Which of the statements is an example of offshore outsourcing?
A big-box store headquartered in Arkansas has stores in Florida and Alabama.
An American telecommunications company has a call center in Mexico.
An America bank hires an Indonesian company to provide customer service.
A Japanese automobile company buys tires for the models it makes and sells in the United States and elsewhere from a Japanese tire manufacturer
The correct answer and explanation is :
The correct answer is:
“An American bank hires an Indonesian company to provide customer service.”
Explanation:
Offshore outsourcing is the practice of hiring an external company in another country to perform business functions or services. This strategy is used to reduce costs, access specialized talent, and increase efficiency. The key elements of offshore outsourcing are:
- Outsourcing – The company contracts a third party instead of handling the work in-house.
- Offshoring – The third party is located in a different country, usually with lower labor costs.
Why the Correct Answer is Offshore Outsourcing:
An American bank hiring an Indonesian company to provide customer service meets both conditions. The bank is outsourcing its customer service operations to another company rather than handling them internally, and the company providing the service is located in Indonesia, a different country.
Why the Other Options Are Incorrect:
- “A big-box store headquartered in Arkansas has stores in Florida and Alabama.”
- This is neither outsourcing nor offshoring. The company operates its own stores in the U.S. without hiring a third party abroad.
- “An American telecommunications company has a call center in Mexico.”
- This is offshoring but not outsourcing if the company owns the call center. If they hired a separate company in Mexico, it would be offshore outsourcing.
- “A Japanese automobile company buys tires from a Japanese tire manufacturer.”
- This is not offshoring because both companies are in the same country. It is a domestic supply chain relationship.
Offshore outsourcing helps companies lower costs but can create concerns about job loss in the home country and quality control challenges.