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Concerns of offshore outsourcers
Competitive Concerns
Offshore outsourcing makes transfer of knowledge easier which creates competitors to the original companies themselves. Example is China. In 1990s and 2000s American auto makers involved China to make parts for their vehicles but China is now ready to sell their fully homemade automobiles and that too in American markets. Chinese manufacturers are already selling their products such as toys, apparel, cosmetics, and electronic goods to their overseas markets.
Another problem of offshoring is movement of investment from domestic country to foreign country. The money that could have been spent on different sectors in domestic market is now being spent on setting up factories, training foreign personnel and paying taxes in the foreign market. As a result there is a decrease in property values, wages and tax receipts in the home market of the company. However, most of the economists do not agree with this theory.
When a company increases production in foreign market their own domestic workers, though experienced, are forced to leave their jobs, often for good. It causes a shortage of trained domestic employees and they get lesser chance to perform their jobs. Thus the domestic market becomes dependant on the foreign market for those goods and services. Strategically, the foreign country weakens the “hollowed out” domestic country. Thus offshoring creates competitive foreign industries.
Legal Concerns
Legal concerns related to politics are another problem and it is one of the major problems in third world country. A great amount of money is spent for illegal bribe to avoid negative consequences of competitors. Bribing system, management cost of negotiation with officials, risks of detection of illegal activity, risk of breached contracts, etc. Increase the cost and difficulties of offshore business. Bangladesh, one of the popular destinations of offshoring, is the most corrupt country in comparison to Russia, India, China, etc. Other concern is the theft of intellectual property. Sometimes domestic companies find that cosmetically near-flawless copies of their goods are sold cheaper in price than that of legitimate goods. Often these fake goods are returned to the company at the legitimate price. Though IP laws are there, tracing down the overseas fake producer is extremely difficult. If these problems arise, the domestic companies doing business overseas may have no legal recourse.
There are also reports of malpractice.
Educational Concerns
Offshoring experts often say that movement of jobs is necessary because of looming shortage of qualified workers in the domestic market and booming number of qualified candidates in foreign markets, especially in India and China. This system ignores the many unemployed and qualified workers in the domestic market.
But a Duke University study gives us different report. It shows that a large number of efficient engineering students come out from different engineering colleges of U.S. China is supplying maximum number of technology specialists. India is also supplying same number of graduate engineers as that of America, but they are not qualified enough. Only 25% of technical graduates and 10 to 15 per cent of general college graduates are suitable for employment in the offshore IT and BPO jobs.
Retraining Concerns
There are a growing number of highly qualified displaced workers in domestic market. There is one offered solution - that is, retraining to new jobs. But this is not always possible as some are really highly qualified and bachelor degree holders in their fields. Retraining them to their current level in another field may not be an option as there is years of study and cost of education involved.
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