Study Guides (238,443)
Canada (115,138)
Administration (1,171)
ADM3318 (31)
All (22)

Advantages for Offshoring for Companies good copy.docx

16 Pages
Unlock Document

University of Ottawa

Advantages for Offshoring for CompaniesThere are numerous advantages and reasons why companies use offshoring to meet their business needsIn todays business environment organizations are pressured to create and add value for their shareholders and customers while still trying to stay ahead of the competition Prior to globalization companies didnt have to compete as much with foreign competitors to attract a customer base they just competed with domestic competitors for the market share Globalization however has pushed companies to compete with foreign competitors who may be able to produce the same products but cheaper due to different labour laws and regulations Multinational corporations must find new and innovative ways of in order to gain an advantage over their competitors There are numerous ways that a company can lower its production or operating costs through the use of offshoringOne of the main factors for a company to be successful is how they can lower their cost of production and operations Offshoring can help with both of these A firm that increases its profits by decreasing its labor costs through offshoring will improve its ability to compete in the global economyTiwary 2009 Labor prices around the world vary significantly As of now the minimum wage in Canada is 1025 Labor Ministry April 2012 and in the United States the minimum wage range is 515 to 904 Department of Labor Jan 2012 These minimum wages are much higher than can be found in other countries In developing countries labor laws are much less restrictive on corporations This allows the companies to pay workers only a fraction of the cost that they would have to pay an employee in western nations in order to get their product manufactured For example in India the National Floor Level Minimum Wagefixed at Rs 115 per day nowIndian Express September 2012 When the Rupees are converted to Canadian dollars it equals to about 209 dollars a day If the average workday is 8 hours it means that the hourly rate is 026 This is only 25 of the pay that a company would have to pay an employee in Canada if their operations were set up here In order to be competitive globally and create that extra value for the shareholder and the customer a business will always choose or will always consider a place where their labor is 97 cheaper An example of this is Apple Although this example is based on outsourcing due to the fact the jobs never first existed in the United States it gives an idea of why companies would pack up their operations in one country and set up shop in a different country where they can save money on wages expense The total cost of making an Iphone in China is 17845 with only 710 in labor costs to assemble each phone 8 hours per phone If these were to be made in the United States the costs would almost double The wage rate for a person doing a similar job in the United States would be about 21 dollars and hour Chakrabortty April 2012 Another example is British Airways by moving some of their operations like customer relations to India they were able to save 23 million dollars for every 1000 jobs that were transferred over there EbStrategy ND To go along with cheaper labor costs it is also much cheaper to build manufacturing plants in developing countries due to fewer regulations on working conditions This allows companies to cut costs on different policies that they would have to abide by in Western countries Examples of this can be seen in how many hours people in developing countries work how many breaks each worker gets and the number
More Less

Related notes for ADM3318

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.