Offshore outsourcing
This is whereby organizations hire other external companies to carry out business tasks and duties. This also entails hiring employees from overseas nations to carry out an organizations tasks. In this case, the business functions are performed in a nation that is different from the one where services or products are actually manufactured. Critics of this venture assert that the aspect of sending work to other nations overseas reduces the employment opportunity of natives within a nation.
For instance, a Canadian computer manufacturing Company can carry out offshore outsourcing. This is despite making and selling its products in Canada. In this case, the Company can have its customer care services handled by another overseas Company. Other tasks that are commonly outsourced include data entry jobs among other duties. It is quite imperative to note that the internet has played a great role in enhancing offshore outsourcing in the twenty first century. Erber, G. and Aida, S.
There are four main types of offshore outsourcing. They include ITO, BPO, R and D, and finally the KPO category. The ITO category entails outsourcing information technology while the BPO deals with outsourcing business processes such as processing customer claims. R and D involve outsourcing research and development. In this case a Company hires experts in another oversea nation to carry out its research and development activities. Finally, the KPO deals with outsourcing processes that are knowledge based. These usually require skills of very high levels. This can be engineering or accounting tasks.
How offshore outsourcing changes the overall understanding of gains from trade
Gains from trade relate to the net benefits agents get as they trade with each other. This emanates from economies of scale and division of labor. Labor is a factor of production that highly affects offshore outsourcing. Offshore outsourcing is highly based on the aspect of comparative advantage where companies take up the initiative so as to have a low opportunity cost.
The income accrued from the venture is used to expand an organizations product line and this would not be possible with high costs of production from factors such as high labor cost. The benefit of this venture is therefore referred to as the gains from trade. This explanation of aspects of offshore outsourcing helps to understand the overall concept of gains from trade.
Research also shows that gains from trade can mean the net benefits accrued when a country reduces its import tariffs. These tariffs can also be imposed such that one nation has more gains from trade than the other. In this case offshore outsourcing is a venture whereby labor is outsourced either in information technology or research and development among others. In this case, a nation that has Companies or organizations that carry out offshore outsourcing has more gains from trade than nations that provide human labor. This is considering the fact that most the employees are paid very little money as compared to their counterparts in the offshore outsourcing nations. While these Companies make enviable profits the venture is not beneficial since it denies citizens the employment opportunity given to foreigners.
Offshore outsourcing is known to have had a significant contribution to loss of many jobs. This is not a gain of trade but a loss. Further research shows that this venture causes very dire consequences to a nations economy. This is considering the fact that there is loss of revenue accrued from income taxes collected by the government among other levies.
Companies that carry out offshore outsourcing enjoy the gain of increased profits. Research on offshore outsourcing however shows that in many instances, the quality of services provided to customers is compromised. This is more so on issues of technical assistance and customer services. Offshore outsourcing has also had adverse effects on the growth of talents and skills in nations.
Conclusion
Many organizations in the twenty first century carry out offshore outsourcing. This is whereby organizations hire external organizations or employees in overseas nations to carry out diverse business functions. These include information technology, research and development, and business processes. Gains from trade refer to net benefits agents get as they trade with each other. Offshore outsourcing takes advantage of factors of trade such as cheap labor in other nations. This leads to increased gains of trade hence helps to understand the entire concept of gains from trade.