The paper "Reverticalization of Outsourcing and Offshoring" is a great example of a term paper on finance and accounting. Emergently, U.S. companies are shifting their focus from outsourcing and offshoring their operations and subsequently relocating them to the United States. According to Noreen, Brewer, and Garrison (2014), the reversal of the offshoring and outsourcing practice has gained prominence as the leading companies opt to re-strategize their operations by relocating foreign subsidiaries back into the country. This essay is aimed at discussing the advantages and disadvantages of outsourcing and offshoring versus the re-establishment of companies back into the United States. Outsourcing/ OffshoringAdvantages Outsourcing and offshoring practices have been characterized by key advantages that have led to their widespread adoption.
Outsourcing enables companies to transfer production tasks to specialized vendors with the expertise and resources in a particular field. The model, therefore, leads to high-quality products and saving on time. In addition, offshoring facilitates steady growth with limited overhead costs (Noreen et al. 2014). Through offshoring, firms are exposed to low-cost labor and readily available raw materials. On the other hand, outsourcing enhances risk-sharing as companies shift selected responsibilities to other vendors.
In relation to corporate tax, foreign subsidiaries have provisions to defer paying corporate tax until the earnings are transferred back into the United States. Subsequently, the demerits of outsourcing and offshoring practices have been the focus of public debate in light of the recent economic recession. Reverticalization of Outsourcing and Offshoring Offshoring majorly leads to the transfer of employment opportunities to the emergent market. This is in contrast to the emergent trend of re-verticalization that is rooting for the relocation of key companies into the US.
Re-verticalization positively contributes to the creation of job opportunities in the country and revitalization of the economy through the 35 % corporate tax (R. Hira & A. Hira, 2008). The relocation of firms in the US further underlines the effective management of confidential data by eliminating third parties as opposed to offshoring that majorly avails recruitment and payroll information to offshoring vendors. Re-verticalization further eludes risks associated with hidden costs resulting from international transactions and contracts that add up to the overhead costs. Consequently, re-verticalization of the key operations of companies also advances the company’ s focus on customers.
With offshoring, vendors engaged with numerous organizations thereby failing to meet client-specific needs of an organization (R. Hira & A. Hira, 2008). In contrast, re-verticalization concentrates on the core operations of an institution based on the corporate and business strategy of the company.