Outsourcing and Multinational Enterprises

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Outsourcing
Jason Lasko
Baker College Online
Caroline Bell
4/24/2011
Abstract

The topic of my research paper will examine the role of outsourcing and the benefits they present for multinational enterprises. There are many people for and against the outsourcing business to different countries other than the domestic nation. Outsourcing gives many people jobs in foreign nations, while taking away work from people in the host nation. International trade has seen more and more outsourcing over the years to keep up with competition. In many cases economic growth of a company or industry requires outsourcing to continue financial growth. The argument amongst most people is that it causes unemployment in the domestic or host nation. Other than jobs being lost domestically there are benefits to outsourcing. Outsourcing entails moving work or labor overseas to increase profit and economic growth. There are benefits to outsourcing regardless if jobs are lost in a certain industry. Generally outsourcing gives a product a cheaper way to be produced giving the consumer the benefit of paying a lower price for a product. There is a loss of jobs up front; however the economy has a way of equalizing by setting a higher demand for more jobs elsewhere. Foreign labor or outsourcing is a great opportunity to increase a developing nation’s economy be providing more work and money into a given country. When jobs are outsourced to other nations, there are more skilled or higher level jobs required to be filled. More often than not are more skilled white collar jobs available for a host nation.

The topic will examine the role of outsourcing and the benefits they present for multinational enterprises. Outsourcing is a strategy that most multinational enterprises or companies look in to for a number of reasons. In the current global economy competition has risen with technology and transpiration advances which of encouraged outsourcing to continue financial growth. The issue is that developed nations have many multinational enterprises that want to continue growth which can happen only if much of the work is outsourced to less developed nations. The labor in more developed nations is much higher because the workers demand higher wages. The benefits of outsourcing for multinational enterprises typically involve much lower labor cost, less tax restrictions, and different labor laws. This can give a company more comparative advantage if the same product can be produced just as efficiently with much cheaper labor. There are benefits to outsourcing which is why multinational corporations outsource; however there are disadvantages to this shift. With the current global economy international companies will look to offshore outsourcing for labor to gain a comparative advantage in a particular industry. Purpose of Study

What is outsourcing and why do multinational enterprises benefit from outsourcing? What are the main reasons a company would resort to offshore labor instead of domestic workers for labor? Outsourcing is when certain aspects of a products manufacture are performed in more than one country (Carbaugh, 2013). With the changing of times communication and transportation became easier and manufacturing increasingly moved to wherever costs were the lowest. With the advances in communication and technology the location of a company does not matter. With this trend even white collar work is being outsourced to nations with much cheaper labor cost. The corporations are able to capitalize on the growth potential being that labor cost is cut to the minimum. “Besides saving money, foreign outsourcing can enable companies to do things they simply couldn’t do before …consumer products company in the United States found it impractical to chase down tardy customers buying less than $1000 worth of goods” until they outsourced their bill collectors (Carbaugh, 2013). The outsourced labor cost made even small...
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