In today’s global economic world, every nation connect with other nations for trade purpose and according to their trading partners each nation has its industries, technological development, investment policies, employment and income level, service sectors, living standard. (Carbaugh, 2013) It generate new concept called “Globalization.” Globalization is the process which involved transfer of goods, services and resources among different nations through the economic integration, trade, immigration, foreign direct investment. It increases degree of interdependence among the nations.
According to Swedish author Thomas Larsson, “Globalization is the process of world shrinkage, of distances getting shorter, things moving closer. It pertains to the increasing ease with which somebody on one side of the world can interact, to mutual benefit, with somebody on the other side of the world” (Larsson, 2011)
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But, after 1980s, developing nations like china, India, also involved in the process of globalization and started manufacturing products. (Carbaugh, 2013) It leads to economic growth in developing countries. The main purpose of Uruguay round (1986-1993) was to eliminate tariffs and nontariff trade barriers. it has achieved tariff cut in the area of steel, medical equipment, construction equipment, pharmaceutical and also it has decreased nontariff trade barriers. It increased export-import trading in the world. (Carbaugh, 2013)
Developing countries have abundance of labor which helped them to products different, large quantity of manufactured products at lower wages. Also, in developing nations production cost is comparatively low than developed nations. It increases competition in international market. To survive in competition, to reduce cost of production, and to increase the profits, industries setup their assembly plant or some facilities to outside from countries (mostly in developing countries) which is called offshoring. (Wiener, Vogel, & Amberg, 2010) But long distance supervision is difficult for any company to operate; it increased demand for low wage labors internationally. This lead to new and more recent aspect called Outsourcing.
There are four powerful factors which influenced economic operation. These factors are demand, supply, interaction of technology, incentives offered to entrepreneurs or industries and they innovate idea of Outsourcing in globalized world. (Quinn, 2000)
It is one of the most dynamic ideas in economic revolution which change international economy and international trade pattern of all countries in the world. “Outsourcing is procuring from external sources services or products that are normally part of an organization.” (Heizer & Render, 2012) Outsourcing is cost saving strategy which involves transfer of some portion of work to outside suppliers instead of doing it inside of the company, also it sometimes also include transferring of employee from one country to another and giving employment to other countries workers for cost reduction. (Investopedia)