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Definition of Outsource:
means a company transfers work to outside suppliers normally to reduce costs.
Companies outsource production if another company has a comparative advantage and is able to furnish the good or service at a lower cost than if it were provided internally. Almost any job can be outsourced including customer service, accounting, printing, manufacturing, maintenance, website management, payroll services, and temporary workers. Outsourcing can be domestic or international. For example, a hospital may outsource lab work to companies that specialize in identifying a rare virus. Many companies outsource their manufacturing by moving manufacturing to countries with an educated, but less expensive, workforce to take advantage of lower labor costs. Recessions can lead to an increase in displaced workers. As companies close or cut their production drastically, pressure mounts for governments to reduce the incentive to outsource manufacturing overseas. Governments may respond by enacting protections in the form of import restrictions. The proliferation of outsourcing has created opportunities for entrepreneurs seeking ways to offer goods and services to larger companies that have laid off employees.
Dig Deeper With These Free Lessons:
Managing Supply Using Outsourcing, Tariffs, Subsidies, Quotas & Licenses
Comparative Advantage and Specialization
Production Possibility Frontier