1.0 Introduction In recent years, the utilization of outsourcing has risen significantly and the process has become immensely popular especially with multinational entities. Moreover, it is now beginning to be integrated in several of the local businesses with the main objective as to catapult these companies to success and enabling them to have a distinct advantage against the rest. Outsourcing put simply is the action in which a business will withdraw an activity which is assumed not relevant to the core competence, an operation that is of inferior value in comparison. It will then be delivered to another external business to be completed and due to the efforts of both the sole entity and the external business what …show more content…
Due to the low production costs more people are able to be employed. In some cases, bringing out of poverty and increasing the disposable income of the newly recruited. In addition, new skill sets will be taught.
And in turn the increment will better the standard of living and lift the welfare and living conditions of the people. Thus foreign companies investing in the developing countries and people brings a great advantage to citizens.
2.2 Aiding the Companies to Success
“If you deprive yourself of outsourcing and your competitors do not, you’re putting yourself out of business.”Lee Kuan Yew, former Prime Minister of Singapore.In this day and age, resources are limited, insourcing ; companies’ activities where kept in house and not brought to external entities, may only be viable to certain extent. Giving firms the upper hand that involves cost reduced processes as transferring minor activities externally rather than hiring and training employees as
Outsourcing simply means acquiring services from an external organization instead of using internal resources (Butler, 2000). By using outsourced resources, organizations can gain a competitive advantage by utilizing contingent staff to accomplish strategic goals without incurring the fixed overhead. By focusing on the leading edge and highly specialized skill sets, outsourcing providers can often offer higher quality services, or at a lower price than the client organization. Typical reasons for outsourcing go beyond simple contingent staffing. Outsourcing providers are able to maintain economies of scale with regard to specialization (...
Offshoring or offshore outsourcing is the practice of a company or a firm hiring or contracting in utilizing the services, skills or labor of the personnel from an outsourcing service provider that specializes in the need that they are looking for such as develop systems, customer service or even write code either from a developing or under developed countries, in their efforts to lower their operational costs and improve their service efficiencies and quality of their products. The former company is called ‘the Outsourcer or the Client’ who pays the money for the services obtained and the later company is called ‘the Outsourcee’ for providing the services to the outsourcer.
In many cases outsourcing has proven to be beneficial for businesses. It can help a business’s management by allowing executives to focus on the core structure of the firm rather than every specific element. Production, manufacturing, or additional servic...
Opposed to widespread belief of outsourcing threatening the labor of United States economy it has been seen that businesses have been able to extract a multitude of benefits through the outsourcing which has in turn created a number of employment opportunities along with it. When the stock market plummeted; companies began to discharge distress signals and corporations commenced labor cutbacks, as a result of which unemployment began to increase greatly. In times when the recession was reaching its peak, the only alternative was to look for cheap labor and ou...
Usually the firms to which the activities are outsourced are specialized in their area of work and so the parent firm gets the advantage of getting the work done through competent employees. Therefore, outsourcing gives competitive advantage to the companies which can be easily sustained by them without much effort.
Globalization along with the rise of information technologies, have led to changes in the global business arena. Outsourcing is when a business hires another entity to perform their functions. It can be on-shore (in the same country) and off-shore (in other country), but this paper will be based on off-shoring since the Global aspect has to be taken in perspective. First off the emergence of outsourcing will be discussed followed by the reasons and scope of outsourcing. Then the paper will focus on the benefits and drawbacks of outsourcing.
In light of recent growth of domestic and foreign countries outsourcing and off shoring over seas, companies been taken advantage of the cheap labor cost for outsourcing and off shoring manufacturing. Competitive business investing in domestic and foreign manufacturing have affects every part of the business industries from design, software development, finances and logistic management, i.e., customer and sales. Nevertheless, outsourcing been praised by businesses for outcomes of cost-effectiveness, efficient, productive and strategic, but damned as malicious, because of companies’ greediness, detrimental, and brutal in the public eyes.
Outsourcing is to obtain (as some goods or services needed by a business or organization) under contract with an outside supplier. (Merriam Webster) Some of the time an organization can not handle all aspects of a business process internally. The advantages of outsourcing is allowing companies to have lower operational and labor costs, faster production, and allowing companies to focus on core activities.
We can define that outsourcing is a practice that having a done certain job functions outside a company instead of having an in-house department or employee handle it. We can outsource it either to expert company or an individual. We must use a strategic solution to less the impact on stability of finance and company growth.
Competitive advantage is mean a firm’s ability to create value in a way that is rivals cannot. While outsourcing is a business strategy that moves some of an organization’s functions, activities, processes, and also decision responsibility from an organization to outside providers. This outsourcing is done by doing negotiating contract agreements with a vendor who takes the responsibility for the quality, customer services, production process, and people management of the function. So, to allow organizations to focus on their core business and create a competitive advantage, the organization must use outsourcing. Outsourcing is use to reduce operational costs. However, outsourcing have a lacking or disadvantages such as quality risk, quality service, language barriers, labor issues, and legal compliance and security.
To fully take advantage, the company needs to better understand its expectations on the subject, its obligations, along with its constraints and desires. It is therefore proper diagnosis of its needs can be acheived by asking the right questions. Many outsourcing operations prove to be a failure (Barthelemy, 2003; Bryce & Useem, 1998; Embleton & Wright, 1998). Many organisations are barely aware of the process that they initiate when they decide to outsource (van Engelen, 2005). Internal HR staff devotes only a fraction of its available time to the management of external relations and the monitoring of providers (Lepak & Snell,
Outsourcing has been utilized by companies in sundry industries for many decades as a key business strategy (Ghodeswar and Vaidyanathan, 2008). Harmancioglu (2009) argue that several successful companies depend on outsourcing to continue being responsive in coping with market changes as well as to expand their operations globally. He also stated that outsourcing was primarily perceived and employed to reduce costs, however recently it has become a prevalent and essential tool to gain competitive advantage. There are various reasons that lead companies to outsource some of their functions, these include: cost cutting, entrance to new markets, and to concentrate on main activities (Ghodeswar and Vaidyanathan, 2008). Wright (2004) mentions a number of functions that a company can outsource, these include: human resources, customer care service, and information technology functions.
Outsourcing is a technique for companies to reassign specific responsibilities to external entities. There are several motivations for outsourcing including organizational, improvement, cost, and revenue advantages (Ghodeswar & Vaidyanathan, 2008).
Outsourcing has been around for many years. In this paper I will discuss some of the history of outsourcing, the goods things about outsourcing, and the bad things about outsourcing.
The outsourcing decisions may change the operation strategy of the firm sing in the manufacturing and service sections. A firm choose to outsource the business activities not only just due to lower the operating costs, it is possible it due to lack of the technology capability, lack of expertise at the particular area, seek for the better service quality vendor, lack of capacity for expansion and lack of internal capacity in meeting production ramp demand. This paper has found out the four independent variables to measure whether the independent variable which is outsourcing decision will bring effects to each of the variables. As the result, outsourcing will reduce the operating costs by reduce the in-house department, overhead and fixed cost, and capital investment. Besides, outsourcing the business activities may help the organization to explore the new market segment and gaining the new customers which may boost up the profitability. A firm which outsource their department to other countries may gain access to the world class capability since they may find a partner who are expert in that particular area. It is not only gain access to the new technological knowledge, it is even help the firm to improve competitive advantages to compete with