Globalization and Offshoring

One of my written works from 2014, enjoy!

Globalization and Offshoring

Abstract

The clothes we wear, car manufacturing and production of certain products all have something in common. What do these all have in common you might ask? All of these undergo certain processes, a plan, a goal, a scheme. Business owners build from their ideas, and are always trying to find ways on improving them. Today, people from around the world have been brought up to the attention of globalization and of its effect towards offshoring. The offshoring categories are: business services, except software and computer services; financial services; insurance; communication; and, software and computer services (Baldwin & Gu, 2008). Both of these terms of globalization and offshoring are quite broad and vast, and depend entirely on the business itself including the consumers it’s being brought to. This thesis will touch base on how globalization and offshoring go hand in hand when it comes to creating and building a successful business.

Stakeholders and becoming a Social Issue

There are many reasons why a company may offshore some of their business. To best understand this you may want to fully touch up on what offshoring is. The term offshoring pertains to a business’s decision to manufacture elsewhere for their product and or services. This is clearly different from its other derivative term, outsourcing. Outsourcing involves moving a portion of production outside of a firm; offshoring entails sourcing part of inputs outside the country (Baldwin & Gu, 2008). Offshoring can also be described as a ‘foreign outsourcing’, which implies shifts in intra-firm or intra-plant supplies to outside providers in a foreign country (Baldwin & Gu, 2008). Businesses are always trying to find innovative ways to make profitable outcomes from their products and or services. The best way to go about this is by offshoring. This gives the business an added increase in value, since it reduces operating costs, labour and improves quality of service. Consequently, this allows the majority of the focus to other conflicts underlying a business. Many businesses and organizations are turning towards offshoring as a way of escaping certain costs of producing within their set site. India, China and Malaysia are three of many countries from around the world which offer production at lower rates. These countries also in comparison have low standards of living, less restrictive laws and environmental regulations which permit such production from happening. With its benefits obviously overpowering the negatives for a business to grow, it is a definite plus for a company to choose another place to produce their goods and services at a much lower rate than in their own. Likewise, this whole scenario comes into ties with globalization. By definition, globalization is all about creating opportunities for interchanging of certain services and products to others globally. However this also means that there is room for creating and exchanging innovative ideas to one another. Talents, resources, ideas, all of those in which relate to making a business grow with time, is enhanced greatly due to productivity elsewhere. This interconnects with offshoring benefits because we then gain trade-offs of not only the products and services created, but also different cliental of talents and specializations. The main stakeholders who benefit from this process are the consumers, the customers per say. The corporate businesses themselves and the government also both hold a position of being stakeholders as well, needless to say what we purchase is suggestively at a lower cost for us. If you really think of it, what we purchase for our daily uses such as clothing, food, and even services; they all have a high possibility of being manufactured or produced elsewhere other than the country or setting it is sold. Many would think that this causes costs to be rather high, conversely we the consumers pay significantly less. In fact, the amount it takes for a product to be produced within our own country would actually elevate the total cost of it. Therefore meaning that current wages that we make on average would not be enough for those to purchase, especially those in a lower social class. Having means of business placed elsewhere to areas where the wages are lower, allows a business to sell to their consumers at a lower rate. Designation of where manufacturing and production that occur is all based on certain entities such as a country’s financial attractiveness. China for example has a high financial attractiveness. This is mainly why countless products for example is ‘Made in China’. Notably, these are all desirable outcomes for the consumers, business owners, and the government. The government exclusively since it will enable tariffs and regulations to be in place, often creating relationships with other countries because of product and or service sharing. Globally, this is the main reason as to why globalization and offshoring has become a phenomenon around the world. It is our responsibility to keep up with the high demands, and of the ever changing economy. As a result we should take careful note about how often we offshore globally. Even though it is a plus to be able to sell at a commercially lower price point, it does not mean that all of the work should be done elsewhere.

