Service Industry (3): Offshoring, Outsourcing, Global Economy Flashcards
What is offshoring?
Company manages its own firms in a foreign country.
What is outsourcing?
Company purchases goods from a foreign supplier (that is independent from the entity)
How are deindustrialization and offshoring related?
Companies began to offshore to countries with cheap labour, causing deindustrialization for home country
What are the three ways in which offshoring popularized?
- GATT, IMF, World Bakn
- Tech improvements like ships, air travel, radar
- Communications like satellite
What are the two types of offshoring?
- Electronics Production
- Finance
When did offshoring in electronics production begin?
In 60s, US companies offshored to East Asia.
Japan offshored to Hong Kong/Taiwan.
What complex strategy did many companies shift to by the 1980s?
Global Production - spreading different stages of production across multiple countries that can do it best.
What are some cons of global production on the business side?
Problems in one plant can slow down entire process.
Difficult to coordinate, offshore R&D, and be consistent.
What are some cons of global production on the ethical side?
Low wages, weakens unions, bypass laws
What is offshoring finance?
Moving banking out of the control/regulation to avoid taxes.
What were the Panama Papers? When?
In 2016, millions of leaked documents from a Panamanian law firm showed companies hid assets, avoided taxes, and laundered money. 140 politicians investigated.
What are the negative effects of offshoring finance?
Lost tax revenue to governments - estimated $130 billion lost corporate income tax per year
How are the two types of offshoring related?
Accelerated at same time in late 70s after Bretton Woods ended.
