Outsourcing to Developing Countries - Term Paper Example

Outsourcing by Americans in other countries has become quite a popular trend in America with many of the companies setting up their bases in other nation. As a result, all Americans suffers in two ways, as a result; the rates of unemployment are soaring up since firms are opting to opting to open shop abroad where the cost of labor is significantly low, the raw materials easily accessible. All this is made easier by globalization, which has considerably reduced the size of the world an enabled, such activities to occur with ease. America’s economy for instance, is highly dependent on a few Asian nations such as china wherein many of its firms have transferred their production firms for the sake of lower taxes with direct contact of the market for their products such as cars and computer. However, the question of outsourcing has a brought about a lot out a myriad of protests, many of them by them based on the escalating the rates of unemployment. Notably, while there are some Americans that take it as a positive thing many more are scared by what it portends especially those who have lost their jobs to foreigners. According to Howard, in the article “Globalization is an anomaly and its time is running out,” China hosts very many of American china stores and myriad firms all are taking advantage of the cheap labor and raw materials. However, should China involve itself in search for oil from its Arabian neighbors there is potential for conflict. In such a case, America and china may be embroiled in an international row and this might force the investments in America to be closed down (Howard). Furthermore, due to political instability in many developing companies, outsourcing might mean risking losing the investment in time of riots or civil wars and the economy back home would suffer directly as a result of a conflict in which America is neutral. Outsourcing is a two-sided sword, effectively cutting both parties in the arrangement, in America; there are several financial gains especially for the firms involved. They get to form international networks thanks to globalization, obtain cheap labor, wide market and finally they are pay very little tax since some of the countries in which they outsource give foreign investors tax breaks to encourage them and other multinationals to invest therein. In this paper, the issue of outsourcing will be examined closely in order to support, through argument, the position that outsourcing is doing more harm than good to the American economy. Outsourcing carries a myriad of negative financial implication for America; one of these is that it greatly contributes to unemployment in the USA. It is predicted that 949 million will be lost because of outsourcing annually. These losses are not purely business by a huge fraction of it represents lost wages, to Americans, whose former employers have decamped so they can hire cheaper labor. Indirectly, outsourcing causes problems such as;, inability to live comfortably, educate ones children and accumulation of debt , which may culminate in one losing their home or car should the creditors come calling. Since outsourcing often involves non-English speaking countries in Asia such as China, and India, some of the cultural value attached to the goods will be lost. This is because the people who produce goods after outsourcing are no familiar with American culture not having prior experience. As such, some of the goods produced abroad are of poor quality of not culturally relevant to the consumers. Outsourcing in many ways involves relinquishing managerial control over the goods being manufacture, if one outsources say to a company in India, the Indian manger will have full control over the products despite the fact that they may not fully understand the job at hand. At the end of the day, it is better that a firms work is done by the companies own employees who they can monitor and exercise authority. When one outsources, there are several hidden costs involved, this is because they may have to hire a consultant who will charge a huge fee, and then have them hire a vendor which make the whole business trickier (Bucki). Furthermore, contracts must be drawn and be updated regularly to avoid legal battles and make allowance for different legal systems. Thirdly, the vendor company employees may need extra training to increase their competitiveness and competence; therefore, in the end, the investment might end up being just as costly as staying home and keeping the local employees. Offshore outsourcing also comes presents several political issues, this is because and the outsourcer and the outsourced may be negatively affected with the geopolitical situation between their two countries, and this might spill over to their business (“Disadvantages of Outsourcing”). Furthermore, political instability in a region my make it an unhealthy location to do business especially if the guest country is involved in political instability (Bucki). Thus, there is a greater threat of the outsourcer being entangled in the politics of the vendor nation or of at least be influenced by the political unsteadiness in the area (“Disadvantages of Outsourcing”). Aside from the subject of competition, pollution and environmental degradation has become a major issue, when the developed countries outsource to developing countries, they may often construct firms and factories therein. These factories will often contribute highly to the greenhouse emissions in the country and resulting in untold damage to the environment and ecosystem of the host country. Notably, in the near future, countries will realize that other nations such as America are exploiting their environment and this might jeopardize their environment. Outsourcing primarily depends on globalization; however, in the near future, globalization; Howard postulates, it will come to an end due to several economic and geopolitical factors extending to, but not limited to; competition among powers for limited resources as well as a myriad other geopolitical issues may result in its downfall. As such too much investment in foreign countries through outsourcing will portend complications in posterity. Ultimately, while one must concede that outsourcing to developing countries is great for overhead and it opens many opportunities to access markets, labor and raw materials. It is crucial to note that too much investment outside one’s home country amounts to putting resources in environments that one cannot always control of the or even predict. Works Cited Bucki, James. “Top 6 Outsourcing Disadvantages; Outsourcing Disadvantages: Reasons That Outsourcing is Bad for Your Company” About.com. n.d. Web. 30 November 2012. “Disadvantages of Outsourcing.” Rose India. (n.d). Web. 30 November 2012. Howard, James. “Globalization is an anomaly and its time is running out” The Guardian. 2005. Web 30 November 2012. Read More