From raw materials to semi-finished components, from consulting to detail engineering and from direct sales to distributor/retailer networks – there have been avenues for outsourcing as a part of strategic management of operations. The new twist to this has been the phenomenal growth of outsourcing from overseas resources as opposed to the conventional local outsourcing, resulting in significant job losses at home and the public outcry.
Business surpluses or profits seek avenues of investment with high returns. Multinational firms in the developed nations with high surpluses and operating in saturated markets look to developing and underdeveloped nations with high populations for investments. The latter countries, on the other hand have the problem of high unemployment or surplus labor and low wage structure. These factors result in overseas investments, actively supported by the globalization process. In the process, the benefit of low cost production not just for the overseas market but for the home market itself
Loss of jobs for locals is a sensitive issue for politicians and the public spirited. President Obama’s famous statement, ‘Say no to Bangalore and yes to Buffalo’ reflects the chasm between political and business compulsions. Multinationals like Nokia, IBM, Microsoft, Wal-Mart, General Motors and Levy have set up production facilities overseas with local employees while even in the US thousands of jobs in the technology industry are contracted to foreign workers (CNN.com; Rai, New York Times Feb.22, 2004; Case study, Rugman & Collinson, 2009, pp.30 &31). The debate surrounding the ‘sweatshops’ of Asian countries with both the supporters and opponents holding out valid arguments, is another angle to the phenomenon of outsourcing. In the ultimate analysis, outsourcing has to be viewed as a trade off between high-cost local manufacture vs. low-priced but standard quality foreign-made products vs. job losses at home vs. expanding demand