DECA Human Resources Management Practice Exam

How do companies benefit from offshoring?

1. By enhancing employee retention

2. By leveraging lower labor costs

3. By increasing local hiring rates

4. By reducing operational risks

The correct answer is: By leveraging lower labor costs

Offshoring allows companies to leverage lower labor costs by relocating certain business processes or production activities to countries where wages and operating expenses are significantly lower. This strategic move can result in substantial cost savings for the company, enabling them to either reinvest those savings into other areas of the business or pass them on to consumers in the form of lower prices. By capitalizing on the cost differential, companies can improve their profit margins and remain competitive in the global marketplace. Furthermore, this approach can also facilitate access to skilled labor and resources that may not be as readily available domestically, enhancing operational efficiency and innovation. The other options do not directly tie to the core advantage of offshoring. For example, while offshoring can sometimes lead to enhanced employee retention within the domestic workforce due to higher investments in talent, this is not a primary benefit of offshoring itself. Additionally, offshoring is less likely to increase local hiring rates, as the focus is on utilizing the workforce in the offshore location. Reducing operational risks can be a consequence of offshoring but is not a direct benefit; in fact, offshoring can sometimes introduce new risks, such as geopolitical instability or supply chain disruptions. Thus, leveraging lower labor costs stands out as