Outsourcing and Offshoring

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Case 3: Outsourcing and offshoring The case highlights one of the important topic of Managerial Economics, i.e. how decision relating location of production are made. Review the news report in The Economist “Welcome home” ( http://www.economist.com/news/leaders/21569739-outsourcing-jobs-faraway-places-wane-will-not-solve-wests ) and the special report on “Outsourcing and offshoring” ( http://www.economist.com/news/special-report/21569572-after-decades-sending-work-across-world-companies-are-rethinking-their-offshoring ). Visit websites with articles on outsourcing. Based on your review, please write a short paper of no more than 5 (five) typed pages that should include: 1. What is the difference between outsourcing and offshoring? 2. What are the advantages and disadvantages of outsourcing? 3. What is reshoring? Why some companies are reshoring manufacturing in the United States? 4. How Bangladesh can benefit from rising costs of production in China? 5. What are the challenges and opportunities for Bangladesh posed by reshoring of manufacturing in developed countries? PDF version of the news report and the special report published in the Economist. Welcome home The outsourcing of jobs to faraway places is on the wane. But this will not solve the West’s employment woes Jan 19th 2013 |From the print edition • • “IDEALLY”, said Jack Welch in 1998, when he was chief executive of General Electric, “you’d have every plant you own on a barge to move with currencies and changes in the economy.” Reality followed vision for Mr Welch, who was a pioneer of offshoring, setting up one of the first offshore service centres in Gurgaon on the outskirts of Delhi. GE’s line has now reversed. Jeff Immelt, Mr Welch’s successor, calls outsourcing “yesterday’s model”. He has returned production of fridges, washing machines and heaters from China back to

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