Global Sourcing Is The Strategy Economics Essay

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

The developed nations recognized the scope of their products or services in the developing nations indeed which led to expand their business boundaries towards foreign market. This process is known as outsourcing.

Global sourcing is the strategy which is used to expand the range of acquisition process to include that operates in other countries. Strategic sourcing is the business process which is used to manage the order and selector process of vendor internally. Because of the global sourcing the development is high

Outsourcing can also be defined as the process of buying services and goods from outside foreign vendors. Japan resourcing is not really a new phenomenon, because of Japanese historical organization in all the industries and markets also aligned themselves with one industry.

In the past few years Japan has faced all the natural disasters more than any other country, but it has improved and all the country was set back to normal within few months this is mainly because of the worth of the hard work of countries outsourcing and also the new technology they developed.

Even though the Japan's outsourcing is not as big as America but the GDP is growing rapidly and is also estimated to cross U.S in next five years this information is found by recent survey on pacific market.

There are also many challenges for the outsourcing of the Japan they are like barriers for the country which are important to be eradicated immediately. They are:

Human resources issues are a great challenge in Japan because of its traditional lifetime employment. Right now this is breaking down for the pressure created due to increase in economic pressure

Cultural factors of Japan are functioned with a concept called kieretsu(a group). But now it is looking to do partnership outside its group.

Outsourcing attitude of Japan is suspicious because the controlling of the services to external organization is new to Japan

Coming to the technology the ability of Japan is quick and elastic. The main question which is occurring is how to maintain balance between global market and local market and also how to make the organization more practical. And also to make the companies to try new innovative approaches for making the business performance improve.

They must outsource their in their own way rather than the way which U.S does .they will secure human resource issues and will start with selective oursourcing.

Since most of the developing countries have various cultures and regions, therefore the market size is huge which made the developed nations to concentrate by penetrating to the market by utilising different segmentation methods.

When they decided to expand their business, there were not sufficient skills in the developing nations. In turn these nations provided they required education and services to do their work and this out sourcing helped developing nations to better their economy.

In 1970, Japan started exporting their electrical products to US but they faced problem from customer that's why they decided outsourced their business to US.

Driving factors for outsourcing.

to expand their business market

to get more profit

to sustain in the cut throat market

cost effectiveness

To be a part of next emerging market these are the next decade's world economy holders.

Strength and weakness (Pros & Cons of outsourcing)


Developed nations can extend their brand.


Low wages


Managerial Conflicts

Communication gap

PESTL Issues


The government is not fully supporting outsourcing; they are very much interested in employing their own citizens rather than other citizens


Toyota is producing auto mobiles throughout the world if they won't take care about pollution and other issues Japan will cancel their contract with that country


Most of the unemployment opposes the process of outsourcing


Ethical issues are whether they are providing good values to them or not

The major companies decided to

The present world economy is with the developing nations especially "BRIC" (Brazil, Russia, India, china) countries.

As the adviser of ministery of trade of japan iam expressing my views

Japan is one of the developed nations, as we know they were very much in technology, if any new technology comes in the market they were the first to grab the opportunities. Most of the firms are very much interested in outsourcing there business to emerging markets ,they are leading in many businesses especially auto mobile and electronic .this is one of the cause many companies want to outsource there business to other markets so they have decided to outsource total manufacturing and other activities those are very big issue to Japanese economy because every firm is manufacturing in developing nations .by that some percentage of country economy is going away from the country economy ,

There are many oppositions against to outsourcing mainly from mother country from where it is outsourcing the major work is shifting to other countries that's why critics are opposing it is a valid critique, because for getting more profit and to save other manufacturing costs they are moving away from country in turn they are behaving like migrants ,so which is not good .

Employing the child labour

Now a day's major countries of world aware that child labour is illegal ,but in still some areas we can see small kid s working in a factory ,to overcome this issue if we found any child labour rather than taking some penalty ,we need to make new rule that cancelling the licence of the firm

When Lehman brothers collapsed, total world economy gone down many were became jobless especially many students graduated from school and those who are doing some other jobs they have lost their jobs because of that many Japanese started going out side the country for job around 100000 went outside of the country for job n 2008.japanese themselves outsourced for employment ,this was highest figure n last 20 years.

If Japanese outsourcing there call centres to India or china Singapore they are not taking Indians nor Japanese speaking Chinese they are taking only Japanese ,because they know that their customers won't feel comfortable with other citizen who is speaking their language and they want to work with their Japanese.