Responsibilities of Government and Firms

The responsibility of the government which include the federal, provincial and municipals is to market where the taxpayers’ dollars are spent towards. This means implementing what amount of money gets spent between offshoring plans and how it is met globally. Today a globalized company uses the world not just as a marketplace but as a source of supply (Poloz, 2011). Firms desire to expand economically, this means creating opportunities for jobs, technology transfer, building human capital, and even physical infrastructure (Jenkins, 2007). Be it small or large of a firm it would not matter because similarly, they both work together in a Canadian economy. Small firms with their origination and large firms with their numerous network of sources, causes a collaboration with one another to develop globally. Thus, this generates a system of linkages of other firms from around the world. Despite the fact these firms choose to work alongside together or not, these linkages prohibits less competition with one another within the set country, in this case Canada. The responsibility of firms is to create profit and wealth, a term that is best used to describe this is CSR. Corporate social responsibility or CSR for short, is a way of firms to maintain relationships with the society as well as being profitable. A firm’s responsibility is to integrate social, environmental and economic concerns into their values, culture, decision making, strategy and operations in a transparent and accountable manner and thereby establish better practices within the firm, create wealth and improve society (CSR). Offshoring does benefit from firms and CSR for the reason that it eventually manifests into a better business strategy. This includes a better management of risks, improved reputation, recruiting and developing staff, competitiveness and marketing, and cost savings; just to name a few. To summarize, small firms exist to help create larger firms, which in comparison help with globalization and offshoring businesses. Without the involvement of the government and firms, it would be quite difficult to gain profit and strategic measures.

Support and other Groups

Taxes have become another conflicting issue for those who offshore their businesses. In spite of this, it is consumers’ best interest to not be paying the necessary taxes for this. It should actually be the businesses and the government involvements responsibility to be paying for these taxes. However in reality, whenever the government is effected by paying these taxes, we the consumers must pay as well. Theoretically speaking, the government has a budget to pay for certain things and all the money they do get come from the consumers go towards these budgets. The government must increase taxes to pay for such plans of offshoring and sorts of globalization. We the consumers must suffer for this because of the fact that governments do have regulations put aside which permits a business or organization to subside towards these taxes. There are significantly different amounts that must be paid when producing a product within their country or elsewhere. Businesses, alongside with their partnerships with other companies should be able to come up with the tax amount needed. Relatively speaking, all the stakeholders will be affected. The other groups in this sector that get effected by means of globalization and offshoring of business, are the workers. There is more note on a large reduction of employment within Canada because of the offshoring of business. It is because the productivity it takes to create or produce a product or service is done elsewhere. Like other imports, offshoring is expected to affect wages and employment in Canada (Baldwin & Gu, 2008). Offshoring is often presumed to affect lower skilled workers (Baldwin & Gu, 2008). However it is also a conflicting factor since it does enlighten the jobs of others in less developed countries. In the end, careful planning must be met in order to be successful when it comes to employment, productivity and profitability.

Conclusion

In conclusion, offshoring and globalization both play an important part in the Canadian economy. Offshoring may be, but is not necessarily, related to outsourcing. It involves decisions both to purchase outside the firm and to do so from abroad (Baldwin & Gu, 2008). Even though it is clearly evident that there are many pros and cons towards how globalization and offshoring effect our country, the negatives do not outweigh its positives. By taking certain precautions and being well aware of what is going on when it comes to the globalization and offshoring methods; businesses should be gaining profit and productivity within their setting.

Outsourcing does not necessarily imply that jobs and production are relocated to another country (Baldwin & Gu, 2008). Offshoring in materials and service inputs results in increased imports from other countries.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

References:

Baldwin, J., & Gu, W. (2008). Outshoring and offshoring in canadaRetrieved from http://publications.gc.ca/collections/collection_2008/statcan/11F0027M/11F0027MIE2008055.pdf

Heineman Jr., B. (2013, March 26). why we can all stop worrying about offshoring and outsourcing. Retrieved from http://www.theatlantic.com/business/archive/2013/03/why-we-can-all-stop-worrying-about-offshoring-and-outsourcing/274388/

Jenkins, B. (2007). Expanding economic opportunity: the role of large firms, corporate social responsibility. (Master’s thesis)Retrieved from http://www.hks.harvard.edu/m-rcbg/CSRI/publications/report_17_EO Framing Paper Final.pdf

Poloz, S. (2011, May 25). Globalization: what next for canadian businesses?. Retrieved from http://www.edc.ca/EN/About-Us/News-Room/Speeches/Pages/globalization.aspx

Unknown , A. (2012, March 05). Corporate social responsibility: the importance of stakeholder engagement con’t. Retrieved from http://www.ic.gc.ca/eic/site/csr-rse.nsf/eng/rs00139.html

Unknown, A. (2012, March 05). Corporate social responsibility: an overview of corporate social responsibility. Retrieved from http://www.ic.gc.ca/eic/site/csr-rse.nsf/eng/rs00129.html

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