with the

comparative advantage theory by David Ricardo which says that trade is as a result of

increasing differences in the factors of production such as technology, and trade is also

beneficial to both trading countries. For instance, the United States and India can benefit from

trade as they exchange goods and services although the cost of the factors of production might

vary in these countries. A country is in a position to achieve a comparative advantage than the

other country if it is able to produce the same goods and services but at a lower cost of

production. That said, most of the countries have been able to achieve a comparative

advantage through global outsourcing of jobs. Some of the multinational companies in the

United States outsource cheap labour from developing economies such as India thus cutting

down their cost of production for competitive advantage (Daniel & Laura, 2010).

Global outsourcing of jobs is increasing in most of the countries, and a good example

is in the US firms whereby research shows that more than 80 US firms both large and small

have outsourced professional services thus resulting into cost advantages as most of the

operational costs have reduced by between 25 to 45 percent annually. A good example is in

the services sector whereby 2 percent of the American jobs have moved offshore. Most of the

companies outsource professional services to enhance efficiency and also reduce costs

(Ramkishen & Sadhana, 2010). An example is the current situation in the US whereby the

economy is struggling to recover from the 2007 global financial crisis which resulted into

deep economic recession not only in the US but also across the globe. You find that most of

the small firms in US offshore jobs because of the increasing inflation and competing wages

so that they can achieve a competitive advantage in the global market. They outsource for

professional jobs globally so as to reduce the cost of labour which is financially beneficial to

the firm. With the increasing labour unions and minimum wage increase in the US, most of

the firms lack the financial back to compete effectively with large firms and this is the reason

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PROS AND CONS OF GLOBAL OUTSOURCING OF JOBS

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why they opt for global outsourcing of jobs which is always cheap. Most of the small firms

have been in a position to compete effectively in the global market because they are able to

access cheap labour from the global market. Economists argue that the payroll is the most

prominent cost for any company whether large or small hence the need to reduce the cost of

labour so as to increase their return on investment. For instance, the average wage of

outsourcing labour from India is approximately $ 11 compared to getting labour in the US at

an average cost of $30. From this research, it is logical to outsource labour so as to increase

the return from their investments (Daniel & Laura, 2010).

Other than the cost advantage associated with global outsourcing of jobs, it also leads

to enhanced trade especially when professional services move from the developed economies

to the most developing economies across the globe. For instance, the outsourcing of expertise

and technological knowhow from the United States to emerging economies such as Australia

has tried to enhance the level of international trade as more resources are exploited from these

economies. The level of competitive advantage of these economies increases as world output

also increases (Business Council of Australia, 2014). Economists argue that international

trade flows are characterized by production sharing facilitated by major advancements in

technological knowhow, information communication, and transportation. Production sharing

which partly involves off shoring technological knowhow so as to take advantage of the

marginal differences in markets, resources, and costs helps enhance international trade. Some

of the developing economies that have benefited from outsourcing jobs globally are Russia,

Poland, South Africa, Israel, Hungary, Australia, Ireland, China, and India. Most of these

countries have witnessed a rapid increase in their exports such as information services and

manufacturing thus enhancing their competitive edge in the global trade (Business Council of

Australia, 2014).

Despite the fact that global outsourcing of jobs from the most developed countries to

the emerging economies lead to the loss of white collar jobs from the developed countries, it

• Grade: 1
• Author: Caroline Mutuku (Author)
• Publication Year: 2018
• Pages: 11
• Catalog Number: V430699
• ISBN (eBook): 9783668743021
• ISBN (Book): 9783668743038
• Language: English
• Tags: global, outsourcing, jobs, pros, cons