Question

Discuss the pros and cons (advantages and disadvantages) of outsourcing for US companies.

Answer 1

Outsourcing is a business decision strategy in which a firm moves some of it's specific process and activities to some outside service providers who are basically the specialist in the given process,example some major functions of US companies are majorly outsourced to developing countries such as India.such as HR services, Call center, Manufacturing and Accounting.

The major advantages and disadvantages of the outsourcing would be as follows-

Advantages:

Decrease cost- outsourcing will result in decreasing the cost of production as companies will have to hire less workers so the labor cost is decreased.Hiring less will mean decrease in cost of providing the workers with various expenses while also taking advantage of low labor cost of a foreign country.

Specialization- outsourcing will result in specialization as the company can get the expertise of service providers from other countries if it doesn't have it in the home country, this gives them the option of using the best talent and increase efficiency and effectiveness of the service at the same time.

Increae Profits and Strengthening International Relations- outsourcing will result in increase in profits for the company as the labor cost is cut down or when the company take advantage of low labor cost of the other country.It also distributes jobs to developing countries which will strength the relation between the two countries who are dependant on each other for economic efficiency and business.

The disadvantages of outsourcing can be as follows-

Job loss: perhaps the biggest disadvantage for a US company would be job loss and it will affect the home market very hard. One major sector is the manufacturing where more and more unskilled labor force is employed and they can't find jobs in other sectors.

Quality: There could be poor delivery of quality of a good or services and if it was outsourced to some other country without any guidelines to identify or measure quality and security which may result in the loss of the goodwill of the outsourcing company and can generate negative publicity harming it's image if it results in exposing confidential data.

The biggest recent example can be seen in Facebook-Cambridge Analytica case.The issue has seriously destroyed the reputation and image of Facebook and the company may face class action lawsuit.

Lack of Control and Focus- the outsourcing companies enjoys little control over the outsourced firm as it is governed by the rules and regulations of a foreign country while the outsourced company may lack focus as it is not governed by the commitment and zeal of the outsurcing company.