By this they are helping the Japanese government to reduce the some percentage unemployment, but noticed that they are paying less money to the people those who are working outside of Japan they working in Japan,

I recommend that for at least salary difference not more than half of the salary what they get in Japan in foreign they also need to consider other employees

I do accept it is helped some countries to have general needs in India and Africa and some other developing countries to have employment in their countries ,take an example of Toyota ,they started Toyota manufacturing in India and African countries and Brazil ,China and Russia ,this reason many people got jobs in good things for countries ,there s also we have negative that they are paying very less and they are getting huge labour for less money


For call centre person or mechanic in the auto mobile manufacturing company if they work in Japan they will get £20 in developing nations same employees will available for 25%of that salary this quite not good

MERITS &DEMERITS Of outsourcing

Managerial control :when outsourcing a business we will have contract with other company ,there strategy is might be different to the mother company ,we might be having different managerial skills for that person ,thats why it varies and there may be loss of managerial control ,because we are just hiring a company for our product to expand in that country ,so he didn't know about mother country objectives ,thats why this loss of managerial control occurs.

Example: when wall mart outsourced in Germany with in a few days they they shut downed there branch.

Hidden cost

When we outsource a business you will estimate only major cost not other costs like ,if currency exchange rate changes you have to pay extra money and if those employers are not fully trained ,again we have to provide training which is hidden cost

Example: when good hope hospitals decided to start their services in India when they signed the contract they didn't know they have to give any training to them

Threat to security and confidentiality

When we outsource a company to foreign we didn't know the security issues in that country and we are not sure that those employees are how much they are trust worthy to keep company secret confidential.

Example: Japanese will hire their people as HR managers and they believe that they are confidential and loyal to firm.

Quality Problems:

When we outsource a product to outside in order to reduce the cost effectiveness and to save the raw material cost we will be using first class raw material. Where we can differentiate the quality of the product . eg., when we see a electronic product, if u purchase in developed nation it will give more services the same item if u take in developing nation the difference is compare to develop market , the developing market price is low and market size is huge that is why they will change the quality of the product in various areas which is not good.


Focus on core activities:

When we outsource a business our main focus will be on core activities. Eg., for IT services we are outsourcing the services to developing countries like India

Cost and efficiency saving:

When we outsource product or service to a country the major advantage cost effectiveness and we can get efficient staff to do work in toughest times. For that we can save our efficiency . when it comes to cost we are getting the labour at very low wages and other infrastructure and utilities everything will be of very less charge . eg, in Japan any person is working for IT firm will be getting 100YENS for the day if that work is outsourced to India roughly he can get 200 YEN in a month. By this there are paying less.

Reduced overhead:

Economy of outsourcing countries and market size are huge so they have to do the overall things in a bulk manner. For that they are recruiting three persons for one task they are not even paying 3% salary not even equal to 0.5 salary of the person. They can reduce their overhead cost

Staff and flexibility:

We have compared with developed nations these people are well motivated and dedicated towards flexible shifts that means they are very much interested about doing work in various shifts. And the people are well trained and can do the work in 6 days weeks.

Developing internal staff:

By outsourcing we can get more empowered employees to reach organizational objective where they are very much loyal to company policies by this we can develop more internal staff those who are well motivated and highly engaged empowered employees.

Special Features of emerging markets:

Low wages

High quality Labour for manufacturing and other skill services

Many countries have large reserves of natural resources

Market size

Market intensity

Legal issues of the government

This will help developed countries to outsource their business to developing countries.


I would recommend that we should not pass a law against outsource we should make some corrections and pass a new law which consist of they need to pay reasonable wages and they should not be any child labour. If they are not following we have to cancel their license in order to overcome the issue of outsourcing ease of low wages.

In Japan financial crisis happened in 2008, they were 100 thousand citizens of Japan migrated to foreign countries where they are getting very less pay and company GDP also gone done 0.32%. if we make a rule that first they should employee Japan citizens rather than developing countries citizen.

While outsourcing they are not much worried about pollution and effluence so if by having contract with outsourced country we (Japan) should come up with a contract they have put a limit on carbon emission tax. Then they will be think about environmental issues.


They need to give very appropriate salaries and they have to provide all health and education services to their family members then only we have to give permission to them.

In developing nations there are no that much serious regulations against pollution because those nations first see about their employment and growth of their economy ,in Japan they have restriction of effluents and air pollution wisely they think that we don't have any issues and can construct the factory anywhere ,obliviously they will see for low poor environmental standards and start polluting air water which is unethical.


If they have a manufacturing firm in Japan that will be far away from living area and for effluent there should be grounded, but if you see factory in developing nation it is near to the living area and no proper sewage system.


Before approving them for outsourcing speak with that country environmental minister to get approved.

Global sourcing helped many nations to increase their GDP .