Bottom Line Is That Globalization

Outsourcing drops the costs of common goods, many of them commoditized and sold on price in mass merchandisers including Wal-Mart, K-Mart and Costco. The price points of these products enable cash-strapped families who are working to survive this recession a chance to make ends meet. Yet this is just a small percentage of overall outsourcing, as billions of dollars are spent on gaining insights and intelligence from knowledge centers globally for competitive advantage (Sturgeon, Van Biesebroeck, Gereffi, 2008).

The uncomfortable truth too is that the U.S. is also benefiting greatly from other countries coming to this nation to outsource their manufacturing here. In my state, California, the leading exports are civilian aircraft, which are 4.4% of all state exports (U.S. Census Bureau, 2010), electronic integrated circuits, which are 2% and parts & accessories for data processing equipment (1.9%). Asian nations who need aircraft expertise “outsource” their projects to California because our state has the world leaders in this industry, from Boeing and Lockheed Martin to Northrop-Grumman and Teradyne.

As this example illustrates, outsourcing is more about going after expertise needed, less about costs. Is California the global low-cost leader in civilian aircraft? Most likely not. But do the aircraft designed, built and serviced here last for decades in service? Most definitely, one just has to look at the record for the Northrop jets now in service across the armed forces of the world. It call comes down to going after knowledge first and seeking competitive advantage through more efficiency as a result.

References

Sturgeon, Van Biesebroeck,, & Gereffi, . (2008). Value chains, networks and clusters: reframing the global automotive industry. Journal of Economic Geography: Global Production Networks: Debates and Challenges, 8(3), 297-321.

U.S. Census Bureau, Foreign Trade. (2010). Total U.S. exports (origin of movement) via California top 25 6-digit hs commodities based on 2009 dollar value (U.S. Census Bureau Analysis). Washington, D.C.: Government Printing Office . Retrieved.

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