by Bruce Paine

Created on: June 24, 2009

Is Offshoring a Good Strategy?

Multinational Corporation's must address an offshoring strategy as part of their value chain. Companies seeking to keep operational costs low and turn a profit will benefit from sending certain jobs abroad in areas where conducting business is less expensive. Since globalization is increasing steadily, more and more business will be assessing this strategy. Offshoring is an important issue to me because I hope to one day own and operate my own business and would like it to be globally competitive. In order to be competitive, I will need to assess the costs and benefits of offshoring. I believe the forces driving globalization are increasing steadily and offshoring will continue to be a major issue in the future.

Evidence supporting the idea that globalization is growing can be found in world production. Twenty-five percent of world production is sold outside its country of origin, compared to 7% in 1950 (Daniels, Radebaugh, & Sullivan, 2009, p. 8). One of the most pervasive factors in globalization is a steady increase in technological advancements. Today, we can communicate easily all over the world. In addition, companies today face increased pressure to go global in order to be competitive. Expanded cross-national cooperation and increased liberalization of cross-border trade and resources has allowed companies to make offshoring a viable strategy. Nevertheless, issues arise from sending jobs to a foreign country.

Increased globalization is inevitable, and offshoring is a major factor for businesses. Given the current research, I believe that the decision to offshore should be weighed carefully because it has potential negative implications for the long-term growth of an organization and its host country. Overdependence on another country can make it vulnerable to demands posed by the larger sellers (Daniels, Radebaugh, & Sullivan, 2009, p. 15). U.S. dependence on foreign oil and the heated foreign relations over price are an example of this. Moreover, the need to ship items from all over the world consumes these nonrenewable resources and increases environmental damage. However, offshoring does have some advantages.

A good business strategy dictates that an effective reduction in cost will create more value. Cost savings generate growth, and growth generates more jobs (Daniels, Radebaugh, & Sullivan,

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