Global Outsourcing of Jobs. Pros and Cons


Academic Paper, 2018

11 Pages, Grade: 1


Excerpt

PROS AND CONS OF GLOBAL OUTSOURCING OF JOBS
2
TableofContents
Introduction ... 3
Pros of Global Outsourcing of Jobs ... 4
Cons of Global Outsourcing of Jobs ... 6
Conclusion ... 9
References ... 11

PROS AND CONS OF GLOBAL OUTSOURCING OF JOBS
3
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.

PROS AND CONS OF GLOBAL OUTSOURCING OF JOBS
4
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

PROS AND CONS OF GLOBAL OUTSOURCING OF JOBS
5
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
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Details

Title
Global Outsourcing of Jobs. Pros and Cons
Grade
1
Author
Year
2018
Pages
11
Catalog Number
V430699
ISBN (eBook)
9783668743021
File size
500 KB
Language
English
Tags
global, outsourcing, jobs, pros, cons
Quote paper
Caroline Mutuku (Author), 2018, Global Outsourcing of Jobs. Pros and Cons, Munich, GRIN Verlag, https://www.grin.com/document/430699

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