Outsourcing
&
The Economy
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What is the Impact of Outsourcing on the Economy?
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Outsourcing has the potential to make an economy more advance with efficient firms.
What is the economy, outsourcing & the potential impact that outsourcing has on the economy?
An economy is a system of interrelated production, consumption, and exchange activities, outsourcing is the practice of passing business processes among other to an external firm making them efficient. The potential impact of outsourcing for an economy is an increase in firms.
In this document; the economy will be defined in the first part, in the second part, outsourcing (outsourcing strategy) will be discussed & finally, the potential impact of outsourcing on the economy (III- Outsourcing & Advancement) in the 3rd part.
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I- Economy
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Economics is divided into 2, macroeconomics & microeconomics. Macroeconomics is concerned with economy-wide phenomena such as gross domestic product (GDP) while microeconomics shows why products have different values. It is concerned with how businesses & individuals conduct and benefit from efficient production. An economy is a system of interrelated production, consumption, and exchange activities; which determine how resources are allocated within an economy, production (including the other 2 activities) is made by various firms, from different industries.
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II- Outsourcing & Firms
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The use of outsourcing strategy by firms enables them to make more profits by having less expense (less expense on wages) and increase their spending (in research & development (R&D), investment), this will enable them to be more competitive.
Firms enable economic growth; outsourcing enable firms to grow, since they will have lower expense & have access to business processes that they desire. Firms are able to outsource certain areas, rather than downsizing or eliminating their functions (business processes). The efficiency provided by outsourcing will enable firms to passe the lowered cost of production to customers.
III- Outsourcing & Advancement
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Outsourcing is important in an economy since it can lead to the creation of more firms as a result of the efficiency (that is enabled by outsourcing) in running a new firm. An increase in the number of firms (made possible by outsourcing) can be the result of the creation of those firms by all the available entrepreneurs (new entrepreneur or former employees). These can enable the creation of more firms in all industries for example: financial sector, quantum industry (quantum computer, quantum sensing, quantum internet), quantum mechanics (materials), 4.0 technologies, space industry, private cities for tourism that can have different transportation system, habitat, communication & or energy (flying city, 4D) & generative artificial intelligence (GenAI) and their applications, or technologies that add industries to the existing number of industries (industry/industry within industry) such as electronics tablet, e paper display (vehicle) or robotics (home) etc. With the rise of outsourcing, artificial intelligence (AI) & robotics (4.0 industrial revolution) in the economy, the need for efficiency by firms has increase in order for them to operate, more firms with a good access to financing (ex. lending) will be beneficial to the economy. Leveraging outsourcing such as business process outsourcing -BPO (efficiency & business processes), 4.0 industrial revolution technologies ( high & quality production & efficiency) & artificial intelligence (effectiveness), new firms will bring growth (revenue & expense) & variety (goods & services) to the economy, this will be seen in the economic cycle. An efficient firms may have half the size of current firm but with the opportunity to bring variety to the economy, more firms will be needed.
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To conclude, outsourcing enables firms to be more profitable & has the potential to increase the number of firms with all departments desired in all industries.
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