Question

Explain why you agree or disagree with the following statement.

Companies in the United States often choose to source items from foreign firms due to cost reasons. Some countries that function as manufacturing hubs have lower wage rates or relaxed working regulations which create cost savings that can be passed on to purchasing companies. Another possible explanation for sourcing items from other companies could be manufacturing efficiency. If a necessary component for a product is manufactured near another component then it may make sense to choose to source the component from that country instead of moving the components around and increasing costs.

Answer 1

Question: Explain why you agree or disagree with the following statement." Companies in the United States often choose to source items from foreign firms due to cost reasons".

Answer: Outsourcing is the process when one takes the service of Foreign partners by delegating them some tasks to get done on behalf of it at affordable rates.Outsourcing thus in a way helps the business to reap the benefit of excellent service providers at distant geographical areas at a relatively low comparative labor cost thus saving financial resources of the company to large extent.

USA being forerunner in globalization & free trade has been the gainer in outsourcing its operations and thus many US Companies often choose to source items to foreign firms due to cost reasons.

The cost reasons which guides US Companies to outsource are as following:

i.Cost Reduction- Cost reduction of operational functions is the leading reason for outsourcing.if significant cost can be saved by outsourcing then the decision is often called "no brainers".Cost is reduced by outsourcing the work in those nations which provides best in class service in congruence to US standards at relatively low labor rates which would be too high if that same work is made to be done by US workforce.

ii.Leverage competency- Outsourcing and offshoring enables US Firms to tap in to and leverage a global knowledge base having access to world class capabilities.

iii.Reserve Fund creation- Outsourcing is undertaken to save cost and provide a buffer capital fund to the company that could be used in a manner that best make profits and expansion to the company in long run.

iv.Focus on strategic activities- Outsourcing is a great way to focus on core competencies for US Firms in which they specialize and to the core basic important specific activities which are crucial for the US Firms to work upon on regular basis and let the outsourced vendors help in those areas that are less significant thus saving both time and money For US Companies.

v.Access External skills- It is not realistic for smaller sized US Firms to have broad service offerings but hiring efficient comparatively cheap labor(in terms of comparative cost) from the country which is best known for providing services at bare minimum and affordable rates to US firms is highly prudent and wise step .

vi.Avoid Capital Investment- No business wants to invest major part of finance on expensive equipment if there utilization rates are not known.In todays world "pay per use" arrangement are much less risky and more financially viable than buying really expensive equipment.

vii.Market access- Outsourcing helps the US firms to expand and gain access to new market areas by making the point of production or service delivery closer to their end users.