Assignment:
Case Study Analysis
Abstract
Within the international economy there has been an influx of offshore outsourcing, in the service industry as well as, the manufacturing industry. Since international business is a competitive market, businesses tend to be innovative while adapting various strategies. Undoubtedly, the increase of outsourcing within the United States, can be associated largely to socioeconomic issues.
Issues for many that include, the belief that outsourcing leads to a decline in employment, a decrease in wages, and a lower standard of living. Throughout this essay, the main focus will be the impact of offshoring on corporations. As well as, the motivational factors for companies who outsource jobs.
Summary
The article focuses on the off-shoring of various corporations, to other countries as a means to increase productivity. These have proved to be important due to several factors; such as the creation of employment, as well as an increase in the manufacturing process. However, when it comes to the services it has been difficult to determine the quantity.
Especially since services are intangible and therefore cannot be measured. Despite all, these new approaches have been made possible. And have resulted in the possibility of ensuring that a better understanding is offered about off-shoring. Measures have been developed to determine the aspect of off-shoring and how various corporations have been affected.
Value Added, Capital Expenditures, and Employment
There are three measures that impact the US multinational corporations. The first measure is the value added. Which measures the total value of the products while subtracting the intermediate inputs that are purchased. The aim of this value is to show the contribution that the firm has done towards the firm about production.
The second measure focuses on employment. Which if it increases, will show that the company has indeed grown. This is because it shows the number of workers that are working in the company; and if the company grows it will need more workers and thus an increase in employment (Bardhan, 2013). The third measure is the capital expenditures which entails the long-term assets, and this includes the machines, laboratories, and even buildings.
The effect of the measures on the U.S multinational corporations has been more advantageous. This is because the records show growth in all the aspects of the expenditures. For instance, when it comes to employment, the number of workers increased from 22% to 28%, on the other hand, the value added increased from 25% to 26%. All this show an increase in productivity, and thus the corporations have been motivated to produce more and even establish more industries. (Gerber, 2011)
Offshore Motivating Factors
One of the factors that motivate firms too offshore, is to ensure that they increase the market and more so the increased productivity. Since the market is new, then the goods need to be of high quality and more so ensure that they fit a particular market. This results in higher income or rather profits and hence another factor for the off-shoring. The firms are also in a position acquire low wages; another aspect is the escape of the labor regulations and thus the cost of production is reduced.
Having availability of labor, raw materials, and the market results in continuous production; which results to the corporations growing. However, these factors will be available and still the regulations will not be involved, this is more so in areas that have already grown. Therefore, productivity increase is not assured at all times; however, several benefits are associated with off-shoring, and thus making many companies establish industries in other countries.
Conclusion
Off-shoring is done for several reasons, for instance, it can be done so as for increase productivity and more so establish more industries in different countries. More so off-shoring enables industries to acquire cheap but quality labor (Winkler, 2009). In some cases, the industries end up being established near the market. This offers assurance to the company that the flow of goods will be efficient.
And also that the production sector will not be affected. Another aspect of off-shoring is to ensure that the products manufactured are specialized so as to have high quality. If the technology used is efficient, then the outcome will be pleasing to the firm at large and the economy of the country will also grow.
References
Bardhan, A., Jaffee, D. & Kroll, C. (2013). The Oxford handbook of offshoring and global employment. New York Oxford: Oxford University Press.
Gerber, J. (2011). Resource Allocation and Income Distribution. In D. Battista, N. K. Seibert, C. Terbush, & N. Fenton (Eds.), International Economics (Fifth, pp. 122-126). Boston, MA: Pearson. Retrieved from https://amzn.com/0135100151
Winkler, D. (2009). Services offshoring and its impact on the labor market : theoretical insights, empirical evidence, and economic policy recommendations for Germany. Heidelberg New York: Physica-Verlag.