Small Business and Outsourcing, Advantages

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Recommended: Core competencies and capabilities

ADVANTAGES OF OUTSOURCING

CORE COMPETENCY

Most small businesses are stemmed from individual or individuals having expertise, knowledge, talent, or technical background in a skill set or trade. This is what is known as core competency. Hanfield and Nichols (2002) describe core competencies as the activity that is best suited for the individual or partners to perform. An example would be electricians that have electrical experience and they start their own electric company providing residential wiring, electrical hook-up, lighting, and fixtures to their customers. Their core competence is electrical work and not accounting or human resource. Therefore, it would make sense to outsource other activities or function of the supply chain in order to focus on the core competency of what they do best which is electrical work. Saxena and Bharadwaj (2007) emphasize that understanding the companies’ core competencies is the basic form of strategic decision making to determine what activities or processes that need to be outsource. When owners don’t focus on their core competencies, they are taking risks that their revenue stream will plateau or even suffer. The decision to outsource activities outside of the core competency allows owners to focus on their trade or skill to increase revenue and maximize profits. Barrar and Gervais (2006) discuss the need for companies to focus on core competencies and to outsource non-essential activities to be effective in conducting business. When you spend too much time on other activities other than your core competency, your company begins to suffer with no opportunity to grow. Therefore, outsourcing can aid in decision making for owners to focus their attention on the business and serving their custome...

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