What is outsourcing and what is offshoring in the context of globalization?

• A. Outsourcing is contracting out business processes to external firms; offshoring is relocating production to another country.
• B. Outsourcing means relocating production to another country.
• C. Offshoring means contracting services domestically.
• D. Neither affects employment.

Answer: (A)

Outsourcing is when a company contracts out business processes or services to an external firm to handle work that would otherwise be done in-house. Offshoring is when production or services are relocated to another country to take advantage of cost differences, access to skills, or markets. The key distinction is that outsourcing is about who does the work (an outside firm), while offshoring is about where the work is done (in a different country). They can occur separately or together: a company might outsource payroll to a specialist firm while keeping it domestic, or offshore manufacturing to another country and also outsource parts of the process to foreign suppliers. For example, a company may use a call-center firm to handle support (outsourcing) or move manufacturing to another country (offshoring), or do both. These strategies can affect employment by shifting jobs to different firms or locations.