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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—physical assets that are used to produce goods and services. This is distinct from financial investments (like buying stocks or bonds).
The key components of business investment (also known as fixed investment) are:
Fixed Assets: New buildings, factories, machinery, equipment (like computers or 3D printers), and research and development (R&D).
Fixed Assets: New buildings, factories, machinery, equipment (like computers or 3D printers), and research and development (R&D).
Inventory: Changes in the value of the goods a company holds for future sales.
Simply put, business investment is money spent today with the expectation of generating higher production, efficiency, and profits in the future.
The outsourcing of jobs and production is considered a part of business investment in the broader strategic sense, as it is a decision made to increase the firm's efficiency, productivity, and profitability—the ultimate goals of investment.
Outsourcing fits this definition because:
Cost Management: By moving a function (like IT support or manufacturing) to an external provider, the company often reduces its operating expenses, effectively "investing" in a more cost-efficient operational model.
Focus on Core Competencies: Outsourcing non-core tasks allows the company to invest its limited internal resources (capital and human effort) entirely on its core strengths (e.g., product design or marketing).
Companies primarily outsource production (a practice often called offshoring) for three main reasons:
Lower Labor Costs: This is the most significant driver. Moving production to countries with lower prevailing wages dramatically reduces the cost of goods sold, increasing profit margins.
Access to Specialized Skills/Resources: Some regions may have specific infrastructure, specialized manufacturing clusters, or a workforce uniquely skilled in a niche process that the domestic market lacks.