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Module 3 - Case

Globalization

Assignment Overview

Global Compensation Issues

The growing world economy has led to many more employees working internationally. As such, organizations with employees working throughout the world face some unique compensation dilemmas.

Variation in laws, living costs, tax policies, and other factors all must be considered in establishing the compensation for local employees and managers, as well as managers and professionals brought in from other countries.

One significant global issue in compensation design is how to compensate the employees from different countries. Local wage scales vary significantly between countries. For example, in some less-developed countries, pay levels for degreed professionals may range from $10,000 - $30,000 a year, whereas in Europe and the US, individuals with the same qualifications are paid $45,000 - $80,000 a year.

These large compensation differences have led to significant “international outsourcing” of jobs to lower-wage countries. For example, the movement of call-centers to India is an example.

Case Assignment

Drawing on the material in the background readings and doing additional research, please prepare a 4- to 5-page paper (not including the cover and reference pages) in which you:

  • Write a persuasive essay in which you discuss the practice of international outsourcing (a.k.a. off-shoring) and discuss the ethical implications that are associated with international outsourcing.
  • As the Vice President of HR, would you consider international outsourcing for your organization? Justify your response.
  • Pick a country in South America and conduct a PEST Analysis to show why you would or would not outsource to that country. A PEST Analysis is a tool used for environmental scanning in which you evaluate a country from a Political, Economic, Social, and Technological perspective.

Assignment Expectations

Your paper will be evaluated on the following points:

  • Precision - Does the paper address the question(s) or task(s)?
  • Clarity - Is the writing clear and the concepts articulated properly? Are paraphrasing and synthesis of concepts the primary means of response to the questions, or are excessive use of quotations how thoughts are conveyed? Are headings included in all papers greater than 2 pages?
  • Breadth - Is the full breadth of the subject addressed?
  • Depth - Does the paper address the topic in sufficient depth?
  • Grammar, spelling and vocabulary - Is the paper written well - is the grammar, spelling, and vocabulary suitable to graduate level work?
  • Referencing (citations and references) - Does the paper use citations and quotation marks when appropriate?
  • Critical thinking - Is the subject thought about critically, i.e., accurately, logically, relevantly, and precisely?

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Explanation & Answer

Attached.

International Outsourcing - Outline
Thesis statement: despite the various benefits that outsourcing on the global economy
such as creating jobs in developing nations and enabling outsourcing firms to be
competitive, it is still got criticisms as it lead to loss of jobs in the local economies while
facilitating the creation of “sweatshops”.
I. Outsourcing contributes to growth of economies of developing nations
A. Creates jobs
B. Increases people’s disposable income
II. Outsourcing enables developing nations to specialize and start new business
A. Reduces the cost of starting new businesses
B. Firms in developed nations focus on technological innovations
III. Outsourcing has ethical considerations
A. Loss of jobs in the domestic market
B. Encourages sweatshops in developing nations
IV. PEST analysis of Colombia
A. Political landscape
B. Economic landscape
C. Social landscape
D. Technological lanscape


Running head: INTERNATIONAL OUTSOURCING

International Outsourcing
Name
Institution

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INTERNATIONAL OUTSOURCING

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International Outsourcing
The Practice of International Outsourcing
Outsourcing an efficient and effective way of reducing a firm’s operating costs. For this
reason, most firms not only in the United States, but across the world are outsourcing their
products in order to remain competitive. Firms are taking opting to produce their products in
developing nations mainly because of low labor costs. For instance, the wage rate in India is
relatively lower compared to that of the United States or United Kingdom. As firms outsource
their products, developing nations also gain a lot. This is because some of the revenues generated
by outsourcing firms are paid as labor costs to their employees. Here, we see that outsourcing is
actually contributing economic growth and development of the developing nations (Robertson,
2008). Despite the various benefits of outsourcing, the practice also has critics.
Outsourcing is defined as the process of hiring foreign employees to do jobs, which
domestic employees can also do. The reason why outsourcing is good for the modern day global
economy is because it enhances efficiency. According to David Ricardo’s 19th century
comparative advantage theory, it is mutually beneficial for the United States to trade with other
nations even if it has an absolute advantage in producing all goods and services. This trade
enables the U.S. to focus on areas where it enjoys more efficiency, hence creating more wealth
and productivity. The U.S. is extremely good at starting new businesses and innovating, and
outsourcing is likely to boost this efficiency (Arrison, 2004).
For example, before the U.S. companies began outsourcing software coding jobs to other
parts of the world such as India, a start-up in the Silicon Valley had to spend a lot of resources
hiring local labor. This is because local labor was very expensive, thereby increasing the cost of

INTERNATIONAL OUTSOURCING

3

starting a business. However, more businesses are likely to be created in the event it is cheaper to
hire labor. The creation of many businesses is likely to spur economic growth and local job
creations as companies re-invest their profits.
It is a matter of fact that outsourcing creates new jobs in developing nations. However,
people need to understand that the market is not a zero-sum game. Besides the obvious benefits
of helping pull poor nations out of poverty, outsourcing also stimulates economic growth of
these nations. Here, outsourcing creates markets for developed nations’ products. Taking into
account how the global market has become competitive, emerging markets in the developing
nation provides firms from developed nations such as the United States a lifeline.
Before criticizing outsourcing, people need to know that the more disposable income an
engineer from Africa has spend, the more he or she is likely to purchase a new product from a
U.S. company. But while the arguments showing the importance of outsourcing make sense, the
debate over offshoring is usually clouded with hysteria and fear. Most Americans think that
outsourcing is a threat to their jobs but fail to think of the other opportunities that comes with it.
Losing a job is not easy, and the same way the world shifted from an agricultural to a modern
economy, outsourcing does indeed displace workers temporarily...

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