How Outsourcing Can Be Good for American Business - Assignment Example

? How outsourcing is and can be good for American business and America as a Whole Teacher December 6, Outsourcing has itsadvantages and disadvantages. The research delves on the reality of outsourcing. Many American companies have transferred their production facilities outside the United States. Some American companies have shifted their manufacturing operations to China, India, Mexico and other countries. Other companies have hired outsourcing companies in other countries to do the jobs that were previously done by the American employees. Many issues cropped up from the outsourcing trend. Whether American residents like it or not, outsourcing has become a glaring reality to the American people. Many American have lost their jobs because of the outsourcing phenomenon. The research delves on the many advantages of outsourcing American jobs to other countries. Outsourcing can be interpreted as good for American business and America as a whole. First, American companies can generate more salary savings. Companies pay the salaries of their employees. When hiring an American employee, the American companies must comply with American labor laws. The labor laws indicate that the company must comply with the minimum wage law. The minimum wage law gives different rates for each job classification. The minimum wage law was instituted in order to prevent the proliferation of abusive sweat shops. The International Labor Organization spearheaded he establishment of minimum wages in many countries. Consequently, different countries have different minimum wages. Likewise, different countries have different wage laws (Neumark 20). The scene shows that the United States minimum wage continued to increase through the years. The minimum wage during 1974 was $2.00 per hour. The minimum wage during 1978 was $ 2.65 per hour. The minimum wage during 1990 was $3.80. The minimum wage during 1997 was $5.15. The minimum wage during 2007 was $5.85. The minimum for 2008 was $6.55. Lastly, the minimum wage during 2009, 3 years ago, was $7.25. The paragraph shows that the American average minimum wage continued to increase through the years (Neumark 25). In addition, the above minimum wage law only requires American companies to pay the minimum wage to workers who are working within the United States territories. The law does not apply or infringe on the minimum wage laws of other countries. China has a lower minimum wage law amount compared to the United States. India has a lower minimum wage figure when compared to the United States minimum wage. Consequently, American companies can take advantage of the other countries lower minimum wage laws (Neumark 25). India continues to be the leading outsourcing destination. The company can hire an India company to do the call center jobs that American can do. With the current information technology advances, people anywhere around the world can communicate with one another live. The use of the internet has ushered in the chat technology and video conferencing technology. Under the new technology, an India call center company can take the calls of the American companies’ online current and future customers. American companies can hire the India companies to sell goods and services of the United States companies’ products online. There are many outsourcing country destinations. South Africa’s outsourcing costs is higher than India’s outsourcing costs. The Russian outsourcing situation indicates there are more language barrier issues when compared to the English speaking India employees. The Czech Republic outsourcing cost is higher than India’s outsourcing cost. Malaysia’s outsourcing employees has lesser talent pools compared to India’s outsourcing source. Mexico’s outsourcing cost is higher than India’s outsourcing cost (Greene 20). The American companies’ customers would not know if the person answering their online or phone inquiries is working within United States or located in another country (Halvey 18). India has been known to be a popular outsourcing nation for call center outsourcing. Consequently, the American companies will save on salary expenses. The American companies will pay the lower salaries of the India call center employees. Consequently, the American companies will be able to pay lower salaries because the India minimum wage laws shows that the Asian country’s employees are paid lower minimum wages when compared to the minimum wages of another country. In fact the Indian employees are paid in the lower valued Indian currency, which is lower than the United States dollar currency’s exchange rate vale. Second, American companies that implement outsourcing business strategies can generate more revenues (Graf 34). With the lower outsourcing countries’ salaries, the company can lower its selling price. The American companies can sell their products to the local United States current and future customers at prices that are lower than the other American competitors. Since the other American competitors in the same market segment have to pay their local American employees’ salaries using American minimum wage provisions, the American competitors cannot offer similarly lower selling prices to the local American customers. Consequently, the American companies that take advantage of the outsourcing industry will be able to sell more products to the price-conscious current and future customers. Economic principles dictate that current and future customers prefer products that have lower prices, when all other are factors are equal. Economic demand principles state that as the price of goods (products) or services increase, the demand for the product decreases (Arnold 55). As the prices of goods and services increase, more and more people will not be able to afford the higher prices of goods (products) or services. Consequently, the company’s current and future customers will be forced to shift to purchasing the competitors’ lower priced products and services. With the implementation of the outsourcing strategy, the American companies can generate more current and future customer demands for their