An Analysis of the Impact of Outsourcing

The assignment provides a comprehensive overview of the impact of outsourcing on business performance, including its effects on employee commitment and loyalty, management capability, and resource-performance linkage. It also explores the financial impact of outsourcing services strategy on manufacturing firms and examines the relationship between outsourcing external recruitment process and employee commitment and loyalty. The document is based on various research papers and studies that investigate the effects of outsourcing on business performance in different industries and contexts.

Running head: DEVELOPING ENTERPRISE
Developing Enterprise
Name of the Student
Name of the University
Author’s Note

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Table of Contents
1. Introduction:................................................................................................................................4
2. Background:.................................................................................................................................4
3. Part 1: Business idea-outsourcing:...............................................................................................5
4. Part 2:...........................................................................................................................................5
4.1 STPD analysis:...........................................................................................................................5
4.2 PESTEL analysis:......................................................................................................................7
5. Part 3:.........................................................................................................................................10
5.1 Financial analysis:...................................................................................................................10
5.2 Cost estimation:.......................................................................................................................11
5.1.1 Cost estimation for using different resources:......................................................................12
5.1.2 Cost estimation for start-up business:...................................................................................12
Table 4: Start-up expense of Morrison..........................................................................................13
6. Part 4:.........................................................................................................................................13
6.1 Value proportion statement:....................................................................................................13
6.2 Product features and statements:.............................................................................................14
6.3 SWOT analysis:.......................................................................................................................15
6.4 Porter’s five force:...................................................................................................................16
Figure 2: Porter’s five force...........................................................................................................17
5. Risk analysis:.............................................................................................................................18
6.6 Competitors’ analysis:.............................................................................................................19
7. Conclusion:................................................................................................................................19
Reference List:...............................................................................................................................21

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1. Introduction:
Before starting outsourcing, business executives have to make an effective business
expansion plan. This particular study has provided an in-depth overview on how Morrison in
quest of outsourcing their products and services in the soil of Asian countries especially in India
has made an effective business plan. Retail industry is one of the fastest growing industries for
achieving international fame and reputation. Morrison has already expanded their widespread
wings in several regions of Asia. The business experts of Morrison have decided to outsource to
India for reducing internal cost. As a result, an effective external analysis has been conducted
for evaluating various political economic factors. An effective financial plan has also been made
in this very specific study based on which the business experts can make a proper budget for
expanding business process.
2. Background:
Morrison is considered as fourth largest supermarket chains of UK occupying a
predominant place in the International market. Food, drinks, books, magazines, CDs and DVDs
are the core products of Morrison. Around 132,000 employees are currently associated with the
organization. As of 2016, the company is occupied with 498 superstores all over the World. In
comparison to other continents Morrison is less available in Asian countries (morrisons.com
2018). Therefore, the business experts have decided to expand their entire business wings in the
market of India. Outsourcing is the process based on which the organization can expand their
product in India.

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3. Part 1: Business idea-outsourcing:
Outsourcing is one form of business practice where a particular company makes a
contract with other company for making their internal job function done by other organization.
Business experts instead of making an in-house department for controlling the business process
tend to contract with other company for exchanging services, expertise and payment (Giustiniano
and Clarioni 2013). As a result, the organization can reduce their cost of physical equipments,
labor as well as technology. The purpose of maintaining outsourcing is not only to reduce cost
but also to access skilled expertise, reduce overhead, flexible staffing and generate more profit.
As a result, the entire process of business can be controlled in a systematic way.
4. Part 2:
In this specific part an effective STPD analysis and PESTEL analysis is made. Before
selecting India as the soil of outsourcing, the business experts have collected an overview about
the political, economic social, technological and environmental aspects of India. On the other
hand, STPD analysis helps to differentiate the market as per segmentation, targeting, positioning
and differentiation (Gurung and Prater 2017). As a result, the business experts can get a clear
overview about the target group.
4.1 STPD analysis:
Segmentation:
Market segmentation is conducted as per geographic, demographic and psychographic
method. As per the geographic market, segmentation Morrison has targeted those groups of
people who belong to the areas of Asian pacific zone. Especially, localities belonging to India

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are the most wanted target areas for expanding the business of outsourcing. Demographic
market segmentation believes that target group should be segregated as per the income status age
group and gender of the people (Anwar 2013). As per the psychological background, Morrison
has targeted the people from every cultural belief and psychological backgrounds. As a result,
the organization has focused to draw the attention of the people of both urban and suburban. As a
result, large number of people is already targeted for using the products as well as services of
Morrison.
Targeting:
Morrison in order to expand their entire process of business has primarily targeted the
people from 20 age group to 40 age group. The business experts like to target both male and
female customers (Sanchís-Pedregosa and Palacín-Sánchez 2014). Therefore, the business
experts have launched diversified products and services so that it can be feasible for both male
and female customers. Morrison has achieved huge appreciation from the customers of various
geographical boundaries and attitudes due to their service equality.
Positioning:
In order to position the brand in the international market Morrison has decided to use
both traditional media as well as digital media. With the help of digital media, the organization
has drawn the attention of International customers (Jamil and Naeem 2013). On the other hand,
traditional media has drawn the attention of regional consumers of India. The marketing
executives focus to use social media sites for reaching the doorsteps of global consumers. On the
other hand, in quest of placing the brand in various localities of India the organization has used
billboards, hoardings, newsletters, and so on.

