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Economic Effects of Global Sourcing

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Economic Effects of Global Sourcing Abstract Global sourcing is a hot topic of discussion throughout the business world. The manufacturing and service industries are the most prevalently sourced today. The pressure is on for CEO's to implement sourcing strategies. This paper shows why today's businesses feel the need to invest in offshore operations. These reasons can include 1) reduced operating and labor costs, 2) increased productivity, and 3) access to talent worldwide. Additionally, the paper will focus on the history and future of sourcing, as well as how the global economy is affected. Table Contents Abstract 2 Contents 3 Introduction 4 History 4 Benefits 5 Economics 6 Future 9 Summary 9 Reference page 10 Economic Effects of Global Sourcing Global sourcing is the movement of work and talent from a high-cost market to a low-cost market. The process allows organizations to compete most effectively in their chosen markets. The most commonly sourced sectors are the manufacturing and service industries. Nations and their businesses involved in global sourcing are seeing fast economic growth. "During the 1990s, income per person in "globalizing" developing countries grew more than three and a half times faster than it did in "nonglobalizing" countries" (Securing Growth and Jobs, 2004). ...read more.


jobs." At that time, NAFTA and GATT/WTO were being implemented (Offshoring, 2004). Experts predict that by 2015, U.S. companies will source U.S. $135 billion in wages and 3.3 million professional jobs. Also, services exported to countries such as India, the Philippines and Russia grew significantly in 2003. The U.S. has dominated almost 75 percent of the sourcing market. With the increase in communication, sourcing has become easier and less expensive. "The U.S. economy recently took an unprecedented path when it regained strength during 2003 and 2004 without creating growth in jobs" (Bonvillian, 2004). Manufacturing and production industries continue to see shrinkage. However, the service sector is seeing incredible growth. The U.S. economy has historically relied on a 1-percent annual population increase resulting in workers and increased output. We are now seeing a major demographic shift. The U.S. faces structural economic difficulties. Hopefully the U.S. can find comparative advantage in the impending global economy. Our last economic war occurred in the late 1970s. Japan was on its way to becoming the largest economy in the world. The U.S. was able to salvage the automobile sector, but lost its dominance in the electronics division. "The U.S. industry's light truck platform, which was protected by tariff from foreign competition, became the basis for the next several generations of U.S. ...read more.


The emergence of China and India can provide benefits to our economy. As these two countries develop as markets, we will be able to sell goods and services to them. However, the number of U.S. exports is currently being squashed by the number of our imports. The Future of Sourcing The future of global marketing is not known at this stage of the game. There are many theories however. One such theory is that over the next 20 to 30 years, the rise of the four largest emerging markets, known as the BRICs - Brazil, Russia, India and China, could create a dramatic effect on the world economy. In turn, China and India could surpass most of the major economics. Currency appreciation, in addition to growth could help BRICs rise. Summary In conclusion, global sourcing makes good sense. If work can be performed more efficiently and for less cost elsewhere, why not? Additionally, the benefits may be seen worldwide. Opportunities for growth and expansion in other areas here in the U.S. will open up as the more menial, labor-intensive positions move elsewhere. However, larger countries, such as the U.S., China and Japan, need to ensure that human rights laws are not violated when entering into contracts with other countries, and within their own employment sector. ...read more.

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