Possibility of off-shoring and outsourcing - 4.2.1

A key difference between offshoring and outsourcing is that the offshored element of the business is still part of the same global business but outsourcing means a completely separate business takes over the work.

Offshoring - When a company moves various operations to another country for reasons such as lower labour costs or more favourable economic conditions in that other country.

The key reasons for this is cost minimisation as the production process can be undertaken at a reduced costs in comparison to the domestic economy. Closeness to market will reduce transport costs for businesses and might allow for easier access to consumers, particularly if operating in the country being targeted e.g. Jaguar Land Rover have set up production in China. As well as this they will take advanatge of economies of scale from operating in larger international markets and having access to more specialised suppliers and services. 
However, offshoring includes the fact that public and employee relations may suffer due to moving jobs abroad, higher costs such as training, poor customer services and risks to legal protection for key business information such as patents and brands. 

Outsourcing - A practice used by companies to reduce costs by transferring portions of work to outside suppliers rather than completing it internally. Outsourcing is an effective cost-saving strategy when used properly.

This is often done to take advantage of another business's specialised skills, which will help them to improve their quality, cost effectiveness and worker flexibility. For example, Apple outsources the production of its iPhone to Foxconn in China. 

Advantages of outsourcing are similar to those of offshoring and also include the business being able to focus on its own core areas, and savings on spending on new production facilities. 

Disadvantages of outsourcing are also similar to those of offshoring but also include a potential loss of customer service and brand recognition as outsourcing businesses may work for many other different customers.