Free «Asian Outsourcing» Essay
Outsourcing is a business terminology which can be defined as the process of getting goods and services by way of contracting with an outside provider (Oxford Dictionary, 1998). This may take place inside a country, which is termed inshore outsourcing. It can also be conducted between different sovereign nations. In this case, one would refer to it as offshore outsourcing. The practice of outsourcing has gained substantial momentum in the sphere of international trade. The paper attempts to highlight the practical aspect of this concept in India.
Analyzing the observable, modern trends, it is evident that the international trade in business services is thriving comparing to trade in physical items. Outsourcing, therefore, is highly pronounced in business services and intermediate goods. Business services are the principal components of the world trade.
India has emerged as one of the most vibrant economies on the planet. In Asia, it stands as one of the serious players in the sectors of education, economic development, and political supremacy. Like other nations including China and Malaysia, India is an active participant in the business of offshore trading, whereby it embraces the concept of outsourcing of a significant number of services and intermediate goods.
Multinationals, medium-sized companies, and even individual, business entrepreneurs are outsourcing various business activities which include product design, assembly, marketing, distribution, and even after sales services. Many firms have adopted strategies that somehow make them virtual manufacturers, since their work would be to design and make plans for their products. Then, they rely significantly on other players in the business world to do the actual manufacturing. The firms themselves may sometimes be excluded totally from the actual process of manufacturing products.
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Besides India, other countries also do embrace the idea of outsourcing in their quest to bridge the gap between what they have and what they may be inadequate. Vertical disintegration is evident in the world trade. In the United States of America, they manufacture about 37 per cent of their cars’ value. Thirty per cent of the total value goes to Korea for assembly, the Germans design 7.5 per cent, whereas 17.5 per cent finds its way in Japan for body parts, and about 4 per cent goes to Singapore and Taiwan for small parts. As if that is not enough, 1.5 per cent goes to Barbados and Ireland for data process, and 2.5 per cent get done in the United Kingdom.
As a country with a tremendously massive population, India faces numerous challenges. The numbers are just too much to sustain. This means that the government and other stakeholders have to strain in trying to offer the public what it deserves duly.
Some of the challenges may comprise of the exact essential services like health care, education, and creation of job opportunities. Despite being a powerful nation, India struggles with high levels of unemployment, poor education standards, and filthy, stinking streets of cities like Mumbai. Considering such problems, it is notable that the country cannot rely sufficiently on the local labor, goods and services for a sustainable economic growth.
India’s economic is the perspective one in Asia. It is growing fast, making it one of the fastest developing countries in the continent. Any appreciable improvement in the rating of any economy must demonstrate emergence and strengthening of the industrial sector. Most of the required raw materials for product manufacture and the needed expertise cannot be obtained sufficiently applying to the local population. This necessitates soliciting and hence outsourcing of services as well as goods.
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Presently, India is one of the best destinations for medical care. Although the most wanted medical attention is available there, there are many other crucial elements leading to that final stage. For instance, experts from other countries play a serious role in training doctors who in turn go to India to offer their services. Some medicines come from other developed countries. Furthermore, Indian pharmaceutical industries do manufacture medicines, which ownership of the chemical formulae belongs to other parties in other countries. India also requires medical devices, which are provided from other nations (Parker, 2011).
In order to sustain the rapid economic growth, there is an inevitable need for proper infrastructure. The most notable infrastructural projects include road construction and other means of transport. Information Communication Technology requires highly technical infrastructural investment. In modern days, economy will not thrive, if information communication technology still lags behind.
The automobile industry is a specialty of other developed countries like Japan and Germany. India is not one of those countries known for car manufacturing. However, the country growing as fast as India cannot do without proper automobile industry. To do this, they must outsource for intermediate goods, which they do not have. Indian automobile industry players would also require expertise to run the industry. This can only be done through outsourcing. They, just like the United States of America, would only end up contributing a remarkably small percentage of the final product created for their own use.
