Final answer:
Offshoring refers to the relocation of a company's operations overseas, typically to access cheaper labor, and is the correct answer to the student's question. This is distinct from outsourcing, which involves contracting outside entities to perform tasks that the company's own workers would have done, possibly in another country.
Step-by-step explanation:
The relocation of a business process or entire manufacturing facility to a foreign country is known as offshoring. This practice involves a company moving its operations overseas, often to access cheaper labor markets, while retaining control over its processes. An example of offshoring is when many clothing corporations closed their factories in the U.S. and relocated them to China to take advantage of cost savings. In contrast, outsourcing is when a company contracts with outside contractors to perform tasks that were previously done internally, which can include contracting companies abroad but differs from offshoring in that the company outsources specific operations rather than relocating them entirely.
The use of offshoring and outsourcing has been driven by the high cost of labor in developed countries and has been facilitated by globalization and trade agreements such as NAFTA. While these practices have created cost savings for companies, they have also resulted in job losses in developed countries and contributed to changes in the demand for labor.