Term Paper on "Outsourcing and Relocation as Our World"

Term Paper 3 pages (1453 words) Sources: 1+

[EXCERPT] . . . .

Outsourcing and Relocation

As our world has become smaller through the advent of new technologies, the economics of business in this highly competitive global economy can now be said to revolve around profits achieved through corporate migration. The consumers of the world have new expectations for lower pricing mixed with higher quality products and services which puts a great deal of pressure on the business community. Couple these consumer demands with the pressures expected by the investment community and one gets a true sense of twenty-first century business. All areas of the American economy from both the service and manufacturing arenas have had to search for novel opportunities or strategies that systematically reduced costs while still providing increased revenues. In the past, businesses simply reduced their labor forces to meet profit demands. Simply put, during the 1990's, layoffs, downsizing or corporate re-structuring were terms that basically equated to reduced labor costs for increased profits. But layoffs are no longer the answer. Today, relocation and outsourcing are the solution to fix thin profit margins from the last decade. There are many examples of corporate America literally moving whole factories and numerous jobs to foreign locations to meet the demands of consumers and investors. Outsourcing and relocation are now logical and viable solutions for doing business in the twenty-first century.

Economics boils down to the basic formula of supply and demand. The United States has always been known for the successes of its free enterprise process and the United States has always lead by example when it came to creating new business models, ideas, or innovations. But today, business and economic news in the United States has been dominated by corporate doom and gloom. Blue Chip stocks are at all time lows while layoffs have become the norm as unemployment keeps climbing. The Enron scandal is just one example of the pressures placed on corporate America to keep producing large profits to meet investor expectations. "The Unites States is going through a massive structural shift -- many economists, business analysts and corporate executives haven't figured this out (yet). The shift into a new economy based on information technology is well underway." (McGarvey, 1996) the old way of doing business has not been conducive to meeting the demands of the new global economy. That is the reason for so much bad economic news like strikes, layoffs and plant closings. Yet, surprisingly, the United States economy has been experiencing steady growth because of the shift in the corporate mentality to find cheaper labor and off shore factories and other related new business opportunities.

A good example of growth through relocation and outsourcing can be seen by the adjustments made in the automobile industry. The automobile industry has actually been producing profits over the past few years far surpassing the dismal economic results from only a decade ago. The adjustments the industry has made are a direct result of how they plan to do business in the future. Relocation and outsourcing is the industry's new business strategy. In other words, manufacturing automobiles has become a global business that has become fueled by cheap foreign labor in new emerging markets throughout Asia and South America. Companies like the Ford Motor Company and General Motors have had to relocate their factories overseas in the new emerging markets and away from the high priced labor here in the United States.

The automobile industry understands that the new automobile consumers of the future will live in countries like China, India, Mexico and the other emerging market nations. It is simply cheaper for the automobile industry to build their cars and parts abroad because labor and taxes are so much lower. The move to build factories closer to parts manufacturers has helped just in time manufacturing techniques and also eliminated the high cost of importing parts and components built abroad and shipped to American factories only to be shipped back to foreign markets as finished cars. It no longer makes sense for the automobile industry to build cars in the United States and then ship them to the consumers abroad. Corporations like Ford and GM and the rest of the automobile industry have found relocation and outsourcing as a viable solution for cutting costs but still meeting the high quality demands expected by their customers.

Cheaper labor and emerging markets are no longer just manufacturing terms.… READ MORE

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