Offshoring vs Outsourcing

Offshoring and Outsourcing
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Offshoring and Outsourcing
Quite often, the terms offshoring and outsourcing tend to be used interchangeably and can be confusing as well, but there is a technical difference. Offshoring refers to the physical relocation of a company from one country to another. This involves the relocation of the manufacturing, administrative, processing and other operative functions of the company. For example, GM is one of the notable companies that engages in offshoring through the opening of branches in other countries.
Outsourcing refers to the aspect of engaging a third party service provider, which provides a wide range of services as per the agreements. Most companies engage in outsourcing of technical services where they require expatriate knowledge, and they pay for it. In outsourcing, the parent company may not have full control of its services, and most of the staff may work under the directives of the expatriates.
Both offshoring and outsourcing is a good thing because it provides the much needed competitive advantage for the company. For example, when GM decides to outsource the production of certain parts of a car from Germany or South Korea, the company will have the advantage of developing hybrid cars. Besides, the company will most likely increase its market share because the outsourcing will provide employment opportunities in the host country.
On the other hand, offshoring is a good thing because shifting and relocating the company premises helps to expand on its territories and develop new marketing networks.

Besides, the good thing about offshoring is that the company does not necessarily need to outsource any services, but just relocate the entire production and other services in the host country. For example, if GM opens a new outlet in France and shifts the entire production, it will have the advantage of operating as an American company in a foreign land without necessarily outsourcing any services.

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