How Do the US Companies Affect US Economy?

‘’ How Do the US Companies Affect US Economy? ‘’

‘’ How do International Outsource and Foreign Direct Investment Affect US Economy? ‘’

Introduction

Economic aspects of globalization, financial flows, trade, technology exchange, outsource, foreign direct investment with the knowledge and the mobility of the workforce through the integration of world economies to each other can be defined as.

Economic globalization and the rapid worldwide spread of technology, goods and services cross-border transactions have become increasingly diverse. World Bank, IMF, WTO, GATT, organizations such as telecommunications, information and transportation technologies to make rapid advances and cross-border sales, which aims to reduce the cost to provide inexpensive sources of international companies, the main factors of economic globalization, the environment is prepared.

Economic sense, globalization is necessary to pay particular attention to two points. The first of these capital movements. Thanks to globalization capital flows has a great fluidity and it has been integrated into world financial markets to each other for the first time in history. The best example of financial markets is that the daily volume of more than $ 1.5 trillion. However, this great capital, changed hands rapidly, causing a decrease in the real economy is also increasingly shared. This is also the cause of decline in the shares allocated to production.

The second important point is that international companies. Although the number does not exceed several hundred in the 1970s, now numbers over 40,000 s to find the multi-national corporations, the global economy have become the most important pillar. Turnover of 200 major companies across the world, is more than a quarter of the entire world's economic activity, given the subject easier to understand how serious. General Motors' turnover reached more than Denmark's GNP.

Sum up, I would like to explain how many company type we have and what are they.

1. International Company: After moving to a country a strong central based management system, and settled in other countries trying to enter the company.

2. Multinational Company: Executives to be able to profit distributing company resources, regardless of the identity of the country, without distinction between domestic and foreign operating company.

3. Transnational Company: International business sense or can be passed beyond the limits of transnational and multinational enterprises, political, economic and even ideological boundaries that did not recognize, a multinational company with people from different nationalities such as the organization adopted and developed by the company management.

4. Supranationalism Company: There is no country was founded by an international agreement does not exist and, before the registration of an organization that is connected to this organization and control, and tax firm that was founded in this country, you will get held by the organization, the company will lose the nationality law.

Firstly, I should explain some definition. I would like start with ‘’ outsourcing ‘’ because it is the most popular one for American company. They like it because of more profit.  "The American Heritage Foundation," glossary "outsourcing" word "in some parts, such as motor vehicles used in the manufacture of products and services, in order to reduce costs, foreign suppliers or manufacturers to supply" is defined as.

Today, the 15-20% of total costs of service items is estimated. "Outsourcing" activities, corporate support units held marketing, human resources, accounting, purchasing, financing and service activities in many fields such as customer relationship management to be provided from outside, through the cost savings that have emerged in order to go.

Previously, "outsourcing" services through the purchases of the country, offering a relatively cheap labor region, were made. However, especially in information technologies (IT Services) as a result of the rapid growth opportunities offered by the U.S. firms in the country they previously carried overseas purchases of contracted service. For example, "Bank of America" company, an Indian company in India, previously made ​​their own units, transfer function of the software development for banking operations "offshore outsourcing" (cross-border outsourcing) is defined as.[1]

The main objective of the Multinational companies world-wide economic activity in a universal manner to maximize profit is to integrate and organize; global company an organic structure which is expected to each part of the service. Another reason for the Company's activities into multinational become the most important customer outside the company wants to watch. For example, Volkswagen decided to produce the famous vehicles in the U.S. and many German car parts maker, glass, frame material, brake assembly and parts for diesel injection pumps has led to establish a facility in the U.S. to produce. These one opposite because generally Americans brand establish factory or do outsource because of cheap labor and export the other country easy transportation with oversea countries. But this German brand is so they set up a factory for geographic and wants to watch customer in position. 

Benefits of Globalization on Multinational Enterprises

Five-way multi-national enterprises have shown benefits of globalization as a basis:

A. Speed: Globalization and the removal of walls between national markets, has given businesses greater speed. Thanks to globalization, multinational corporations have had a chance to enter different markets, different products constantly.

