Jul 4, 2019 in Management

Outsourcing: An Engine for Growth of the US Economy

How does Apple gain lots of profit and hold 137 billion in cash? One of reasons for this is that Apple outsourced its production lines from America to other countries. Outsourcing has become and is expected to continue to be a widely debated issue of American economy for a long time to come. A better understanding of this concept is necessary to facilitate holding discussion that surrounds the issue of outsourcing. As the world economy has continued to grow and become sophisticated, so outsourcing has. Virtually, all sectors of American economy have experienced impacts of outsourcing. At the same time, very heated discourses around the issue have emerged, especially among politicians, economists and businesspeople. Some people think that outsourcing could do harm to US economy and become a fundamental and inevitable part of business of the global business environment.

It is partly caused by a fear of an apparent and transient loss or slippage of jobs and wages. However, there is a number of people who argue that outsourcing can benefit American economy as US companies can earn value from overseas outsourcing. I happen to be one of those people who strongly believe that outsourcing is an advantage for American economy. Overseas outsourcing can be profitable for American economy due to creating more jobs, providing cheaper services and promoting business success. Outsourcing benefits a country by reducing unemployment rate through job creation in other countries. This is well illustrated in the work of Thomas Friedman “30 Little Turtles”. In this piece, Friedman raises a thorny issue of outsourcing. He uses people in their early to mid-twenties in the city of Bangalore in India to show how outsourcing can benefit the society. He writes about people fresh from college who are unable to get a well-paid job despite having requisite skills. Friedman reveals us that jobs that would otherwise be cast aside in North America can be valued and bring a feeling of self-worthiness to people. In fact, he demonstrates that these young professionals are fulfilled with hope and aspiration as a job offers them a launching pad from which to broaden their horizons. For this reason, skilled workers from India, China, Vietnam and Mexico full of enthusiasm have created a great value for American companies, which can also lead to the US economic growth. Another very obvious benefit of outsourcing is the impact it has on an average consumer, that is, it provides less expensive services. The best example of how outsourcing benefits average consumer can be drawn from the medical field. Currently, there is a trend to go overseas to do expensive surgeries.

Outsourcing of medical services provides the poor a fair opportunity for cheap surgeries abroad. In the article titled “Outsourcing Your Heart”, the author named Unmeshtried to investigate a huge increase in costs of medical procedures. He discovered that 30% of Americans are flying out for certain types of surgeries. A notable counter argument to outsourcing of surgeries is that they are risky. Moreover, according to the article “Does Outsourcing Harm America”, many overseas doctors got their degrees abroad. Most notable is the fact that 25% of American physicians got their degrees abroad (Krueger 24). If protectionists just want to impede outsourcing movements by enacting laws that make it difficult or impossible for companies to go abroad, it will further complicate the circumstances for companies struggling to grow or survive. Services will end up being out of reach for most of consumers and an unemployment gap will continue to widen. In fact, outsourcing is being referred to as the third industrial revolution. Consumers have started enjoying its benefits and companies are using outsourcing more than ever before to survive in a highly competitive business environment. Outsourcing in the white collar sector is helping the American economy. Its adoption, therefore, creates a more globally integrated American economy, which apart from strengthening the US promotes growth in economically struggling counties. The benefits that a country can accrue from outsourcing are in fact so many. Outsourcing jobs overseas could help a company to succeed by cutting cost and changing its structure. Generally speaking, outsourcing is one of the best ways to reduce costs, including labor cost, equipment cost and other costs from human resource (HR). For instance, Apple outsourced production to Foxconn, which is a manufactory in Taiwan, which provides cheaper production and assembly costs. In real life, Apple never worried about money spent on paying salaries and plant improvement. The company does not even have a production department in America. Outsourcing production enables Apple to gain huge profits by reducing labor cost and equipment cost to zero. As a matter of a fact, companies love it. Also, companies could change their structure by outsourcing tasks to third companies for a special purpose. For instance, if Apple wants to know how much market share they own in the Chinese market, the best way to do this order a research from a third party company instead of doing it by itself.

Apple knows cost of doing research in China is much higher than the cost of outsourcing this job to a third company. Similarly, it would be unwise to spend a lot of money to establish a new department addressing this short-term issue. Reports from a third party are objective and professionaland can help Apple reposition its products better, change its strategy, and, accordingly, earn a larger profit.What I am saying is that a company can become profitable by outsourcing jobs overseas, which can both reduce costs and avoid changes in the organizational structure of a company. Notwithstanding numerous benefits a country, in this case America, can accrue from outsourcing, resistance against it has been fast and furious. For instance, those opposed to outsourcing argue that outsourcing activities increase unemployment and, in effect, shift jobs to foreign competitors. In addition, companies often outsource production to countries that have unfair trading practices, that is, either the outsourcing destination limits imports or does not protect property rights. Anyway, according to this point of view, the US or any other country will make itself deprived and weakened by off-shoring outsourcing capacity to competitors. Similar reasoning is propagated by French in “Driven abroad: The outsourcing of America”. The author discusses the threat posed to workers in the US. She holds the view that H-1B program has led to shifting of at least 40 million jobs from the US to other countries such as India and Pakistan. He believes the majority of visa applicants under this program are outsourcing companies singling out Wipro Technologies and Accenture of Bermuda (French 33). This is one of reasons, which results in a higher rate of unemployment in America and makes US citizens feel angry and opposed to offshore outsourcing. On the other hand, we see that American economy has significantly grown for the last couple of years, and outsourcing has played an important role for economic growth. Thus, we could not provide jobs only for American citizens.

While the US has an international economy, the country needs an industrial diversity. Admittedly, citizens of the United States are currently faced with a high unemployment rate. I would appeal to the Federal Government to review policies and laws that govern outsourcing of jobs. This appears to be an instrumental step since it would largely reduce the increasing cases of joblessness in America. Most of the jobs would appear retained within the borders of the United States of America. This would also appear fundamental since lucrative jobs that are subcontracted abroad would be occupied by qualified US citizens. It is clear from the foregoing discussion that properly executed outsourcing becomes an engine, which can produce significant results. It creates job opportunities in other countries, provides cheaper services for American citizens and helps companies succeed by cutting costs and restructuring. Of course, offshore outsourcing has negative impacts, but my point of view is that benefits of outsourcing by far outstrip its drawbacks. Any country seeking to improve its position in the global economic environment must embrace this concept and enjoy benefits that come along with the process of outsourcing.

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