Question

What if ABC Corporation has targeted 10,000 new jobs in manufacturing this year. Many of these jobs will result in returning work that was formerly performed overseas. What are three advantages and three disadvantages of bringing work back to the U.S. from a foreign country. Cite references.

Answer 1

Advantages

1. More local jobs - Reshoring jobs back to US will bring back jobs to their local economy, which will decrease unemployment. More jobs, means more income in the hands of people, thus more spending. This will give a boost to their economy.

2. Increased quality control - When all the processes and manufacturing is done in-house, the companies will be able to monitor it closely and will be able to apply tighter controls on the quality. They will thus be able to ensure best quality standards they are capable of delivering.

3. Reduced legal and political exposure - Some economies could have a vulnerable political and legal environment, which could expose firm to more risks and increased costs.

Disadvantages

1. Increase business risk - Putting all eggs in one basket reduces diversification benefits for the company. If a firm is completely dependent on one economy, any disaster in that one geography can expose the operations of the company to a significant risk.

2. Reduced access to international markets - While accessing international markets, a firm gains access to a wider customer base, thus a significant potential to increase revenues.

3. Greater cost of factors of production - Local production costs could be higher in US because of higher labor cost or higher cost of raw material. This could lead to increase in production costs and could affect the bottom line of the company.