This blog contains posts and comments written by students in Dr. Tufte's economics classes at Southern Utah University.
2/13/2007
Outsourcing: Ripoff Nation
The article I read is titled “Outsourcing: Ripoff Nation." Outsourcing has been a major contributor to companies trying to bring costs down. One of the most famous countries to outsource to would be China. Many companies have found that by moving their manufacturing facilities to China they can cut costs dramatically, but those companies are finding out that there are also some consequences involved in relocating to China. Since China is so good at making products so cheap, they will make imitations of the products they see move into the country. They are usually able to make them cheaper, so they are able to sell them cheaper. The article says that competitors in China are able make and market their imitated product in as little as two years. This problem is discouraging many companies from outsourcing to China. I think that this is finally giving Americans an advantage when it comes to outsourcing. More companies will likely keep their manufacturing jobs here and provide more jobs for U.S. citizens. This will only benefit our economy. Prices might go up a little because of the more expensive costs, but a company will be able to keep their competitive advantage longer by staying here.
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4 comments:
I think that ultimately ever more companies will start outsourcing, or moving their manufacturing operations, to low wage countries. Especially the countries were the labor force is becoming more skilled as we speak. China is a good example of such a country and I think it will become increasingly attractive for US domestic companies as a manufacturing base. In my opinion managers will start to get a better grasp on the cultural differences that so often make investments there less attractive. In China it is all about getting a good relationship based on trust. In China contracts aren’t as valuable as in the U.S. or Europe, but building long-term relationships is the key to a successful business venture.
Outsourcing is very effective for companies to bring down costs. But they have to be careful, because making products cheaper and less quality is not always the smartest. The real advantage comes with making the best product. Coompanies would retain much more of the consumers. If a company has established themselves properly, then the imitation products shouldn't affect them.
Relocating to China might not be the smartest either. They have alot of limitations companies must follow. I read an article once about how many foreign companies don't do so well after relocating in China. China's government still has total control. Take Wal-Mart for instance, for them to be able to enter in China, they had to agree to Unions for the employees. China has alot of regulations as do probably most countries.
I agree with Joseph's reaction to the posted blog about outsourcing to China and other countries. You might have to deal with the corruption in the country in which you enter as a company, but the costs are still less. What companies need to learn is how to stay ahead of their own products. For a long time, technology has doubled every six months. Why can't the U.S.A. stay ahead of that? We should.
-1 on Joseph and Mason for repeated grammatical errors.
I have some simple questions.
Is it like that these "new" costs they are identifying were measured or even considered by accountants?
What field argues that managers have to pay more attention to implicit and opportunity costs?
Is it possible that economists arguments are not as irrelevant as they are sometimes painted?
Wow Jessica! I'm not sure where you got that technology doubling every six months figure. More like doubling every 30 or 40 years.
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