B. Reducing Costs: Decreasing the differences between markets, businesses provided great benefits in terms of reducing costs. The low-cost entry to the business standards of globalization, no matter where in the world, have had a chance to achieve. Globalization has also a decline in distribution costs. Points of distribution and manufacturing businesses that no longer make the minimum production costs.

C. Standardization: Globalization in the different national markets, combined with consumers by identifying a common denominator, for these segments led to the introduction of standard products and services. This multi-national businesses, in each national market were rescued from the obligation to respond to the needs of different audiences and different. For example, upper-income target audience of young consumers who choose to be a multinational enterprise, their partner's needs, tastes and preferences have the chance to make the production of goods and services for. In this way the audience will have some common characteristics and standardized according to this definition applies to everyone who will be able to deliver shared services.

D. Deployment Activities: Business, various activities according to the local advantages, has the chance for distributing the various geographic regions. After globalization, multinational corporations, receiving entries from any country of their production to another country, and sell their products elsewhere in the management of all of these functions have the chance to make another country. However, this distribution can be co-ordinate and co-ordination and integration is required to function without any problems.

E. Centralization: Centralization, as already mentioned provides co-ordination of activities which are necessary for the healthy operation of the act of distributing. Emerging technology is no longer a single center management can be made. Business activity spread over a geographical location that covers much of the country, even in terms of computers, video conferencing, internet, and so on. Technology provides the performance of management in a single headquarters.

In This Global Century Two Countries are so Popular for Outsourcing

First one is China. Capital of China is Beijing and this country population biggest force for business and it affects price number of population is 1.3 billion. Major Technical Centers are Beijing, Guangzhou and Shanghai. We can see details below:

Labor Pool: China's technical schools turn out 50,000 graduates annually, many of whom migrate west. Those who stay generally don't speak English.
Costs: IT salaries range from $3,000 to $8,000 annually. No real BPO competency.
Government: China's government has hampered growth due to trade policies and overregulation; intellectual property concerns linger. The hope is that these issues will evaporate as China blends into the World Trade Organization. 

Infrastructure: Infrastructure can be spotty outside major cities, but China is building networks, particularly telecommunications, almost as fast as the U.S.
Expertise: Transaction processing, low-end software development and maintenance.
Major U.S. Customers: HSBC, Microsoft.[2]

Second country is India. Capital of India is New Delhi and this country population is 1 billion.
Major Technical Centers are Bangalore, Chennai and New Delhi. We can see details below:

Labor Pool: India has many prestigious technical universities, but the Indian Institute of Technology stands apart as one of the world's best. India produces 75,000 IT graduates and 2 million English-speaking graduates’ annually. 

Costs: Labor costs have crept upward over the years but have been offset by falling telecom rates. Typical salaries range from $5,000 to $12,000 for technical staff, while back-office salaries range from $3,500 to $7,500. 

Government: Outsourcing is so ingrained in the fabric here that the Indian government has a national minister specifically for IT. The government favors IT foreign ownership and imposes no export taxes.
Infrastructure: With redundant telecom and utility infrastructure, there is very good reliability within India's special IT parks. Reliability can be spotty outside the parks or in more remote areas.
Expertise: Application development, maintenance, call centers, financial processing. Experts see India becoming a hotbed for more critical analytical jobs.
Major U.S. Customers: Citigroup, GE Capital and American Express have a very large presence and have set up their own centers here.[3]

10 Top Outsourcing Countries

1          India  
2          Indonesia       
3          China 
4          Bulgaria         
5          Philippines     
6          Jordan 6.2     
7          Singapore       
8          Thailand         
9          Lithuania       
10        Egypt             
10        Malaysia
12        Estonia           
14        Chile  
15        Hungary         
16        Poland
17        Czech Republic         
18        Ukraine          
19        Romania        
20        Latvia 

India, China and Russia and the Philippines are the most conspicuous examples. For example, universities in India alone approximately 200,000 new graduates each year are in the field of information technologies. Founded in 1950 in India Institutes of Technology, leaning heavily on high-technology programs in this field and prepared to train qualified personnel, software technology parks in the late '80s (software technology parks) was established. However, on Obtain an adequate development of the Indian companies became more strategic international cooperation, to be the dominant language in English, with opportunities for educated and cheap labor diasporas connections, were the cornerstones of success today. Today Bangalore, the software (software) business, "Silicon Valley" has become compared to that.

