Leslie

Van Scyoc
IMS 3310
Paper #1
Outsourcing and Globalization

Weve all heard unemployment is a bad thing and we want to keep the unemployment

rate at a specific percent, but what are the consequences of doing this? By outsourcing jobs

from the U.S. to foreign countries, we are raising unemployment in America, but its not all

bad. By outsourcing, we are able to have lower labor costs driving a lower consumer price on

goods. There is no right and wrong as far as having a balance, but there are extremist who

will argue that outsourcing is the only option or having jobs here is the only option

(Tverberg, 2015).

An estimated 14 million jobs have been outsourced; nearly double the amount of

unemployed, 7.6 million, in the US (The employment situation, 2017). Sure, if we brought

back all the jobs we outsourced, we could not only employ the unemployed, but also take

part-time employees and make them full-time. Currently we stand at what is considered a

healthy unemployment rate of 5%, which recently rose from 4.9% before March. We need

a healthy unemployment rate to drive a normal consumer market (Inskeep, 2013).

The consumer market is driven by price. If we increased the prices of all consumers

goods, not everyone would be able to afford the same items they once enjoyed. Normal items

would soon become luxury items and inferior items would soon become normal items. The

whole balance in the U.S. would be thrown off. Unemployment is an issue of globalization

because we want to outsource, but not too much. Outsourcing will never, well should never,

be eliminated.

We have to have outsourcing, especially for human resources and marketing. By

outsourcing U.S. business are able to promote their business by having local marketing and
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contacts in other countries. It is necessary to promote these relationships to help U.S.

businesses grow and develop. Businesses will grow and develop because having a foreign

and domestic market makes them more competitive. If no one outsourced, companies will be

forced to hire more expensive laborers, which will put struggling companies out of business

in an instance(Amadeo, 2017).

President Donald Trump based part of his campaign solely on bringing back the

American jobs. While his plan to create 25 million jobs sounds wonderful from the idea, the

effects will not be what we are expecting. As stated above, his plan to eliminate outsourcing,

will drive a less competitive market, lose foreign contacts and consumer markets, and

increase the consumer price here in the U.S. Even if Trump keeps the minimum wage at

$7.25, as his proposed plan stated, this will still drive costs to increase, considering we were

paying maybe half the minimum wage for the same labor in other countries (Amadeo, 2017).

While Trumps campaign was coming to an end, he attacked Ford Motor Company

for announcing the move of their small car production facility to Mexico (Kelsey, 2016).

Fords plan to shift the facility was going to have no job impact in the U.S., but they were

outsourcing in order to make a more of a profit due to cheaper fuel prices and decreased

labor wages. Due to the lowered gasoline prices in the U.S. it is making it very difficult for

Ford to make any profits on a small vehicle produced in the U.S. Trump argued that Ford

would be taking away jobs, but Ford announced that the current employees would still be

employed, but working on large vehicle production instead of small vehicle production. Ford

also announced that in the last 5 years theyve created 28,000 jobs in the U.S. itself (Reuters,

2016).
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IMS 3310
Paper #1
By January of 2017, Ford chief executive, Mark Fields, announced that Ford Motor

Company would be ditching their plan to outsource to Mexico and instead expanding their

Michigan plant in light of new technologic opportunities. The company reevaluated future

opportunities and realized that keeping the plant here in Michigan would lead to more

economic benefits in the long run. The new extension of the plant will be in Flat Rock

Michigan, where 700 new employees will be working on building self-driving and electric

cars (Pacquette, 2017).

By keeping the production here in the U.S. Ford will be able to learn new technology

and engineering skills. Ford feels that keeping technology near the engineers is an important

thing, at least in the first generation and that gives them a lot more control to monitor a

system. After economic consideration, Ford realized that the demand for small cars was

decreasing, so the ultimate decision came down to having a place where innovation and new

product development for electric and self-driving cars would occur, and that was Michigan,

not Mexico (Pacquette, 2017).

