How does outsourcing relate to economics?

3 Comments

1. Charmaine B says:

   June 26, 2009 at 8:20 am

   Outsourcing is one of the advantages of trade especially for countries which do not have many raw materials such as Singapore. They have to obtain materials for manufacturing by importing them and then using their high-end technology to produce manufactured goods and then use them domestically or export those goods at a higher price.

   A country which has a strong currency will find that importing goods from overseas is cheaper relative to home grown goods. For example, in order for a firm to stay competitive, it may outsource raw materials overseas to keep the cost low rather than buying from a local supplier which can be much dearer.

   However, if a country like Singapore becomes to dependent on outsourcing or if the demand for imports is inelastic, it may import the inflation of its trade partners as well, which makes their exports less competitive.
2. James J says:

   June 27, 2009 at 4:50 pm

   Outsourcing isn’t necesarily done in other countries. Outsourcing could be as simple as hiring a law firm rather than having a staff counsel on payroll. That law firm could be next door, or on the other side of the world.
   The idea of outsourcing has a number of benefits. You are attampting to use thier expertise. For instance, if I make airplanes, I might decide to buy engines from someone that is especially good at making engines rather than try to make my own airplane engines. The firm that is an expert at making the engines is likely to have more expertise and cost efficiency. So firms that used to have lawyers on staff are often finding it cheaper to use a law firm than have lawyers on the payroll, and firms that used to make the engine and the airplane are finding it cheaper to just make the airplane, and outsource the engines to the experts with better costs structures.
3. Berly Martawardaya says:

   June 30, 2009 at 3:49 pm

   outsourcing is like trade inside a company.

   Company has been buying goods from all over the world for centuries. But only recently, the process within company (accounting, costumer service, legal) are also tradeable and done some where else in the world cheaper.

   Why they do it? to save money. What is the limit? legal boundary and trust (especially when deal with sensitive data)