Offshore Outsourcing: The Role Of Globalization In Business

Globalization is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology. This process has effects on the environment, on culture, on political systems, on economic development and prosperity, and on human physical well-being in societies around the world.( http://www.globalization101.org/what-is-globalization/)

The concept of globalization is not new to the world. Most commentaries on developments in strategic management start with the observation about the changes in the business environment. Globalization can be describe as the impact that a particular concept or element from one country being spread

Outsourcing is a practice used by different companies to reduce costs by transferring portions of work to outside suppliers rather than completing it internally.

(http://www.investopedia.com/terms/o/outsourcing.asp)

Out sousing can be further divide in to three, near shore outsourcing, onshore outsourcing, and offshore outsourcing. This is one of effective cost saving mechanism for companies to follow when the need expertise and skills which they do not have in-house.

In modern business environment net work organizations are common. Those are much more similar to out sousing. This is a situation where a company that is having man other companies linked to it but it appears to the customer as one company. To illustrate the features of network organization,a good example to use is the online retailer Amazon.com. For amazon.com it does not have its own manufacturing units but rather it’s all suppliers are coming from outside. This method can be consider as the extreme use of out sousing.

There are lot more methods of globalization as I mentioned above and business entities analyze those methods according to its business strategy and implement

Strategic Risk, Operational Risk, Technological Risk, Economic Risk and Financial Risk are some of the major risks which companies faced when operating globally.

When consider about the investment in Electro tech economic risk and operational risk may have high impact on their project. Economic risk includes the effect of fluctuations in exchange rates and interest rates, changing in monitory policies and fiscal policies. Those changes can influence in many ways to investments special y in foreign countries.

Operational risks include underperformance of suppliers, shortfall of goods and services,lack of perfect logistic and inventory. All these negative points will lead to in efficiency in production. Since Electro tech’s investment is carried out in order to enhance it production Facilities Company will have to face above operational risks and there should be proper risk management plan in order to minimize its risks.