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What is offshoring?

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Quick Answer

Offshoring is a technique used by a business to lower operating expenses by basing a portion of the company's business in a different country. This is similar to outsourcing, as it involves work being done in a different country than the customer base and company home.

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Full Answer

One of the benefits of offshoring is that labor is often cheaper in the offshore location. This lowers the total operating costs of the business, which can lead to an increase in profit margins from sales. When a business decides to begin offshoring, its employees in the original country are commonly either laid off or placed in other positions. The company then hires workers in the new country at a lower rate than what previous workers were paid.

In many cases offshoring focuses on moving a specific part of the company while keeping other operations in the home location. For example, a company may move its manufacturing and production to another country but keep sales representatives and all of its corporate workers in its original country. A company also could move its customer service, accounting or information technology to another country, which may decrease the overall costs associated with the company's payroll. India, Ireland, the Philippines, Czechoslovakia and Poland are typical offshoring sites for American companies.

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