Finance:Regional insourcing
Regional insourcing is a process in which a company establishes satellite locations for specific entities of their business at sites that are away from their headquarters. Through this process, companies can take advantage of the benefits one state may have over another (i.e. taxes, education, or workforce) in regards to specific fields of employment.[1] This concept is directly correlated with the more common business model of insourcing, which focuses on the delegating or reassigning of procedures, functions, or jobs from production within a business in one location to an internal entity that specializes in that operation in another location. This allows companies to streamline production, boost competency, and increase their bottom line.[2]
Regional insourcing takes this competitive strategy one step further by applying the classical argument of Adam Smith, which posits that two nations would benefit more from one another by trading the goods that they are more proficient at manufacturing. For instance, if France produced wine better than England, but England was more apt at manufacturing wool, both nations would benefit from trading with one another, rather than trying to produce both wool and wine on their own.[3] Regional In-Sourcing applies this concept to modern business development. Companies still create separate entities for specific tasks, as was the case with insourcing, but rather than these operations being performed under the same roof as the rest of the company, they are undertaken in an environment that is far more suitable to their specific purpose.
Regional insourcing is not outsourcing, as companies do not contract their business out to separate companies resulting in a new business partnership.[4] Instead, they simply relocate certain enterprises underneath the umbrella of the parent company to locations that are more hospitable to their specific needs.
See also
References
- ↑ David Van Adelsberg, and Edward A Trolley, "Strategic Insourcing: Getting the Most from the Best," Training and Development 52. no. 7 (1998): 57-59.
- ↑ Marc J. Schniederjans, Outsourcing and Insourcing In an International Context(New York: M.E. Sharpe, 2005) 3.
- ↑ Adam Smith, The Wealth of Nations: Part II (New York: Princeton Library, 1902), 102-104
- ↑ Robert C. Feenstra, Gordon H. Hanson, "Globalization, Outsourcing, and Wage Inequality." American Economic Review 86. no 2 (1996): 240-245.
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