Term Paper: Outsourcing as a Business Strategy

Pages: 8 (2661 words)  ·  Bibliography Sources: 15  ·  Level: Master's  ·  Topic: Business  ·  Buy This Paper

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[. . .] This has resulted in changes of how a business delivers its products to its customers and the services offered (Chan et al., 2009). Businesses are now trying to connect with their customers at all levels and for a business that is primarily in the manufacturing industry it would be difficult for them to focus on their core business, as well as reach out to their customers. It is for this reason the manufacturing company would outsource its customer service function to a company that deals with this line of business and has a proven track record. Wullenweber and Weitzel (2007) notes outsourcing allows a company to free up its resources and encourages a company to focus on its core business. There are instances when outsourcing core functions is beneficial to the business. In today's business world companies are also outsourcing their core competencies. This demonstrates that the companies want to offer the best service to their customers, and it also shows the importance of these functions. The very critical and vital functions can be outsourced to ensure that the company does not need to worry about those functions and also to receive assurance that those functions are well managed.

A global company with offices in different parts of the world would need to have offices in all the countries it is operating in, but the size of the office does not have to be large. The company could outsource its Human resource, accounting, and payroll in order for it to have a centralized management of these functions. Outsourcing is very relevant in today's business because many companies are always on the lookout for methods they can use to reduce their operating costs and increase their revenues (Lancellotti et al., 2003). Outsourcing has leveled the playing field of most companies and has allowed smaller business to compete with the large organizations. Shifting production and manufacturing processes to countries that have the capability to deliver at lower rates is beneficial to a company. For example, Apple outsources the manufacture of its handsets to China, which has allowed the company to focus on developing its software and applications. Outsourcing has also allowed the company to reduce its manufacturing costs, which would be more than double if it had opted to continue manufacturing in the United States. This is a clear demonstration that outsourcing is vital for tackling the current business challenges.

There are many risks associated with business operations especially in today's marketplaces. Outsourcing enables a company to share its risks with another partner company (Grover et al., 1996). Sharing of risks allows a company to reduce the impact of any decision it makes or volatility of the market. Forming strategic partnerships ensures that a company does not suffer in case there is a problem with their partners systems. It would be the partners sole responsibility to ensure that they provide the contracted service and in case of any failures, the company is mostly cushioned against these problems. The concept of outsourcing is relevant in that many businesses have to contract other companies that have the capabilities to handle some of their core functions. A company that mainly deals with e-commerce would not be suited to handle its logistics management, but if the company could outsource this function to a company that deals with logistic management it would reap the benefits of costs. The partnerships would be beneficial to both companies as they will both focus on what they are good at and leave the worry of the other functions to the partner company. Logistics management companies have large warehouses in different locations, and they can hold the client's goods in their warehouse for faster delivery. This would be beneficial to a company as it can eliminate the need for storage space, and all its products would be stored in the other company's warehouse.

The concept of outsourcing promotes business specialization. Allowing a company primarily to focus on its business ensures that there is specialization across the board (Honig and Prasad, 2007). This specialization is beneficial to the company because it can formulate better strategies that would be in line with its core competencies. A specialized business is easier to manage than a business that has different functions all working towards the same goal. Specialization has given rise to the call centers that are only focused on offering customer service to other businesses. Many of the call centers have outsourced some of their services like information technology to other companies. This specialization ensures that a company will receive the best service from the outsourced company. The back office operations of a company are mostly conducted once a month and having employees handling such operations on a daily basis is costly for a company. Back office operations like payroll, IT, and human resources can all be outsourced, and this would free up resources like space and employees. These resources would then be used for other key functions that would add more value to a company.

References

CHAN, F.T., KUMAR, V. & TIWARI, M.K. 2009. The relevance of outsourcing and leagile strategies in performance optimization of an integrated process planning and scheduling model. International Journal of Production Research, 47, 119-142.

DUHAMEL, F., GUTIERREZ-MARTONEZ, I., PICAZO-VELA, S. & LUNA-REYES, L.F. 2012. The Key Role of Interfaces in IT Outsourcing Relationships. International Journal of Information Technologies and Systems Approach (IJITSA), 5, 37-56.

FEENSTRA, R.C. & HANSON, G.H. 1996. Globalization, outsourcing, and wage inequality. National Bureau of Economic Research.

FEENSTRA, R.C. & HANSON, G.H. 1999. The impact of outsourcing and high-technology capital on wages: estimates for the United States, 1979-1990. Quarterly Journal of Economics, 907-940.

GROSSMAN, G.M. & HELPMAN, E. 2005. Outsourcing in a global economy. The Review of Economic Studies, 72, 135-159.

GROVER, V., CHEON, M.J. & TENG, J.T. 1996. The effect of service quality and partnership on the outsourcing of information systems functions. Journal of Management Information Systems, 89-116.

HANDFIELD, R. 2008. A brief history of outsourcing. Supply Chain Resource Cooperative-Supply Chain Management; May 2006; available at http://scm. ncsu. edu/public/facts/facs060531. html; Last accessed: 9 June 2007: http://atschool. eduweb. co. uk/kingworc/departments/geography/asglossarycw. ht m.

HATONEN, J. & ERIKSSON, T. 2009. 30+ years of research and practice of outsourcing -- Exploring the past and anticipating the future. Journal of International Management, 15, 142-155.

HONIG, W.L. & PRASAD, T. A classroom outsourcing experience for software engineering learning. ACM SIGCSE Bulletin, 2007. ACM, 181-185.

KELLY, T. 2002. A brief history of outsourcing. Global Envision.

LACITY, M.C. & HIRSCHHEIM, R.A. 1993. Information Systems Outsourcing; Myths, Metaphors, and Realities, John Wiley & Sons, Inc.

LACITY, M.C. & WILLCOCKS, L. 2000. Global information technology outsourcing: In search of business advantage, John Wiley & Sons, Inc.

LANCELLOTTI, R., SCHEIN, O., SPANG, S. & STADLER, V. 2003. ICT and operations outsourcing in banking. Wirtschaftsinformatik, 45, 131-141.

LONSDALE, C. & COX, A. 2000. The historical development of outsourcing: the latest fad? Industrial Management & data systems, 100, 444-450.

WULLENWEBER, K. & WEITZEL, T. An empirical exploration of… [END OF PREVIEW]

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