“For decades, multinational organisations have evolved models for operating amid expanding
geographies. Over the past ten years, with advances in information technology, a new approach
has taken hold: one that centralises data and decentralises functions. This new model explains
how American companies can engineer car models in China, perform database research in India
and underwrite US land titles in the Philippines. What is more, it foretells even greater shifts of
processes, services and higher-level functions as more offshore labour markets advance in
language and technical skills.”
Source: Rutherford, B., and Mobley, S. (2005)
Read the following article to gain an overview of offshoring:
Rutherford, B., and Mobley, S.. 2005. ‘The Next Wave: refining the future of offshoring’
Journal of Corporate Real Estate, Vol. 1, No. 1, pp. 87-95
Read the following transcripts (available on the Portal) to learn a little more about offshoring:
7:30 Report, 2006, ‘Business ‘offshoring’ gains momentum’, TV Program, Australian
Broadcasting Corporation, Australia, 26-06-2006.
7:30 Report, 2010, ‘Business Virtual office Becomes a Reality’, Tv Program, Australian
Broadcasting Corporation, Australia, 02-02-2010.
Chapters 4, 5, 6, 8, 9, 10 are relevant for this assignment.
You are the Human Resources Manager for a small firm (approx. 50 persons). The CEO watched a
7:30 Report segment on TV on the use of offshoring and was very attracted to the idea. She is
thinking of using offshoring to provide labour for some key support functions of the business: IT
Services, Accounting activities, Customer Services and Marketing. Before looking into the
practicalities of doing this, she would like you to prepare a report on the difficulties associated
with managing staff in another country.
~ 2 ~
You are required to compile a report that covers the following items:
1. A description of offshoring, its history, advantages and disadvantages.
2. Identify and describe five (5) areas related to managing people (drawn from chapters 4, 5,
6, 8, 9 or 10) that need to be considered. Explain why these areas are important to think
about before adopting offshoring.
3. Provide specific recommendations for the CEO to overcome any difficulties that you have
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Towards the end of the 20th century, growth in information and communication technology has led to emergence of new forms of businesses. One of the emerging models of businesses is offshoring. Offshoring has structured international and domestic businesses in different ways. It has led to emergence of new labor economy where the domestic labor market is no longer a limitation for successful operation of a firm. Most companies which were previously forced to conform to strict domestic regulations are now finding new labor frontiers beyond their domestic market. Firms are no longer limited by the domestic labor conditions (Bliner, 2006). Most firms in developed countries have found new labor market in developing countries which charge low wages for similar quality work. Therefore, offshoring has revolutionized international labor market in different ways. However, offshoring is not a bedrock success for most firms. It comes with various challenges, especially in human resource management. Management of the domestic labor is very different from management of the international labor and this has become a major challenge for most firms (Mark, 2007). While some firms are moving their production units to low waged markets and their management, others have taken a different route and are off shoring their services to international firms with negligible interference with their management. For most firms which set operation overseas, people management becomes difficult due to cultural differences. This means that there is need to understand local business culture for firms which are establishing operations in a foreign country.