I feel that insourcing is important for any type of business. Being able to have employees all throughout the business be able to put in ideas about ways to promote the business is a key. A business owners needs to listen to their employees as to what they think could help promote the business to become better. Most of the time these employees are frontline with the business and see what is happening on the daily inside the business. Where the business owner does more of the behind the scenes and doesn’t see what is happening up front. When it comes to outsourcing a new company just starting is going to want to invest in that. This is how they are going to get customers to view them and who they are.
Outsourcing to poorer countries aren’t going to get a business far. A company can outsource to a poor country, but when those customers are satisfied they aren’t going to have the funds to be able to actually buy the product. Which is why that will lead to the company losing business. Although when it comes to a business outsourcing, they want employees who enjoy the job. This allows the employee to be outside of work and still talk to others about their job because of how much they it enjoy it.
Comparative advantage can be used for any type of business. Although the biggest thing with it is to make sure that the government is enforcing some type of trade agreement. All governments have trade agreements so that goods aren’t being promoted all around illegally. Otherwise there would be companies selling products to the poor countries for little to nothing in hopes that they will be able to sell a lot and make a good profit.
I think this true when companies are just starting out. They do not have a reputation built yet in their own country so insourcing makes more sense. Making sure that employees are secured in their jobs is important as well and that their job would not be outsourced by building a community that shows that they matter. Insourcing is an investment that can help benefit a company because it can help build a reputation in the country and get more loyalty to buy your product or service. If the company is really small or just starting out it would not be better to outsource non-essential tasks since they would be losing money. Another thing would be them not knowing any cultural differences thus making mistakes that could make them lose reputation and money.
There are many consequences with outsourcing production like laws within a country, people protesting against the unsafe work conditions, and etc. An article talks about how multinational corporations in America are slowly moving offshore. It goes on how China has been exploited mercantilism and the American government is not enforcing the trade agreement. This in turn is making our trade deficit grow and making Americans lose tons of jobs from outsourcing. Using the free-trade model helps with comparative advantage however it helped China grow and deindustrialized in America. This tells us even if a country would have a comparative advantage it can still be taken advantage of if its government does not try to enforce a trade agreement (Collins, 2021).
Collins, M. (2021, May 27). Please Enable Cookies. StackPath. https://www.industryweek.com/the-economy/competitiveness/article/21165472/whats-good-for-multinationals-isnt-good-for-manufacturing-or-the-country.
I think that insourcing has its benefits, just like outsourcing does. One thing I noticed in the article was that the author mentions that hiring a virtual assistant from another country was not the best move for him to make as it created more work for him (Kalis, 2018). Well, of course it wasn’t the best move – why would you hire an assistant who can only get to know you and your needs virtually? I think this one example might have skewed the author’s opinion – and let’s remember that this is an opinion piece – in favor of insourcing. Of course an assistant should be local and visible around the office, but some roles can truly be done anywhere in the world, so there is still value to a firm in saving money by outsourcing.
That said, I think insourcing does benefit a company in many ways, for example in employee morale and job satisfaction. It may seem like a better move to outsource some tasks in order to have non-essential work done less expensively, but in some situations the actual best use of resources would be to beef up the staff on-shore and provide them with a positive, happy work environment – which in theory encourages the employees to give their all every day, leading to the company’s performance improving.
As for the consequences of outsourcing, I look at it from personal experience, as I used to manage call centers overseas. One consequence to the home country is the loss of jobs that have been shifted to a site located overseas, but the lost jobs aren’t the only thing that takes a hit. Customer perceptions of a firm can change after they talk to an employee that they clearly recognize is based overseas, because the customer may feel animosity over a “foreigner” taking what they feel is a job that belongs in their home country. One consequence to the country the jobs move to is a labor market full of people ready to work, but not necessarily skilled in the type of work needed. For example, when I was working with our hiring managers in India, they commented to me that we had hundreds of applications for 40 call center jobs, and maybe a quarter of the people that applied had actually worked in a call center. But, because there was a surplus of labor and we were hiring, so many people applied that it took weeks to identify the actually qualified employees.
I think that comparative advantage tells us that the work should be based where it can be done most efficiently at the least expense, which is basically the concept behind outsourcing, if you think about it. Now, the work may not be done much more efficiently in an outsourced situation, but almost every time it IS being done much cheaper than having the same work done on home soil. Here, the comparative advantage exists for the country that can deliver the best results – and expense is big factor in what the best results are.
Kalis, M. (2018, April 25). Outsourcing Is a Shortcut; Insourcing Is an Investment. Entrepreneur. https://www.entrepreneur.com/article/312380