1. Explain the term Business Investment.
2. How is the outsourcing of jobs and production a part of business investment? Why do companies outsource production to other countries?
3. Who in the U.S. is helped and hurt by outsourcing? Provide concrete examples.
4. What parts of John Stossel's agreement about outsourcing do you agree with?
5. What parts of John Stossel's agreement about outsourcing do you disagree with?
6. Overall, are you for or against outsourcing and why?
Business investment refers to the spending by firms on capital goods—that is, goods used to produce other goods and services. This spending is aimed at increasing the firm's capacity, efficiency, or future profitability.
Key components of business investment include:
Fixed Investment: Purchase of new equipment, machinery, buildings, or infrastructure (e.g., a factory or new computers).
Inventory Investment: Changes in the stocks of raw materials, finished goods, or work-in-progress inventories held by firms.
Intangible Assets: Spending on research and development (R&D), software development, or acquiring patents and licenses.
Outsourcing is a form of business investment because it represents a strategic expenditure designed to increase efficiency, reduce costs, and enhance the firm's productive capacity or competitive advantage.
Strategic Investment: By outsourcing non-core functions (like customer service, manufacturing, or IT support) to specialized external vendors, a company is investing in a new, more efficient business process structure. The money spent on the contract is an investment in achieving lower operating costs and improved quality or focus.
Expansion of Production: When a company outsources production to other countries (often called offshoring), it's typically done for the following reasons:
Lower Labor Costs: Wages, benefits, and regulatory costs are often significantly lower in developing countries, leading to massive cost savings for labor-intensive processes.
Access to Specialized Resources: Accessing materials, technical expertise, or infrastructure that is better or cheaper abroad (e.g., specialized manufacturing clusters).
Market Access: Establishing a presence in a country to better serve the local market and avoid tariffs or trade barriers.
Favorable Regulations: Taking advantage of less stringent environmental, safety, or tax regulations.
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