products and services because they can afford to lower their selling prices. The lower selling prices will translate to higher demand for the American companies that take advantage of the outsourcing phenomenon. Third, American companies can generate more gross profits. With the increase in the demand for the American companies’ advantageous use of outsourcing technology, the company’s gross profit will increase. Gross profit is the difference between the company’s total sales and the cost of offering the company’s products and services. With more customers patronizing the lower priced products and services, the company will automatically generate higher gross profits (Bragg 36). Fourth, American companies can generate more net profits (Gitman 390). With the lower prices of the American companies’ products and services, the company will automatically generate more net profits. Profits include the amount paid for the outsourcing country’s operational expenses. The American companies may opt to set up a branch in China. The American companies will hire Chinese local residents to perform jobs that were previously done by American residents in the American Companies’ United States job sites. Consequently, the American companies may have to pay for the electricity expenses, telephone expenses, water expenses, rent expenses, repair expenses, research and development expenses, and other related expenses. With the lower China branch expenses, the American companies can generate lower operational expenses when compared to paying for the same types of expenses of the United States-based branches. The net profit amount is arrived at by subtracting the company’s total expenses from the company’s gross profit discussed in the prior paragraph. Clearly, the American companies will higher net profits by incorporating outsourcing in the company’s management strategies. Fifth, the American companies can help the government generate more taxes (Torgler 70). The company’s selling the products at lower prices will generate higher sales. Consequently, the company will be paying higher taxes. The United States tax laws indicate that the tax amount is arrived at by multiplying the tax rate with the companies’ total revenues. For example, the tax amount is arrived at by multiplying the tax rate by the American company’s generated $100,000 sales figure. When the American business organizations’ sales figure increase to $180,000, the American companies must pay a higher tax amount by applying the same tax formula. The lower demand for the American competitors’ higher priced goods will generate a lower tax amount, reducing the competitors’ tax contribution. Sixth, the American companies can generate more jobs for American residents (Shukla121). The American companies can hire employees who can perform other job types. The company can hire more supervisors. The United States-based supervisors can monitor the activities of the India outsourcing company. The company can hire more experts. The experts will train the Asian Indians the rudiments of how to process or manufacture the American products. The company can hire more marketing personnel. With the strong demand for the company’s products and services, the company can hire more United States –based sales personnel. The sales personnel can open up more stores to sell the company’s very highly salable products. Seventh, the American Companies will save on unexpected accident expenses (Butler 4). The medical cost of the American healthcare is lower than the healthcare facility expenses in the outsourcing country. The cost of paying for the medical bills of the United States employees is higher than the cost of medical bills of the healthcare facilities in India. By moving the company’s production facilities to India or any other country, the American companies will be paying the medical benefits of the outsourcing country’s hospital bills. The doctor in India will be charging lower medical rates to the India patients when compared to the American medical doctor who charges an outpatient department customer in Los Angeles. When the India employee meets an unexpected accident within the India production facilities, the American companies may pay for the medical bills of the outsourcing employees’ medical bills. On the other hand, the American companies will be paying for the higher medical rehabilitation expenses of an employee who meets an accident in the company’s New York production facility. Seventh, the American Companies can venture in other business forms. The American companies can shift from the major part of their business to the marketing sector (Chaston 85). The American companies can replace the production personnel with marketing personnel. With more marketing employees, the company will benefit from the increase in revenues. More sales personnel will generate more sales activities. More sales activities will include approaching more current and future customers. More sales activities include setting up stores in more locations. Many American jobs cannot be outsourced. Many United States customers prefer United States licensed engineers, doctors, lawyers to handle their requests. Many United States customers prefer to hire a United States guidance counselor to hear their sad stories and misfortunes in life. With more sales activities, the company can blaze into new paths (sales territories). The hiring of more sales personnel will translate to more sales. More sales will generate more gross profits. More gross profits will generate more net profits. Last, the statement that outsourcing is not good for American business entities and the United States as a whole indicates a biased concept. Some parties will fight against outsourcing. The displaced United States employees will cry foul when they are given their retrenchment letters because the company has decided to shift their production facilities to China. The complaining employees should never think that it is the end of the world or the end of their life’s work journey. The retrenched employees can set up their own business operations. The retrenched employees can find the next available job. The retrench