In the wake of economic gloom across the globe, many countries with history of having successfully mastered the art of outsourcing their products & services have taken a refuge that they will take hard look at outsourcing process so as not to put their labour at risk of losing jobs.
This view, however simple and appealing it may sound to the naïve, is actually an anathema to the progress and is counterproductive to the country of its stated objective.
To understand why, one must grasp the realities of business environment and the challenging times that the business has to face for survival.
It is no secret that prime driver of any successful business enterprise is its ability to service its customers with good quality product at optimum price. Competitive pressures drive the businesses to continuously evolve; look for innovations and reengineer their processes to cut cost, yet improve quality of their products.
It is this effort that helps them survive and continue to reward its stake holders i.e. employees, shareholders, government etc.
Imagine a situation where there are two business organizations in different countries. One has a disadvantage of high labour cost while the other has a disadvantage of lack of technology. If both were to continue their businesses in protected environment respectively, then one will have product manufactured at high cost and the other will have product of an inferior quality. Since there will be other products in global market which would be cost competitive & of a good quality, both these organizations will be at a severe disadvantage and would not be able to survive due to lack of demand for their products. If they fail to survive, then their stack holders would stand to lose substantially.
Not wanting political fallout of this failure, the populist action most likely from the government would be either:
a. To bail out the business by granting loan/ subsidy
Or
b. To levy high import duty on similar goods imported from international market
In both cases, the burden of loss will only be on locals either directly or indirectly.
A bailout will have to come at a cost to exchequer and will have to be compensated by increased direct and indirect taxes on the population. On the other hand, Levy of high import duty on imports would attract retaliatory actions and would make its exports suffer. Truncating exports coupled with artificial restrictions & protected environment resulting in inefficient system will dip foreign reserves, as investors will start getting wary. Thus on the whole, this will have a chain negative effect on the economy which will create conditions of falling production, negative growth and steady rise in unemployment.
It is therefore most important to respect the concept that world is flat. While each country should capitalize on its strength, it should build up resilience to leverage on the strength of others by outsourcing from it.
Visit: www.easy-outsourcing.co.uk
This view, however simple and appealing it may sound to the naïve, is actually an anathema to the progress and is counterproductive to the country of its stated objective.
To understand why, one must grasp the realities of business environment and the challenging times that the business has to face for survival.
It is no secret that prime driver of any successful business enterprise is its ability to service its customers with good quality product at optimum price. Competitive pressures drive the businesses to continuously evolve; look for innovations and reengineer their processes to cut cost, yet improve quality of their products.
It is this effort that helps them survive and continue to reward its stake holders i.e. employees, shareholders, government etc.
Imagine a situation where there are two business organizations in different countries. One has a disadvantage of high labour cost while the other has a disadvantage of lack of technology. If both were to continue their businesses in protected environment respectively, then one will have product manufactured at high cost and the other will have product of an inferior quality. Since there will be other products in global market which would be cost competitive & of a good quality, both these organizations will be at a severe disadvantage and would not be able to survive due to lack of demand for their products. If they fail to survive, then their stack holders would stand to lose substantially.
Not wanting political fallout of this failure, the populist action most likely from the government would be either:
a. To bail out the business by granting loan/ subsidy
Or
b. To levy high import duty on similar goods imported from international market
In both cases, the burden of loss will only be on locals either directly or indirectly.
A bailout will have to come at a cost to exchequer and will have to be compensated by increased direct and indirect taxes on the population. On the other hand, Levy of high import duty on imports would attract retaliatory actions and would make its exports suffer. Truncating exports coupled with artificial restrictions & protected environment resulting in inefficient system will dip foreign reserves, as investors will start getting wary. Thus on the whole, this will have a chain negative effect on the economy which will create conditions of falling production, negative growth and steady rise in unemployment.
It is therefore most important to respect the concept that world is flat. While each country should capitalize on its strength, it should build up resilience to leverage on the strength of others by outsourcing from it.
Visit: www.easy-outsourcing.co.uk
