4.2.1 Outsourcing and offshoring

Question 1

Outsourcing

examples

Answer 1

Where a business function is contracted out to a specialist external provider (home or abroad)

e.g some of it’s product manufacturing, call centres, website development, legal work

Question 2

2 pros of outsourcing

Answer 2

1) Can benefit from specialised knowledge from business they outsource too

2) May allow you to accept contracts that they would have otherwise turned down. (e.g can outsource manufacturing products to help keep up with demand) -> also means doesn’t have to invest in new production facilities

Question 3

2 Cons of outsourcing

Answer 3

1) relying on 3rd parties - less control over the quality of outsourced work

2) Maybe cultural & language barriers -> can effect work

Question 4

Offshoring

Answer 4

moving operations and manufacturing of your business to another country with lower production costs

Question 5

2 pros

Answer 5

1)Access to lower wage rates/labour costs

2) Access to skilled labour/raw materials

Question 6

3 cons of offshoring

Answer 6

1) Damage to business reputation in home country as jobs may not be available

2) As economies develop production costs also rise

3) Cultural and language barriers