Globalization And Offshoring Term Paper Example
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Globalization is the act of a business, philosophies or technologies to spread to other parts of the world leading to an interconnection of the marketplace that is not limited by national boundaries or the time zones. Offshoring is the practice whereby firms and companies purchase their goods and services from abroad, instead of turning to the local providers. In offshoring, companies may also base some of their processes in the other countries so as to benefit from the low cost of labor and production in those countries. (Pierre, 2005) Many firms in the American economy have globalized their operations and, as a result, offshored most of their employment opportunities.
Globalization and offshoring by individual firms have the interest of many stakeholders in their mode of operations. There are three primary stakeholders whose interest comes to play in such decisions. They include the investors in those companies, the workers of the business and the customers of the enterprise. Each of these groups holds a different view about globalization and offshoring by the companies (Pierre, 2005).
Many investors gladly welcome the concept of globalization and offshoring because it leads to lower cost of doing business hence the investors will be able to realize more profits from the firms. The firms will also be tapping into new markets hence they will witness an increase in their volume of sales are compared to when they were operating locally. The investor’s primary desire is that the company makes more profits so as to increase their dividends (Parry, 2015).
The workers of the firms are however not happy particularly about the offshoring part of this idea. This because companies slowly lay off workers as they tap into cheap labor markets outside America. The workers that have secured employment in these firms will hardly have their salaries reviewed upwards as the company is contracting the same services they are offering at a lower cost from the cheap labor countries. The workers primary interest is that they are assured of job security and that they are not forced into early retirement or lose their jobs as the company tries to cut its operational cost.
The customers are not concerned about the globalization of the companies. They are, however, worried about the products quality issues as a result of offshoring. They are concerned that since the services being offered, or the products may not be developed in a standard way, their quality might be substandard. The customer’s desire is that no matter how the company carries out its operations, it must assure the customers that the goods they produce are of high quality (Bharadwaj and Roggeveen, 2008).
Initially, the issue of globalization and offshoring was considered as a private issue that concerns only the company, the workers, and the investors. However, the issue has become a social problem since it has grown to affect the lives of many Americans directly. Companies are retrenching workers at an alarming rate (Brown, and Siegel, 2005). Many employees know that it is just a matter of time before they are laid off as the companies continue to seek lower operational costs. Initially, the service sectors were safe from offshoring. (Brown, and Siegel, 2005) However, advances in technology have made it possible to offshore these jobs to the developing countries. The political leadership has been concerned about how the companies today consider human capital as extra cost. They want policies to be in place to control offshoring of the American jobs.
The individuals affected by this growing trend have different responsibilities on this issue. The workers in the companies need to boost their skill levels to avoid being laid off and to put up stiff competition with the low-cost workers. The investors, on the other hand, need to consider the social dimension in terms of the increased unemployment. They should stop thinking only about ways of increasing their profits. Their call for more profits is what is driving the companies to seek cheaper labor overseas leading to massive unemployment (Bharadwaj and Roggeveen, 2008).
The American firms have significantly contributed to the growth of the Canadian economy. As it is, Canada is one of the countries that have taken up some of the offshored American jobs. The country also enjoys the current state of America’s offshoring obstacles. It is because many manufacturing jobs in Canada depend on the services and the products they export to the United States. If the barriers to offshoring were eliminated, then Canada would also lose its competitive edge in the job market to the low-cost third world countries. It is because the manufacturing processes will be moved to those countries. The current state that the firms in US are faced with includes formal obstacles, intangible barriers, and significant risk that are involved in investing in the low cost makes Canada a more preferred destination.
The governments have a responsibility towards this globalization and offshoring issue. The federal government is responsible for setting policies about to what extent the firms can offshore their services. The government is also responsible for putting restrictions in terms of the degree to which the company may import goods for production when they can be locally made. It will reduce the rate at which the company offshores the goods and services shifting the demand back to the US market. It will help in creating more jobs and boost the local industries. The provincial and municipal governments should help provide a favorable environment for the firms to operate in so that they can expand their business within these localities.
The government needs revenue for it to offer services effectively to the public. The companies have a responsibility of paying their tax on time at the end of every fiscal year. They should also deduct the right amount of tax from their employees’ salaries and pay it to the government. The government can mobilize resources to ensure that the policies set to curb the massive offshoring are being followed.
The issue of globalization impacts positively on the companies. However in as much as the companies tend to make more profit and pay more revenue to the government, the rate of economic growth is still inhibited. Many people will be left jobless hence the few that are working will be forced to pay more taxes to support the government’s activities. It will result in higher operating cost for the companies, and they will outsource more. The trade unions need to step up their game and fight the massive capitalism witnessed through offshoring.
However solving this issue might not be as simple as it appears. The government may set strict policies to force the firms to depend heavily on internal goods and services. It may raise the cost of operations so much for the companies that they may begin operating at a loss. The overall effect will then be the companies collapsing. The government will then be forced to use a lot of its revenue in bailing out the company. It will end up hurting the economy is the taxpayers will feel the pinch of this bailout. On the contrary, when the companies are let to operate freely without any restrictions, they may completely offshore almost all the services they can so that they can reap the maximum profit. It will escalate the level of unemployment ultimately hurting the economy.
Bharadwaj, N. and A. L. Roggeveen: 2008, ‘The impact of offshored and outsourced call service
centers on customer appraisals’, Marketing Letters 19(1), 13-23.
Brown, S. P. and L. B. Siegel: 2005, ‘Mass layoff data indicate outsourcing and Offshoring
Work’, Monthly Labor Review August, 3–10.
Parry, R. (2015, January 1). Globalization: Threat or Opportunity for the U.S. Economy?
Retrieved March 23, 2015, from http://www.frbsf.org/economic research/publications/economic-letter/2004/may/globalization-threat-or-opportunity-for the-us-economy/
Pierre, M. (2005, February 1). Globalization, offshoring, and American trade politics: Prospects
for Canada-US trade. Retrieved March 23, 2015, from
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