Question

In: Economics

In 150 words, give the pros and cons of outsourcing in our economy. How would you...

In 150 words, give the pros and cons of outsourcing in our economy. How would you as a manager balance the need for stockholder profits with the human element of lost jobs?

Solutions

Expert Solution

Pro 1: Outsourcing can increase company profits.

Companies generally decide to outsource the production of goods and services if they think it can save them money and, by doing so, increase company profits. Companies might outsource and/or offshore to a country that has lower labor costs.

Pro 2: Outsourcing can increase economic efficiency.

Sometimes companies outsource because of the opportunity costs of doing or producing a good or service themselves. For example, a CEO of a tech startup might outsource HR because she feels her time would be better spent meeting with venture capitalists and getting her tech team up to speed than with managing employee benefits.

Con 1: U.S. job loss.

The drawback to outsourcing that gets the most press is the loss of jobs in the U.S. The fact that workers in other countries may be getting job opportunities they hadn’t had before is little comfort to members of, say, U.S. manufacturing communities hit hard by factory closures.

Con 2: Lack of transparency.

More and more, consumers want to know where their products came from and who made them. Outsourcing makes this kind of transparency difficult. A U.S. company might outsource part of its business to a company in, say, Bangladesh, which might also outsource to another Bangladesh company for staffing. So if the staff at a Bangladesh factory is working in unsafe conditions, is that the fault of the staffing company, the Bangladesh manufacturing company.

Managers recognize the impact that measures have on performance. Effective measurement, however, must be an integral part of the management process. The balanced scorecard provides executives with a comprehensive framework that translates a company’s strategic objectives into a coherent set of performance measures. The scorecard presents managers with four different perspectives from which to choose measures. It complements traditional financial indicators with measures of performance for customers, internal processes, and innovation and improvement activities


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