CASE STUDY

Answer this question:

Given your learning of outsourcing, can the companies outsourcing its production to other countries
lessen their cost and increase their profit? Justify.

Yes, companies can potentially reduce their costs and increase their profits by outsourcing their
production to other countries. Here are some reasons why:

1. Lower labor costs: In many cases, companies can benefit from significantly lower labor costs in other
countries. This is often because the cost of living is lower, wages are lower, and labor laws may be less
strict. By outsourcing to these countries, companies can pay lower wages, which can reduce their overall
production costs.

2. Reduced overhead costs: Outsourcing can also help companies reduce their overhead costs. For
example, they may be able to save on rent, utilities, and other expenses associated with maintaining a
large production facility in their home country. Additionally, outsourcing can help reduce the need for
expensive equipment and infrastructure, which can also contribute to lower costs.

3. Access to specialized expertise: Outsourcing can provide companies with access to specialized
expertise and skills that may not be readily available in their home country. For example, they may be
able to tap into a pool of highly skilled workers with specialized training in certain areas, which can help
improve the quality of their products or services.

4. Greater flexibility: Outsourcing can also provide companies with greater flexibility and agility, which
can be a competitive advantage in today's fast-paced business environment. By outsourcing certain
functions or processes, companies can focus on their core competencies and adapt more quickly to
changing market conditions.

However, there are also potential drawbacks to outsourcing, such as language and cultural barriers, time
zone differences, and the risk of quality control issues. Additionally, outsourcing can have negative
impacts on local economies and communities in the home country. It's important for companies to
carefully consider the potential risks and benefits before deciding whether to outsource their
production.