The Product Life Cycle and Outsourcing

The theory of the International Product Life Cycle was developed in the 1960’s. The cycle revolves like this; local production, introduction into the international markets, overseas standardization and production and eventual importation into the country of origin- in this case, the United States. This theory has some important facets as to why it is important in international business, and outsourcing. Developers of the system were of the opinion that the U.S., having the expertise and wealth, develops the technology to produce certain goods that are eventually exported. Being the only source of these desirable goods, American exporters initially flourish. In the second phase a multinational firm begins production in a foreign country with lower costs to the multinational firm. Funny enough, this is the epitome of outsourcing, except as the concept is advanced, it is not termed outsourcing. Outsourcing developed as a separate entity later, but i think they are one and the same. Under the original model, after economies of scale are achieved in the foreign country, their exports compete directly with the United States due to their lower labor or raw material costs. The cycle is complete when this advantage overtakes production in the U.S. and importation of the same product becomes feasible for American businesses. Think call centers, essentially the customer service nerve center. It became much cheaper to house these important facets of customer service in overseas countries. Now, foreign companies are offering call-center services to US companies.With customer service scores at all time lows, some companies are taking call centers back in-house, even advertising "talking to a real person" as their first line! Measure your needs against your numbers..