Global Companies in China

China's socialist reforms and management approach in China, but also in the context of free market economy is organized to live with the terms of the new dual structure, but especially the poor and the unemployed population of large and also high in the world, re-reduction of production costs make production much cheaper to a ready market conditions to create a new and cheaper production. Although China did not show an equal distribution of the Chinese who want to harness the power of leverage to employ a part of many companies, large and small, to make their own behalf, and to make production, and to have a part to do contract manufacturing for other companies, who outsource their behalf have flocked to China for production. Motorola, General Motors Corp., Ford Motor Co., Toyota Motor Corp., Volkswagen AG, Audi Group, Renault Group, and so on. Many large investors to make investments in China in the world, carries out production. Thus, China, cheap labor, cheap raw material, capacity, and large market potential for new investment areas, the organizational structure of the global network organizations as part of the world, a large export ratio of world exports in statistics has been growing very fast. In fact, it is subject to export products, China's economy, not the geography of the Chinese economy that has been produced, mainly westerners, including businesses owned by other countries.

Apple Incorporated in China

iPhones are designed and marketed by Apple, one of the most innovative US companies. Apart from its software and product design, the production of iPhones primarily takes place outside the US.  Manufacturing iPhones involves nine companies, which are located in the PRC, the Republic of Korea (hereafter Korea), Japan, Germany, and the US.  The major producers and suppliers of iPhone parts and components include Toshiba, Samsung, Infineon, Broadcom, Numunyx, Murata, Dialog Semiconductor, Cirrius Logic, etc. All iPhone components produced by these companies are shipped to Foxconn, a company from Taipei, China located in Shenzhen, PRC, for assembly into final products and then exported to the US and the rest of the world. Table 1 lists major suppliers and costs of iPhone components and parts. The manufacturing process of iPhones illustrates how the global production network functions, why a developing country such as PRC can export high-tech goods at least according to the currently applied methodology for calculating trade statistic and why the country that invented the iPhone becomes an importer

China is with only the mounting base of Apple's multi-national production chain to increase the U.S. trade deficit cannot be said to be involved in many more. Apple's manufacturing processes are determined in the center of the United States, price policy and the relevant decisions are taken in the United States. One can take to resolve the imbalance of foreign trade in China's decision to allow the Yuan appreciation. However, even in case of appreciation of the Yuan, Apple may not allow the reflection of prices, exchange rate changes.

iPhone in the U.S. instead of China is said to increase the production cost of $ 65 per device. This difference in terms of hardware cost of $ 178.96 dollars portion is equivalent to only 6.5.
China's exports to the United States to appear as the products sold in China is completely against the U.S. and US-China trade balance in spite of ruin, TEPAV according to research, in 2009 China's exports to the U.S. $ 2 billion only 73 million dollars for iPhone part stems from the value added created in China.

Sum up, lasting for months at a time when the U.S. established manufacturing base in China, done in a few days. Most hardware manufacturers should improve the procurement process and to be there. Apple executives in the United States knows that this flexibility.

Labor costs are not one of the most important items in the expense of electronic production. If Apple produces in the U.S. instead of China labor is only 65 dollars on the iPhone will make a difference. This is not a financial burden not afford Apple. Does not offer much cheaper labor in China as in the past as well. But labor is so cheap nowadays, the production managed to establish the chain of production of all the spare of the moment. China is now in another country, price can be eaten, but fast and flexible production with the 'know-how has become a country that is not easy. Technology companies to establish production facilities in the United States for the introduction of overseas sales tax exemption would create the source said. Tax exemption can only provide additional revenue to Apple $ 8.2 billion.

Finally, I want to mention about how China effects US employment. Because I told generally in a good way but this report from: “Unfair China Trade Costs Local Jobs” by Robert Scott of Economic Policy Institute. It is very important because of US citizens lost job for Global American Companies use cheap labor force and geography. For this reason recently years unemployment rate is dramatically increase.

