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Chapter 8: Problem 2

Which statement is true? (LO4) a) Offshoring is a type of outsourcing. b) Outsourcing is type of offshoring. c) Outsourcing and offshoring are identical concepts. d) Outsourcing is the opposite of offshoring.

Short Answer

Expert verified
a) Offshoring is a type of outsourcing.

Step by step solution

01

Understanding Offshoring and Outsourcing

Begin by defining and understanding the concepts of offshoring and outsourcing. Offshoring refers to the practice of relocating a company's operations, especially production or services, to a foreign country in order to reduce labor and overhead costs. This can be done within the same company (intra-firm) or by hiring another company (inter-firm) to perform the tasks in the foreign country. Outsourcing is the practice of contracting out certain tasks or functions to another company or organization, which may be either domestic or abroad. This is often done to reduce costs, increase efficiency or simplify business operations. Now let's analyze each statement.
02

Statement A: Offshoring is a type of outsourcing

This statement is true if the offshoring process also involves the use of another company or organization to perform the tasks in the foreign country. In such a case, the tasks or functions are not only relocated to a different country (offshoring) but also handed over to another company (outsourcing).
03

Statement B: Outsourcing is a type of offshoring

This statement is incorrect because outsourcing can occur without involving relocation to a foreign country. Outsourcing can be domestic, meaning that the tasks or functions are contracted out to another company within the same country.
04

Statement C: Outsourcing and offshoring are identical concepts

This statement is incorrect because, as explained above, outsourcing refers to contracting out tasks to another company or organization, while offshoring involves relocating the tasks or functions to a foreign country. The key distinction is that outsourcing focuses on the management of tasks, whereas offshoring focuses on the geographic location of tasks.
05

Statement D: Outsourcing is the opposite of offshoring

This statement is also incorrect. Outsourcing and offshoring are not opposites; instead, they are related concepts that can overlap in certain situations, such as when tasks are both contracted out to another company and relocated to a foreign country. With these explanations, it's clear that the correct answer is:
06

Answer

a) Offshoring is a type of outsourcing.

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