What is offshoring
Offshoring - definition and meaning
Under the term offshoring one understands the outsourcing of operational activities abroad. Translated into German one would speak of “relocation abroad”. Roughly, it can be subdivided into near-shoring countries and more distant countries such as. China (farshoring).
The major difference to outsourcing is that outsourcing is an organizational relocation. In the case of offshoring, on the other hand, one speaks of a demographic shift.
The main goal of offshoring is to save costs and thus remain internationally competitive. Another important point is to reduce personnel costs. Both wages and training costs are to be reduced. Since the labor costs are much lower in the countries in which this outsourcing is operated, but the quality is the same, many resort to this tool to save costs.
The biggest criticism of offshoring is the loss of jobs in one's own country. The increasing pressure of competition among internal employees is also a point of criticism.
Reasons to use offshoring
The basic requirement for successful offshoring is to find trustworthy partners or service providers abroad. These should deliver the same quality at lower prices.
The reasons for offshoring can be of a business, political, technical or tax nature. Here are a few examples:
- Development of new sales markets
- Lower labor costs
- Higher export costs
- Lower environmental standards
- Shorter / easier approval procedures
- Infrastructure aids
- Shorter sales channels
- lower transport costs
- Lower effective corporate rate
- Less extensive tax base
- Special economic zones
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