The growing U.S. trade deficit with China has cost jobs in every one of the nation’s congressional districts, the study reported, including the District of Columbia and Puerto Rico. Between 2001 and 2010, the computer and electronic parts industry was hit the hardest, as more than 909,400 jobs were displaced. The rapidly growing number of imports of computer and electronic parts, including semiconductors and audio-video equipment, accounted for more than 44 percent of the $194 billion increase in the U.S. trade deficit with China during that time.[4]

The report cited other industrial sectors hit hard due to the growth in the trade deficit with China between 2001 and 2010, including apparel and accessories (178,700 jobs), textile fabrics and products (92,300), fabricated metal products (123,900), plastic and rubber products (62,000), motor vehicles and parts (49,300), and miscellaneous manufactured goods (119,700).

Outsourcing in India

Information and communication technology sector in India shows a remarkable improvement. Succeeded in creating a profitable business areas of the ICT sector in India and it is fast becoming a global supplier of software services, the most important continues to progress. India has banking, insurance, technology, telecommunications, engineering and multinational companies operating in areas such as business services that are popular global production chain, manage call centers, financial accounting, and database production has become an area they do. Because in India, trained professional workforce, low labor costs and economic reforms started free market for American and European companies. India today has become an outsourcing haven. Information technology and business process outsourcing, especially for Process led to the accumulation of deep experience.

Now the world's largest companies, accounting, back office operations, call center, software, biotechnology, medical tourism in India will request such services. The following 11 factors behind India are outsourcing being a haven described in the header.

Why company should choose India? We have so many reasons for that.

1. Science and technology competency with plenty of Human Resources
2. Low Labor Costs
3. English Proficiency
4. Geographical Advantages
5. Education and Training
6. Legal Environment
7. Quality Management
8. Software Technology Parks Development
9. Software Industry Institutions
10. Venture Capital Environment in India

U.S., Britain, Canada, France, especially in countries such as NASA and Microsoft technology and science, generating hundreds of Indian employees is confronted with many institutions. India, as an opportunity to evaluate the brain drain. Scientific institutions in Western countries, the knowhow and experience the rich know-how and technology transfer to India as the brains of winning are reversed.[5]

US will produce a large amount of human capital equipped with a great education, whereas this is not enough. Countries like India to join the world market and to reduce the production of American mathematics and science education system to be educated workforce at a time with an extreme has emerged to outsource jobs abroad. So the other reason is that companies outsource jobs abroad, the size and quality of accessible labor market.

Bank of America in India

Bank of America is the biggest bank in US. They have many branches in US. This is a bank it isn’t not like Apple that they can use outsourcing. Because Apple manufactures in China. This brand iphone, ipad, mac book, laptop broadly computer and smart phone. Thus they can reduce labor cost and they can use geographic factors for import and export. Bank of America in US so they don’t care geographic factors and it is finance sector they don’t manufacturer how can they outsource something.  But you forget something. Communication area which you forgot it. Because yes we use via internet our account and in US internet is the most popular but people don’t want write via e mail when they lost card or same problem. They want to speak so person. Call center sectors are growing last days. And Bank of America use two languages. First one is English and second one is Spanish. For English they use outsourcing in India. Theoretical you are in Ohio and you lost your card when you call the Bank of America number you are speaking smooth English but the person from India and he answers you in Mumbai via internet he help you like he is in states. Why has Bank of America chosen India? Firstly, India government 10-year tax exemption and exemption from customs duty is applied. The state provides tax relief in international communication. Telecom liberalization is going. Finding supports the activities of private investors. Up to 15% of fixed investments are encouraged. Creating free trade zones with tax exemption of State encourages the establishment of call centers here. Call centers of all kinds to move software, office duty free entry brings to the instrument. Annual $ 3,000 a year per person $ 1,000 state representatives winning customer support. Local governments are supporting the establishment of technology parks. Allows the establishment of advanced telecom infrastructure (Software Technology Parks).[6]  The first service in large amounts to outsource the software industry. Basic too big to easily transport data and work products of the first importance, and it to accomplish very complex communication equipment free. 1980 telecommunications equipment has dropped in price substantially. In this case, developing countries, with the software related trades only low-cost and low work has changed the concept of qualified jobs. Encoded in the physical environment the data can be transmitted through cables today. The amounts of outsourcing, has risen rapidly in volume. Even as India developing countries, complex, high value-added software products can be outsourced. India, superior in terms of cost in developed countries or the previously, for the production of India.

