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Offshore Learning

1. The article discusses the trend of reshoring manufacturing back to the US from other lower-cost countries. Reasons for reshoring include rising wages in places like China, a more flexible US workforce, and falling transportation costs. However, arguments remain for continuing offshoring due to attractive business environments and supply chains in places like China. 2. As automation reduces the importance of labor costs, the cost difference between home and host countries matters less in decisions of where to produce. Data suggests manufacturing costs are now similar in some parts of the US and China. 3. Most firms originally went offshore to benefit from lower input costs in labor-intensive industries. However, decisions involve many factors beyond theoretical

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Duy Nghi
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77 views1 page

Offshore Learning

1. The article discusses the trend of reshoring manufacturing back to the US from other lower-cost countries. Reasons for reshoring include rising wages in places like China, a more flexible US workforce, and falling transportation costs. However, arguments remain for continuing offshoring due to attractive business environments and supply chains in places like China. 2. As automation reduces the importance of labor costs, the cost difference between home and host countries matters less in decisions of where to produce. Data suggests manufacturing costs are now similar in some parts of the US and China. 3. Most firms originally went offshore to benefit from lower input costs in labor-intensive industries. However, decisions involve many factors beyond theoretical

Uploaded by

Duy Nghi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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Vietnam National University--International University

School of Business Administration


Course: MBA.IB.009, International conomics, Se!tem"er #$-%cto"er &#, &0#', ((h, )*#$-+*'$ !m
Professor* ,r. -atherine .. -o
Name* V% N/%- ,U. N/0I Student I, * MBAIU#102'
(itle of the article* 3Special report - Outsourcing and offshoring: Coming home; Reshoring
manufacturing
Source* (he conomist, &0#1
1. Briefly describe the economic issue(s), concept(s), question(s), and/or policies covered by the article.
(he article !rovides different an4les and o!inions related to offshorin4 and reshorin4 !ro"lems of
American firms that has a history of outsourcin4. 5easons su!!ortin4 for reshorin4 include* the intan4i"le
"enefits of manufacturin4 in home country, the recent increase in 6a4es in lo6-cost countries have , the
overstretchin4 situation of -hina7s la"our mar8et, American 6or8er are "ecomin4 more fle9i"le as costs
are fallin4, dollar has "een 6ea8enin4: risin4 shi!!in4, rail and road costs, the use of advanced
manufacturin4 techni;ues that !romise to alter the economics of !roduction.
In contrast, there are ar4uments 6hy offshorin4 is still the trend, for e9am!le* the America<s "usiness
environment is not attractive enou4h com!ared to lo6-cost coutries, -hina7s "est su!!ly chains of
com!onents for industry in the 6orld and its 4ood infrastructure, aimin4 for other availa"le emer4in4 and
attractive lo6-cost countries
2. Why are the economic issue(s) policies of interest !hat is, "hy are they relevant
(he 4lo"ali=ation !henomenon has not only !rovides chances for the trade of 4oods "ut also 4ive
com!anies chances to o!timi=e their manufacturin4 !rocess. s!ecially, in different sta4es of com!any7s
develo!ment and the 4lo"al economy status, firms should "e fle9i"le in choosin4 the "est !lace to !ut
their manufacturin4 lines to "alance "et6een the cost and com!any7s intentions.
#. $dentify relevant facts contained in the article.
(he advanta4e of countries 6hich is la"or- a"undance is "ecomin4 6ea8er than it used to "e as
machines , ro"ots and automatic trend are already ma8in4 a difference to the share of la"our in total costs.
(herefore, the different in 6a4es "et6een home country and outsourcin4 !laces does not !lay such an
im!ortant !art in offshorin4 and reshorin4 decisions as it used to "e. (he articles !ointed out that for
com!uters and electronics, machinery, a!!liances, electrical e;ui!ment and furniture,>it 6ill cost a"out
the same to manufacture 4oods for the American mar8et in certain !arts of America as in -hina
%. $dentify &ey relationships, analysis, or e'planations for the economic issue(s) policies under
consideration.
Most of the firms 4oin4 offshore and outsource 6or8force from lo6-cost com!anies are 6or8in4 in
la"our-intensive industry so that they can "enefit from the in!ut costs. 0o6ever, the reality and economy
system is not ideal as theorems, therefore many other factors are !layin4 !art in the decision- ma8in4
6hether to outsource or not. Sometimes, the firm ne4lects the 6a4es and other costs 6hen they 6ant to
reach the !otential mar8et or for s!ecific "usiness !ur!oses.
(. )our personal thou*hts on the article+ (,ritique/-eaction)
(his !a!er shares many similar ideas and information in com!arision 6ith another readin4 material I
did read in Mana4erial conomics su"?ect, titled* 3@a4e Increases in -hina* Should Multinationals
5ethin8 their Manufacturin4 and Sourcin4 Strate4iesA. In this article, the author is still very o!timistic
a"out the continuin4 trend of oursourcin4 in lo6-cost countries: ho6ever he !ro!osed some useful
strate4ic recommendations for MN-s, re4ardin4* Bocusin4 on o!erational e9cellence, e9!andin4 across
@est -hina and the ASAN, o!timi=in4 across the 4lo"e and 4ro6in4 the local mar8et.

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