Offshoring and Outsourcing

What does offshoring mean?

Moving parts of a business to cheaper countries.

Which business departments are commonly offshored?

Customer service and manufacturing.

Which countries are common destinations for offshoring?

China, India, Malaysia, Mexico, and Indonesia.

What is a drawback of offshoring?

It can harm a business's image due to UK job losses and criticism from the media and trade unions.

What is reshoring?

Moving a business's departments back to its country of origin.

Why are some businesses reshoring?

Changing consumer attitudes and backlash against poor treatment of overseas staff.

What are the benefits of reshoring?

Improved product quality, easier manufacturing control, cheaper distribution to the home market, and better customer service.

What could prevent businesses from reshoring?

The appeal of low overseas wages, though rising wages in emerging economies may encourage reshoring in the future.

How has offshoring created specialisation in some countries?

Certain countries offer specialised skills or services that attract overseas businesses.

What does India specialise in, and why do businesses offshore there?

Communications (e.g., call centres) and IT services, offering competitive prices and trained workers.

Why do businesses move manufacturing departments to China and Brazil?

To take advantage of cheap, skilled labour, although products may focus on volume over quality.

Why does China attract research and development departments?

To be closer to manufacturing, leverage skilled low-cost labour, and utilise strong infrastructure.

Why do businesses move IT departments to the Philippines?

Due to young university graduates with strong work ethics and excellent digital communication infrastructure.

What problems do countries with specialised services face?

Worker demotivation, diseconomies of scale, and competition from other countries providing skills more efficiently.

What is outsourcing?

Contracting out tasks to other businesses instead of doing them in-house.

Why do businesses outsource?

To handle increased demand, access expertise, or reduce costs by avoiding permanent staff for occasional tasks.

What types of tasks can be outsourced?

Manufacturing, finance, recruitment, advertising, and IT.

What is offshore outsourcing?

When a business outsources work to another country, e.g., a UK company using a German law firm for legal work.

What is the main benefit of outsourcing?

Businesses can accept more contracts and benefit from specialized expertise while reducing costs.

What is the main disadvantage of outsourcing?

Loss of control over quality, which can harm the business’s reputation if the outsourced work is poor.