What does offshoring refer to in a business context?

Offshoring in a business context specifically refers to the practice of relocating various business processes or functions to overseas locations, primarily to take advantage of cost efficiencies. Companies often choose to offshore operations such as manufacturing, customer service, or IT services to countries where labor and production costs are significantly lower than in their home country. This strategic move can lead to increased profitability due to reduced operational expenses and allows businesses to focus resources on core activities while leveraging global labor markets.

The emphasis on lowering costs is critical, as organizations typically engage in offshoring to improve their bottom line, and this is what distinguishes it from other concepts such as local supply chain management or domestic market expansion. In contrast to transferring ownership of products or managing local supply chains, offshoring is a strategic operational choice aimed at global resource allocation to minimize costs.