What is Offshoring?

The notion of offshoring refers to the act and the result of offshoring. This verb, for its part, refers to the transfer of an industrial activity from a country or a region to another place with the aim of lowering production costs.

Offshoring, therefore, involves the transfer of jobs, capital, and production processes from one place to another to gain competitive advantage. Beyond the fact that this type of decision is usually linked to a reduction in costs, it can also be associated with the search for better infrastructure or more qualified personnel. See Abbreviation Finder for acronyms related to Offshoring.

Suppose a company produces sports shoes in the United States. Due to an increase in costs, the owners decide to relocate their production plant, and therefore move it to China. In this Asian country they can pay workers lower wages and have a lower tax burden. In this way, while the production of a pair of shoes in the United States cost the company 50 dollars, in China the amount drops to 30 dollars. This allows you to increase your profit margin.

For the region that loses productive activity, relocation is usually a social problem. When a factory leaves a territory, many people lose their jobs. In addition, there is a loss of indirect jobs (those intended to meet the needs of factory employees).

The areas that benefit from relocation, for their part, manage to create jobs, although they are generally poorly paid. This leads us to reflect on the balance of this business tactic, so common today; it is impossible to find a balance in which both regions benefit equally, since the office move itself is carried out with a well-defined interest, which has little to do with generosity or compassion for the workers involved.

When a company makes the decision to resort to relocation to lower its production costs, it knows perfectly well that this practice can offer benefits only because the world is not well organized: thanks to the fact that wealth and natural resources have not been distributed in a fair to all countries, there will always be easy points to exploit.

In the cities that become the targets of offshoring, there are usually no large national companies, but activities tend to revolve around production for major multinationals with foreign roots. In an ideal world, no company would be exploiting its workers for a favorable profit margin, because it would also not be under pressure to create new products every year or to offer them at an extremely competitive price.

Leaving aside the moral issues that relocation hides, we cannot deny that thousands of people benefit from this measure, since jobs in these facilities usually require a lower degree of prior knowledge and official qualifications. In addition, it is common for the number of places to be much greater than in the main offices: for example, while in a studio of a French software development company there may be space for forty workers, it is likely that abroad they gather groups of more of two hundred.

Another benefit of offshoring for those given the opportunity to work in a foreign company is the possibility of a future transfer to headquarters: many people start out doing relatively low-paying, monotonous jobs but eventually manage to catch the eye of others. their employers positively and then they gain access to higher positions, outside the offshoring system.