This is a perfect example of a failure to outsource. While Ford Motor Company had

not gone through with the project already, they made the economic prediction that keeping

the jobs here in the U.S. would be more beneficial. Ford acknowledges that advancements in

technology will lead to a decrease in available jobs, but are still finding ways to create jobs

every year.

Just because Ford Motor Company failed to outsource this project, doesnt mean

every attempt to outsource will fail. When Ford began, they originally outsourced most of the

accounting department to India. Ford found that India was able to provide a high level of
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quality and reliable services and eventually began to outsource their software development

center to mange their e-commerce solutions in India, as well. It wasnt long until Ford also

outsourced their call center to India as well due to decrease labor wages. By working with

India, they are able to use flexible pricing options, premium quality services, great

technological infrastructure and capabilities, IT strategies, quick time-to-market, and time

zone advantages (making it easier to provide 24/y services) (Pais, n.d).

Outsourcing is not a guarantee that your business will profit. Although some of the

benefits of outsourcing are great, these are not promised with each project. A true benefit

analysis must be done before deciding where to conduct business, whether domestic or

foreign. One must ask several questions to determine if outsourcing is a good idea, such as:

what will the demand be in the future, will this decrease my expenses, will this create good

relations with foreign countries, will this provide a new consumer market, and many more.

I propose that we create jobs that are needed and specialize in the departments that we

can. If I were the CEO of Ford I would make the best decision economically. By creating

new jobs in the U.S., Ford would be able to hone down on new technology advancements,

that they wouldnt necessarily see if the facility was in foreign territory. There is no need to

eliminate outsourcing, as it actually promotes the U.S. economy as a whole. While an

unemployment rate of 0% would be terrific for any country, it is inevitable that any given

country will have an unemployment rate of some percentage greater than zero. Outsourcing

allows the U.S. to have a competitive market, keep low consumer prices, and promote

growth and development for businesses, including technological advancements.

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Amadeo, K. (2017, January 23). Can Donald Trump bring back American jobs? Retrieved

March 03, 2017, retrieved from https://www.thebalance.com/trump-and-jobs-

4114173

Amadeo, K. (2017, January 02). How outsourcing jobs affects the U.S. economy. Retrieved

March 03, 2017, retrieved from https://www.thebalance.com/how-outsourcing-jobs-

affects-the-u-s-economy-3306279

Inskeep, S. (Producer). (2013, January 03). What is a good unemployment number, really?

[Transcript, Radio broadcast]. In Morning Edition. Texas: Red River Radio.

Kelsey, A. (2016, September 15). Trump Attacks Ford Motor for Outsourcing Car

Production to Mexico. ABC News. Retrieved March 03, 2017, from

http://abcnews.go.com/Politics/trump-attacks-ford-motor-outsourcing-car-production-

mexico/story?id=42112216

Pacquette, D. (2017, January 04). The real reason Ford abandoned its plant in Mexico has

little to do with Trump. Chicago Tribune. Retrieved March 3, 2017, from

http://www.chicagotribune.com/business/ct-trump-ford-electric-car-20170104-

story.html

Pais, N. (n.d.). 5 biggest US companies that outsource to India [Web log post]. Retrieved

March 03, 2017, from https://www.31west.net/blog/5-biggest-us-companies-

outsource-india/

Reuters. (2016, November 16). Ford is moving small car production to Mexico. Retrieved

March 03, 2017, from http://fortune.com/2016/11/15/ford-move-mexico-trump/

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The employment situation - January 2017. (2017, February 03). Retrieved March 3, 2017,

retrieved from https://www.bls.gov/news.release/pdf/empsit.pdf

Tverberg, G. (2015, July 11). Twelve Reasons Why Globalization is a Huge Problem.

Retrieved March 03, 2017, from https://ourfiniteworld.com/2013/02/22/twelve-

reasons-why-globalization-is-a-huge-problem/