Discuss the implications for UK service sector firms that have off shed IT or administrative functions to low cost economies, such as India.

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Discuss the implications for UK service sector firms that have off shed IT or administrative functions to low cost economies, such as India.

The relocation of certain industries or functions from the UK to other low-cost economies abroad has raised a number of issues over the years. From a management perspective, it is seen as a great way of reducing overheads. However, customers have identified this as a drawback in most industries today.

Firstly, transferring parts of a business to a low cost economy decreases overall expenses as mentioned earlier. This could be that, the value of the pound is much stronger than that of the currency in these low cost economies so businesses have to pay much lesser total overheads. As these firms receive their revenue in pounds sterling, they would rather pay out their expenses such as electricity in Indian rupee which is about 0.01% of a pound. This is an ideological tool in exploiting different economies efficiently. It helps businesses to keep their costs very low but rather increase their profit margins. This may not always be the case though, since economic factors are very much unpredictable. Such firms are likely to have a huge