How to Choose the Right Offshoring Partner?

 

Original Content- Business Upside

The simplest offshoring definition would be when one business relocates its production from one country to another. It usually refers to business companies, although state governments may also employ offshoring. Offshoring products revolves around relocating the physical manufacturing process to a lower-cost destination. Such an act is typically known as product offshoring. Example of offshoring includes producing goods in countries like China or Vietnam. A significant incentive for showing arrival in the North American Free Trade Agreement made it simpler for firms to relocate manufacturing facilities outside of the United States. Later, the trend changed to China, which provided low pricing to cheap land, ease of environmental regulations, and vast economies of scale. Services such as finance and accounting, IT, application development are also known for offshoring. The is called service offshoring. One of the countries to benefit from this was India, as it has a large pool of English-speaking people and a technically proficient workforce. Because of inflation, high domestic interest rates, robust economic growth, and increased IT offshoring, the Indian IT sector has witnessed significant wage growth.

Offshoring for free trade is seen as beneficial for both the origin and the destination country by a lower cost of goods and services to the origin country and providing jobs to the destination country. Therefore both sides should see an increase in the Gross Domestic Product rate. The total number of jobs also increases in both countries as those workers in the origin country who lost their jobs can move to higher valued jobs in the country with a comparative advantage.

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