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Like most aspects of business, outsourcing must be assessed according to a cost/benefit analysis. Some of the costs of outsourcing include can include the following:
- Anger by people and politicians in the country from which jobs have been outsourced. Such anger can often lead to retaliation, as in political moves to penalize the practice.
- Bad publicity in the country from which the jobs have been outsourced – publicity that may lead some customers to buy products manufactured (or services rendered) in their home countries.
- Even worse publicity, especially when journalists uncover evidence of abuse or exploitation of overseas workers, as in some recent cases involving Chinese manufacturing done for Apple computers.
- Organized boycotts, as in the long-standing boycotts of Walmart.
- Weakening of economic conditions in the company’s “home” country, which may lead to higher taxes and an atmosphere antagonistic toward business.
- High costs of transporting products from overseas to the company’s “home country.”
Benefits of outsourcing can include the following:
- Higher profits.
- Greater productivity at less cost.
- Opening of new markets for products.
- Employing people who might otherwise be unemployed.
- Helping to transform overseas societies so that they become more prosperous (and, ideally, better markets for one’s own product).
- Competitive advantages.
For all these reasons, outsourcing is a crucial issue for any large business. In the words of William R. King (see source below),
Decisions regarding outsourcing significant functions are among the most strategic that can be made by an organization, because they address the basic organizational choice of the functions for which internal expertise is developed and nurtured and those for which such expertise is purchased. These are basic decisions regarding organizational design.
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