Since India is just an emerging economy, the government would seek for loans and grants inevitably. Aid comes from the World Bank and other developed countries like the United States of America, France, and Britain. As much as one would refer to some of such contributions as aid, there are many conditions that the benefactors attach to them. For some reasons, those giving the aid may require that they participate in the project for which the funding targets. As a result, it may be a compulsory necessity to outsource for the projects’ materials and services from the donor country. In this situation, outsourcing takes place circumstantially but not out of choice.
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In India, many people do not have a chance to pursue their education to high levels mainly because of poverty. That means there is a deficiency of skills in many areas of expertise. Such areas include engineering, technology, and medicine. The three disciplines are strong anchors of the economy. The labor force must gain access to quality health facilities. They say that a healthy nation is actually a wealthy nation. Skilled labor is mandatory for development and sustenance of industries. India needs technologists and engineers, as well as qualified medical practitioners. A crisis of such valuable personnel can only be overcome through international outsourcing to fill in the spaces.
The international community acknowledges the availability of the technological savvy of Indians. This is a country that educates marvelous programmers, who are respected in the entire world. In spite of the fact that young Indians have the reputation of being computer savvy and glorious programmers, it is still evident that Indian firms and government agencies still outsource for Information Technology services from other countries. One could associate such tendencies to the reality that Indians may be geniuses. However, their skills do constitute much to brand them the tag of being self-reliant in that field.
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The concept of outsourcing, in this case, offshore outsourcing, brings a lot of comfort in the way business is conducted. There is the convenience of utilizing the resources that one may physically lack. That is to say that unavailability of a good or service within one’s locality cannot mean end of the journey in one’s business adventures. Business firms can obtain what they need from other players in the industry. However, there is also a second side of the coin. Outsourcing also has demerits to the countries employing it in its business affairs.
Within the Indian environment, and even in other countries, the practice of international outsourcing helps reduce the risk of damages which may result from the lack of appropriate know-how. The firm or agency solicits for specialists who manage the given area of concern on their behalf. Some countries, especially in the developed world, have more skilled personnel than their counterparts in developing nations.
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Through outsourcing to a group of experts, client companies get the opportunities of accessing skills through training expertise that the internal environment could offer by itself. India, just like any other developing countries, benefits from services such as recruitments as well as the offer of incentives on training and performance. This helps to improve the technical ability of the local people to prepare for future assignments within their areas of specialization.
To add on that, firms or companies that hire services from experienced experts usually increase their levels of performance. They take advantage of the high skills of their outsourced labor force to increase the productivity of their companies. This, in turn, raises the profitability of firms. It also improves service delivery to people in the area of a given specialty. This is beneficial for everyone, the company itself as well as the local people.
In spite of the huge benefits that international outsourcing brings to the companies and the native people of the client company, there exists its reverse side. Sometimes, International Outsourcing impacts negatively on the client company and the local communities. In fact, this has led to enactment of laws that restrict the practice.
According to studies carried out in India, they established that Offshore Outsourcing increases the chances of high profile job opportunities. The practice, consequently, lowers the chances of low profile jobs. India, being one of the largest demographic figures in the world, suffers a significant setback. Majority of its people has low skills. Embracing the practice of international outsourcing, therefore, means that some significant part of the population remains unemployable. International Outsourcing is also a cause of job loss to the local people.
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The process of negotiating and bidding for services usually take too long to complete. That means the exercise of getting may cause a delay of some processes from executing. There is also substantial waste of quality production time. This is not beneficial to the outsourcing party. It slows down the productivity and performance of the firm.
It is sometimes devilishly difficult to settle on one service provider from many others whose performance records may not be clear. This, to some extent, implies that one may end up settling for a substandard service provider. This should not be the case since outsourcing aims at getting the best out of the best.
Besides, the outsourced team could ask for long contractual periods. This could decrease the company’s flexibility in a big way. Additionally, it may lead to the loss of the company’s strategic alignment with clients.
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In conclusion, India stands out as a major player in the world trade today. Its strategic policy of International Outsourcing is in line with demands of any developing economic power and modern trends of businesses. Although there are appreciable demerits with the idea of international outsourcing, India appears to be focusing on the benefits and intention to make maximum use of them. It is currently a major economic and political powerhouse not only in Asia but also the entire world.