Introduction
I was given the task to make an assignment on the subject of International Business. In this assignment, I have to analyse the several thing that related with the global outsourcing. Besides that, the objective of this report is to know the benefit of global outsourcing and reason many company choose to engage in global outsourcing. Before I start making the assignment, I have find the information that related with assignment and understanding the big picture about the question that given from lecturer.
Before I explain more about this question, I want to explain the reason companies need to use outsourcing company. This is because nowadays international competition is growing rapidly, and organizations or enterprise must always remain ahead of the competition to ensure their survival. Consequently, the organization must keep pace with dynamic conditions and fast changes, be innovative, and adapt to new systems, techniques and technologies. In a competitive market environment, consumers are becoming more conscious and tend to demand a variety of customized products at a specific pace. This is because in today’s competitive global markets, consumers will look the quality products at the lowest prices. The organization also must keep pace with the dynamic requirements of the market and be receptive to reform. Due to the intense global competition among the producers or company, and the supply chain must be able to respond quickly to the changes.
Besides that, companies are facing fierce competition today, which is constraining them to seriously consider new applications that they can use to enhance the quality of product or services and to reduce cost of production. Furthermore, increasing pressure from foreign compet...
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In general, growing trends in global market shows that businesses are seeking to be more agile to adjust to a more volatile global economy. This can be seen by the increased foreign direct investment in the form of outsourcing. In addition, through global outsourcing the company can reduce overall cost and provide other benefit like 24 hour business operation, oversight and feedback are paramount to a successful outsourcing operation. Therefore it is critical that businesses involved in outsourcing activities maintain control and oversight over their activities and redeploy when necessary. Global outsourcing not only gives beneficial to the companies and outsourcing company, but at the same time it gives benefit to the consumers in that country. Global outsourcing also remains an effective tool for business to focus on their strategic goals by reducing cost.
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 (...
Since the concept of outsourcing was introduced it has been a subject of debate between politicians and citizens of the United States. Remarkably, it was the United States who supported outsourcing and now it is the United States that feels its economic progress is being threatened by outsourcing. One may argue that the financial situations that existed two decades earlier are not the same as they are today, thus the change of time, business priorities of economies have also changed.
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.
Outsourcing occurs when products or services are obtained by an outside supplier (Vonderembse & White, 2013). Companies may decide to outsource if it can be obtained less expensively due to specialization or the other company may have proprietary technology that gives them a competitive advantage (Vonderembse & White, 2013). This paper will analyze trade-offs for productivity improvements, discuss both the advantages and disadvantages of global sourcing versus producing in the United States, recommend a low labor cost country based on inputs, trade-offs and global advantages and give an example of a product of the specific country.
The significant level of outsourcing programs used across all business sectors is well documented in the literature (Bender 1999; Quinn 2000; Dun and Bradstreet 2000; Klaas, McClendon and Gainey 2001). Past research has progressed along several paths. First, some researchers have focused on motivations and reasons for outsourcing activities (Conner and Prahalad 1996; Greer et al. 1999; Sinderman 1995; Mullin 1996; Grant 1996; Frayer Scannell and Thomas 2000). According to this perspective, the global imperative for outsourcing accelerates as firms evolve from sellers of products and services abroad to setting up operations in foreign countries and staffing those operations with host countries or third party nationals (Greer et al. 1999). Most corporations believe that in order to compete globally, they have to look at efficiency and cost containment rather than relying strictly on revenue increases (Conner and Prahalad 1996). As companies seek to enhance their competitive positions in an increasingly global marketplace, they are discovering that they can cut costs and maintain quality by relying more on outside service providers for activities viewed as supplementary to their core businesses (Mullin 1996; Grant 1996).
Outsourcing relationships demand the same care and attention to sound management principles and practices as do in-house operations and valued employees. Managed well, continuous improvement, increasing value, and constant innovation can be expected. Managed poorly, the services and overall relationship deteriorates resulting in higher costs, operational disruption and lost business opportunities.
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.
Businesses face lots of challenges today during their development and growth, and they should decide how much financial investment are they want to put into the development of certain projects.
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.
Nowadays, many large companies are using outsourcing through IS/IT sector in order to gain benefits to their company especially reducing expenses. it also to ensure that the company can focus on their core business and give other operation to outsourcing company that is expertise on the field.
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.
Culpepper, (2007). Compensation and Benefits Surveys. Retrieved July 2, 2007, from Culpepper Web site: http://www.culpepper.com/eBulletin/2007/AprilTrends.asp