When does outsourcing, competitive advantages work and not work?
One thing that I don't like about outsourcing manufacturing, services,
etc. is the asymmetries involved here:
1. The C-level executives with the Board of Directors (~20 people)
decides the fate of hundreds, if not thousands. The consumers don't
get a big price break, and also, the employees have no say-so in this.
2. Another asymmetry is that the jobs can be shipped overseas, but
the employees can't. No Americans want to migrate to another nation.
The jobs can be shipped far more easily than the American human
being. However, the converse is not so true: An Indian or Chinese
would gladly come to a developed nation for work, whether it's farming
or something more value-added, like service-oriented work at an IT
Outsourcing/shipping jobs overseas will not work if: The destination
nation has worse worker's rights and environmental safeguards than the
corporation's host nation.
Finally, if the cost of outsourcing and all this talk about
competitive advantages is true, then why haven't the Americans seen a
corresponding drop in prices? The inflation rate is about the same as
it was prior to the age of outsourcing! Another words, even though
the goods/services are produced much more cheaply, the savings are not
passed off to the consumer. Moreover, the former employees also
didn't benefit. Only the Shareholders (i.e. C-level executives and
Board of Directors) benefited.
Please clarify your thoughts/opinions.
It doesnt work with some things like pizza delivery. The
pizzas are a tad cold by the time they get from India etc.
Doesnt work for much emergency medicine either. You're likely to
have died from your heart attack by the time you make it to India etc.
While diabetes isnt usually that time critical, you usually see such
a high level of medical intervention needed once it develops into the
end stage diabetes that the air fares to India make that unviable too.
Not that many diabetics are interested in going to India to die etc.
It isnt even viable for haircuts, or coffee shops either.
That happens even when the manufacturing is done within the country.
And lousy decisions can have an effect on much more than thousands
too, millions in fact with the car industry and millions with commercial
They do actually, most obviously with fakes of name brand stuff.
Thats true of almost all manufacturing. There are a few operations
that do things differently on that, but not very many at all.
Sometimes they are. Not very often tho.
Thats just plain wrong. Lots have in fact migrated all over the place.
One Indian operation is actually run by an american.
Hordes of americans have in fact migrated, mostly trying to convert various
Thats the case with India and China and it works fine.
In fact with environmental safeguards its almost universal that
the destination country has worse environmental safeguards.
They have. The cost of low cost consumer goods has dropped dramatically.
Its mostly the lower cost operations that do the outsourcing,
so americans have seen a drop in prices that way too.
Sure, but low cost consumer goods are only a small part of the basket of
goods used to determine inflation. And inflation is dominated by other stuff
like the price of gasoline etc which has increased substantially at the same
Yes they are, most obviously with low cost consumer goods and less
obviously with the lower prices that the most aggressive operations
charge for services, who are mostly those who do outsource.
Sometimes they did. Particularly the ones that were forced
to get off their lard arses and get qualified for better jobs etc.
There are a lot more shareholders than those in your brackets.
And with modern mutal funds etc owning the bulk of shares in companys,
essentially almost everyone who has any money invested benefits too
when the company makes better profits because it outsources.
BeanSmart.com is a site by and for consumers of financial services and advice. We are not affiliated with any of the banks, financial services or software manufacturers discussed here.
All logos and trade names are the property of their respective owners.
Tax and financial advice you come across on this site is freely given by your peers and professionals on their own time and out of the kindness of their hearts. We can guarantee
neither accuracy of such advice nor its applicability for your situation. Simply put, you are fully responsible for the results of using information from this site in real life situations.