Indian speaks better English than Chinese. That is why US has chosen India. India's second largest English-speaking country after the United States. Have access to the source of many people who can speak English in India India is one of the advantages. In India, nearly 290 000-year engineering degree and diploma holders participating in the labor force. India's abundant, high quality and cost-effective services and large skilled labor source software, it amounts to global software clients make it attractive. India each year, with the ability to produce many high-skilled employees is emerging as one of the best providers of IT resources. Multi-emphasis on science and mathematics education system, science and engineering graduates in the field results in too much. The quantitative dominance of English proficiency in concepts, coupled with allowing the benefits of the existing international IT demand caused the emergence of qualified employees. Government agencies such as Indian Institute of Technology and Indian Institute of Management offer qualified graduates each year.

How does outsourcing effects Indian economy?

The importance of the sector contributing significantly to export earnings appears more prominent. India is estimated more than 25% of export earnings. In 58% of export earnings sector in calculating the contribution of the Software, Business Process Outsourcing (BPOBusiness Process Outsourcing)’s contribution is calculated as 27%. The software and services sector, in India's total exports between 1996-2003 rose by 3% to 21% in the Indian economy is increasingly important. Indian IT sector, doubling the number of jobs added each year, the largest rise in employment creation, growth occurs at a rate of increase in the number of side jobs and high disposable incomes have contributed to the raising of a young consumer class. IT-based services in India, India's economy has a very large multiplier effect. Another direct effect on national income and employment, the sector also grow a variety of industries to the side, an increase in direct tax revenues and a rise in consumer spending due to significantly contribute to the high disposable income.

Today, in India, it is not the same as five years ago in India. Annual economic growths of 8% Indian businessmen seeking business in the U.S. are investigating ways of establishing a business in their own countries. Now with call centers in India are not only increasing the business community all over the world also offers enhanced services such as consulting and financial analysis. Intel, Microsoft, General Electric develops and sells technology with companies such as Pfizer, GlaxoSmithKline, Merck, and such a large and leading pharmaceutical companies, many of the tasks once done by Americans, Indians to take advantage of cheaper labor. For example, an Indian firm, Infosys, Fortune 500 companies to produce and maintain software performs nearly 300. India's leading outsourcing service sector is undoubtedly the most important reason for having a very large country with a population that speaks English. The other hand, governments in India in recent years, outsourcing some of their facilities for the development of India strengthened its role as a pioneer in this field.

According to a survey conducted by the year 2010 the number of people in India, 2.3 million people, outsourcing jobs to run directly, indirectly, the number of people who work will be approximately 6.5 million people. According to a survey of this work is the same until 2010, India will be held around U.S. $ 60 billion in revenue to be obtained. The report in question until 2010, and IT services outsourcing in India is estimated that 44% of exports.[7]

On the other hand not only in California, in 2000 there were 314 819 and most of them are Indians working in the IT industry. However, these highly trained individuals with the rise in unemployment in the United States less than half the salary they received in the United States returned to their home countries. This situation has contributed significantly to the development of outsourcing in India.

Conclusion

Nowadays, continues to increase even more with each passing day, and the effects of
deepening process of globalization as a phenomenon to affect businesses and continues to direct. Compared to the process of globalization to local businesses, we can say that a different dimension in terms of multinational enterprises. From one perspective with the process of globalization, multinational enterprises are said to increase the requirements to return a structure, when viewed from the other one is seen to play an active role in the process of globalization, multinational enterprises themselves. This situation must be accepted as natural. Because the reach of multinational companies operating in the fields of economic size and diversity as a compelling factor in the process of globalization, multinational companies pushing into. Favorable for the process of globalization, a process that can be said that the multinational enterprises. The process of globalization with the increasing liberalization trends, pushes the borders between the countries are relatively more permeable structure. This situation particularly in developing countries is higher. This information is extremely important in terms of multinational enterprises, goods / services and capital transfers make it easier. Thus, multinational firms sourcing, capital transfers from foreign countries, and more importantly, they found opportunities to be able to easily transfer their profits to their home countries. In this respect, the process of globalization, multinational enterprises in the global market makes an even stronger position. For this reason, in this process as well as multinational corporations and the globalization process is affected by the globalization process and enhancing plays a role.