employee can apply for marketing jobs. Normally, the American companies will open new job categories as they shift their job preferences. Surely, the complaining sectors of United States society can take the outsourcing issues as stepping stone to better career shifts or location transfers. Summarizing the important points of the above discussion, outsourcing has many benefits and disadvantages. Several American companies shifted production facility activities to the cheaper locations in other countries. The outsourcing activities triggered salary expense expenses for the American companies. The outsourcing trend generated more revenues. The outsourcing preference precipitated to higher net profits. However, many American have lost their jobs because of the outsourcing phenomenon, increasing the United States unemployment rate. The affected outsourcing individuals can always shift to better pastures by taking the outsourcing phenomenon as a stepping stone as they find better job priorities. Evidently, outsourcing can be understood as good for American business and America as a whole. Works Cited (Annotated): Arnold, Roger. Microeconomics. New York: Cengage Learning Press, 2010. Economic principles dictate that current and future customers prefer products that have lower prices, when all other are factors are equal. Economic demand principles state that as the price of goods (products) or services increase, the demand for the product decreases. Bragg, Steven. Business Ratios and Formulas. New York: J. Wiley & Sons Press, 2012. American companies can generate more gross profits. With the increase in the demand for the American companies’ advantageous use of outsourcing technology, the company’s gross profit will increase. With more customers patronizing the lower priced products and services, the company will automatically generate higher gross profit. Butler, Richard. Safety Practices, Firm Culture, and Workplace Injuries. New York: Upjohn Press, 2005. The American Companies will save on unexpected accident expenses. The medical cost of the American healthcare is lower than the healthcare facility expenses in the outsourcing country. The cost of paying for the medical bills of the United States employees is higher than the cost of medical bills of the healthcare facilities in India. By moving the company’s production facilities to India or any other country, the American companies will be paying the medical benefits of the outsourcing country’s hospital bills. Chaston, Ian. Boomer Marketing. New York: Taylor & Francis Press, 2009. The American Companies can venture in other business forms. The American companies can shift from the major part of their business to the marketing sector (Chaston 85). The American companies can replace the production personnel with marketing personnel. With more marketing employees, the company will benefit from the increase in revenues. Many American jobs cannot be outsourced. Many United States customers prefer United States licensed engineers, doctors, lawyers to handle their requests. Gitman, Lawrence. The Future of Business. New York: Cengage Learning Press, 2008. American companies can generate more net profits. With the lower prices of the American companies’ products and services, the company will automatically generate more net profits. Profits include the amount paid for the outsourcing country’s operational expenses. Graf, Mitchie. Power Marketing, Selling, and Pricing. New York: Amherst Press, 2009. American companies that implement outsourcing business strategies can generate more revenues. With the lower outsourcing countries’ salaries, the company can lower its selling price. The American companies can sell their products to the local United States current and future customers at prices that are lower than the other American competitors, increasing revenues. Greene, William. Growth in Services Outsourcing to India Preopellant or Drain on the U.S. Economy? New York: Diane Press, 2006. India continues to be the leading outsourcing destination. The company can hire an India company to do the call center jobs that American can do. With the current information technology advances, people anywhere around the world can communicate with one another live. Business Process Outsourcing: Process, Strategies, and Contracts. New York: J. Wiley & Sons Press, 2007. The American companies’ customers would not know if the person answering their online or phone inquiries is working within United States or located in another country. India has been known to be a popular outsourcing nation for call center outsourcing. Consequently, the American companies will save on salary expenses. The American companies will pay the lower salaries of the India call center employees. Neumark, David. Minimum Wages. New York: Technology Press, 2008. American companies can generate more salary savings. When hiring an American employee, the American companies must comply with American labor laws. The labor laws indicate that the company must comply with the minimum wage law. The minimum wage law gives different rates for each job classification. Shukla, Ravinder. Talent Management. New York: Global Press, 2009. American companies can generate more jobs for American residents. The American companies can hire employees who can perform other job types. The company can hire more supervisors. The United States-based supervisors can monitor the activities of the India outsourcing company. The company can hire more experts. The experts will train the Asian Indians the rudiments of how to process or manufacture the American products. Torgler, Benno. Tax Compliance and Tax Morale. New York: Edward Elgar Press, 2007. American companies can help the government generate more taxes. The company’s selling the products at lower prices will generate higher sales. Consequently, the company will be paying higher taxes. The United States tax laws indicate that the tax amount is arrived at by multiplying the tax rate with the companies’ total revenues. The lower demand for the American competitors’ higher priced goods will generate a lower tax amount, reducing the competitors’ tax contribution. Read More