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Human Resource Management 7th Edition by Raymond Noe, John Hollenbeck, Barry Gerhart, Patrick Wright
Edition 7ISBN: 9780073530475Human Resource Management 7th Edition by Raymond Noe, John Hollenbeck, Barry Gerhart, Patrick Wright
Edition 7ISBN: 9780073530475 Exercise 2
What factors should a company consider before reshoring What are the advantages and disadvantages of reshoring
Explanation
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Offshoring refers to the process transferring some of the business overseas to perform services, process, and/or manufacture goods which were done traditionally in-house. Offshoring are generally done to cut costs in the operation. Offshoring supporting activities allows the company to focus on its core strategy. The companies outsource to various far east countries where the labor costs are much lower than home country.
Following are the factors that a company should consider before offshoring:
• Economic situation : The company should evaluate the economic condition and favorability for the business of the offshoring country before basing their processes at the location.
• Government position : The company should be familiar with the policies, rules and regulations at the offshoring location so that the business doesn't face any obstacles in the future.
• Employee morale : As some processes are offshored, some employees have to be laid off which can have an impact on morale of the employees still with the company. The company should assure them of job security and introduce activities to increase their morale.
Following are the advantages of offshoring:
• The foreign countries offer lower labor costs as compared to the home country. Labor-intensive businesses can benefit a lot from offshoring their manufacturing process.
• Apart from wages and salaries, the company also benefits from the cost saving in utilities, infrastructure, lower health insurance costs, etc.
• Some countries, to attract FDIs, gives tax benefits and other financial incentives to companies to set up shop in their country.
• The company can benefit from a vast pool of skilled labor in foreign countries like country I and country I.
Following are the disadvantages of offshoring:
• The company can face cultural and social issues because of the differences in values and traditions of different countries.
• The company may have hard time controlling the quality of the product as the manufacturing is done offshore and aren't done up to company standards.
• Offshoring of business results in large number of layoffs resulting increased unemployment in the home country.
In conclusion, offshoring helps the company save on costs but can result in various cultural and social issues, and communication barriers.
Following are the factors that a company should consider before offshoring:
• Economic situation : The company should evaluate the economic condition and favorability for the business of the offshoring country before basing their processes at the location.
• Government position : The company should be familiar with the policies, rules and regulations at the offshoring location so that the business doesn't face any obstacles in the future.
• Employee morale : As some processes are offshored, some employees have to be laid off which can have an impact on morale of the employees still with the company. The company should assure them of job security and introduce activities to increase their morale.
Following are the advantages of offshoring:
• The foreign countries offer lower labor costs as compared to the home country. Labor-intensive businesses can benefit a lot from offshoring their manufacturing process.
• Apart from wages and salaries, the company also benefits from the cost saving in utilities, infrastructure, lower health insurance costs, etc.
• Some countries, to attract FDIs, gives tax benefits and other financial incentives to companies to set up shop in their country.
• The company can benefit from a vast pool of skilled labor in foreign countries like country I and country I.
Following are the disadvantages of offshoring:
• The company can face cultural and social issues because of the differences in values and traditions of different countries.
• The company may have hard time controlling the quality of the product as the manufacturing is done offshore and aren't done up to company standards.
• Offshoring of business results in large number of layoffs resulting increased unemployment in the home country.
In conclusion, offshoring helps the company save on costs but can result in various cultural and social issues, and communication barriers.
Human Resource Management 7th Edition by Raymond Noe, John Hollenbeck, Barry Gerhart, Patrick Wright
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