The Economist: Report on Outsourcing and Offshoring

The current trends, outsourcing and offshoring, affect the business activity of the present-day companies. The former means an organization’s initiative to send the work to be done outside of firm. The latter is sending work overseas to other companies or their own branches in other countries (Collins, 2020). According to Tamzin Booth, the principal reason why businesses start rethinking their offshore strategies is the global labor arbitrage which is gradually disappearing. The second reason is that companies do not need as many workers as before. The third reason is that the practice of offshoring and outsourcing happened to be less profitable due to management specificities than it was expected.

The automotive company which adopted the practice of offshoring in the past is General Motors. However, it has also changed its policies due to the emergence of new needs. Thus, the use of overseas suppliers of IT systems was profitable but less innovative. Since GM needs new ideas to keep up with the world’s trends, they decided to create their own IT systems (Collins, 2020). This decision is also connected to their intention to be local for a bigger market.

At present, General Motors is still shipping jobs overseas, mostly to Mexico and China. Nevertheless, the difference between their previous policy and current initiatives is in the fact that the company is launching new models in these countries while developing them in the United States. In this way, they are more involved in the process and make it more innovative. Another company which has followed in the footsteps of GM is Ford, and it also sent the work to China. In the context of the COVID-19 crisis, I would not support these strategies since any change in their cooperation can lead to large-scale financial losses.

Reference

Collins, P. (Host). (2020). Special report: Outsourcing and offshoring. The Economist. Web.

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