China accepted and established as market network organizations in the world process of globalization of production and other issues that should be taken into account, the differences in quality of products with the same brand and function of different parts of the world, different prices is presented. The company with the same brand, which is more experienced in producing a portion of production and can produce much higher quality 'businesses in developing countries' making, but the quality of production as the top of the other part of the standard that can produce a lot of products that caught no businesses in the country. This companies income level and living standard of quality products, especially in developed countries when selling to customers with high and low quality products with potential customers in less developed countries and markets offer more low-income and standard of living. Thus, the increased volume of quality through a variety of products and markets are taking place. In fact, even in the country of production, while sales of indigenous people, ‘they export goods’ sales with the introduction of the most obvious example of this are being performed. In this case, in fact "quality" is a lifestyle-shaped common.

Outsourcing, offers great opportunities for many developing countries. The most important of these opportunities is the creation the prestigious of employment opportunities for educated and young population. In addition, the services offered abroad in the country with knowledge and experience generated within the country also makes it possible to create new markets.

India, with high information and normally the U.S., Europe and Japan are expected to be a competitive advantage of IT and CT based Countries such as areas such as software and services based on the combination of cheap labor with advanced technology to upgrade the welfare of society and poverty in a collective business model does not in dribs and drabs gained the opportunity to a country. The most important thing to learn the success of India, even in the less developed a country's development, "new ideas" and "knowledge" played an important role in how to do.[8]

Borders between countries recent developments in international trade has become completely unimportant because almost all the advances in computer and communication technologies in the services sector operations started to be in a paperless environment. This situation does not change under normal circumstances, the rule of international free trade, subject to the competitive advantage as a result of shifting to countries with cheaper labor countries has resulted in expensive, and thus emerged as a phenomenon is the globalization of local services. Subject to political aspects, as well as the economic bears has become very popular recently. Countries who use the service outsourcing industry, as well as in countries engaged in various aspects are discussed and where this situation are discussed who's winning. As a result of the globalization of local services is considered as a global world economy, and it takes it a step further, and who makes these services possible to say that all countries come out profitable.

---

[1] The American Heritage College Dictionary-4th ed., 2004, Houghton Mifflin Company, Boston-New York, USA, page 989

[2] Forbes Magazine, Best Countries For Outsourcing  http://www.forbes.com/2003/08/21/cx_ld_bestcountrieslide_4.html

[3] Forbes Magazine, Best Countries For Outsourcing

 http://www.forbes.com/2003/08/21/cx_ld_bestcountrieslide.html

[4] Ashish Arora&Alfonso Gambardella, The Globalization of the Software Industry: Perspectives and Opportunities for Developed and Developing Countries, May 2004

[5] Rosenthal, M. (2004). Beyond Outsourcing: Sustainable Economic Growth in India: 3.        web.mit.edu/profit/India%20and%20Outsourcing%20Papers/India%20Trip%20'04%20Paper_Marjorie%20Rosenthal.doc. (12.03.2009).

[6] Kuruvilla, S. and Ranganathan, A. (2008). Economic Development Strategies And Macro- And Micro-Level Human Resources Policies: The Case Of India’s “Outsourcing” Industry: 8. digital common

[7]   http//:www.businessweekonline.com, “Is Outsourcing Becoming Outmoded?” by Bruce Nussbaum, September 20, 2004, erişim 15.12.2005

[8] UNCTAD (2004). World Investment Report 2004: The Shift Towards Services: 148. http://www.unctad.org/en/docs/wir2004_en.pdf (12.09.2008).