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Differentiation:
In order to enhance the range of target customers the organization has made a
differentiation between low cost customers and premium customers. Low cost customers are the
primary target for Morrison so that the organization can deliver their services to large number of
people (Vilko 2013). As per the ethical belief of this specific organization, the service providers
like to show equal respect and dignity to the people of various cultural backgrounds and
attitudes.
4.2 PESTEL analysis:
Before entering in a new market, the organizations like to make an effective
environmental analysis based in which the political, economic, socio-logical, technological,
environmental and legal factors are discussed.
Political  Government instability
 Systematic taxation policy
 Least chance of terrorism attack
Economic  Low economic strength
 Developing industries
 Raise of employability
Social  People of diverse cultural backgrounds
 Different socio-cultural people
Technological  Technologically growing up
 Sufficient technological equipments
Environmental  Instable weather and climate

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Legal  Well-maintained acts and regulations
 Systematic taxation policies
Table 1: PESTEL analysis of India
(Source: Lahiri, Kedia and Mukherjee 2012)
Analysis:
 Political:
India being one of the largest democracies in the World runs federal government. The
government policies of India are highly influenced by politicians’ interest. As a result,
government does not follow a systematic rules and policies (Dhar 2012). Morrison may have to
face difficulties in running their business effectively due to the lack of political stability. At the
same time, it is undeniable that Morrison Indian government likes to maintain a systematic
taxation policy. As a result, the business experts do not have to face difficulties in paying service
tax, income tax sales tax and so on.
 Economic:
India is economically developed country. For that very specific reason the organization
has targeted low cost customers so that people in average cost can purchase products as well as
services. In addition, after the reduction of industrial licensing, liberalization of foreign capital
and formation of FIBP the economic strength of India has been developed enough.
 Social:

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People of India are from various cultural backgrounds and attitudes (Han and Mithas
2013). Therefore, the organization like Morrison has to deal with diversified products and
services. As a result, people of different geographical backgrounds and attitudes can easily show
their interest in purchasing products of Morrison.
 Technological:
As per current scenario, India is facilitated with 3G and 4G technology, which has left
immense influence in the business industry of India. Morrison would not have to face challenges
for choosing India in order to maintain outsourcing. The business experts with the help of
technological equipments can easily control the entire process of business.
 Environmental:
Weather of India is a major challenge for industrialization and urbanization. However,
before launching their business wings Morrison would have to focus controlling environmental
pressure groups, noise pollution system as well as air pollution (Sørensen 2012). As a result, the
customers would not have to face challenges in availing the organization.
 Legal:
While running the business process the executives have to maintain a proper taxation
policy so that government does not get the scope of preventing the way of business (Kang et al.
2012). In addition, various the organization like Morrison has to maintain immense regulations
and acts such as data protection act, anti-discrimination act, right to information act, gender
equality act, health and safety act and so on.

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Figure 1: PESTEL analysis
(Source: McCarthy, Silvestre and Kietzmann 2013)
5. Part 3:
5.1 Financial analysis:
The function of business process outsourcing is to make an effective agreement between
two companies. Financial planning or budget estimation is highly needed in order to develop the
entire process of business. BPO provides customer services from various perspectives.
Therefore, the role of business experts is to make an in-depth financial analysis so that a proper
budget can be estimated (Benaroch, Webster and Kazaz 2012). At the initial stage, Morrison has
estimated very low budget for expanding their business in the market of India.
The various aspects for which budget should be made in order to run a BPO effective are as
follows:
License, permits and 60,000 (GBP)

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legal services
Maintenance of the
software of the BPO
40,400
Insurance policy 30,000
Salaries of the staffs 70,000
Renovation of the centre 40,000
Marketing promotion
expenses
60,000
Payment of the utility
bills
50,000
Buying office vehicles 50,000
Website launching 60,000
Miscellaneous 40,000
Total expense 5,00000
Table 2: Financial analysis
(Source: Created by the author)
5.2 Cost estimation:
Before making a business plan organizations have to make an effective budget based on
which the business experts tend to get an overview about the expense. A budget is made before
expanding the entire business wings. In this very specific part, the study has focused to make an
overview about the budget based on which the organization would like to prepare their marketing
plan.

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5.1.1 Cost estimation for using different resources:
Sources Amount (GBP) Amount(GBP)
Sources of income
Bank loan 150,000.00
Government Sponsorship 60,000.00
Total income 210,000
Sources of expenditures
Room rent 5,500.00
Taxes 2,000.00
Workforce 10,000.00
Advertisement 20,000.00
Electricity 4,000.00
Charges for administration 5,000.00
Other Equipments 25,000.00
Other maintenance 10,000.00
Communication expenses 50,000.00
Miscellaneous charges 3,000.00
Transport 15,500.00
Total expenditure 150,000
Surplus budget 60,000
Table 3: Cost estimation for using different resources
(Source: As created by the Author)
5.1.2 Cost estimation for start-up business:
Start-up expenses of particulars Amount (GBP)
Legal requirements 3,000
Leaflets 5,000
Consultants 195000
Insurance 1000
Room Rent 1000
Cost for renovation 1,500

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Charges for equipments 2,000
Salary for the employees 52,000
Others 6,000
Total expense 91,000
Required assets
Cash balance 500,000
Other form of short-term assets 8000
Total number of short term assets 508,000
Long-term assets 0
Total number of assets 508,000
Total requirements 598,000
Table 4: Start-up expense of Morrison
Source: (As Created by the Author)
6. Part 4:
6.1 Value proportion statement:
The overarching term value proportion refers to the business statement based on which
the company summaries why their products and services are superior to others. This particular
statement enables the business experts to analysis on which perspective the customer should
analyze the value of products and services (Teo and Bhattacherjee 2014). Some of the several

13DEVELOPING ENTERPRISE
strategies are there based on which Morrison tends to create value of their products and services.
The steps are as follows:
 To make an attractive tagline by highlighting the product features in quest of drawing
customers attention
 To maintain effective promotional activities so that customers of different localities can view
the product features
 To highlight the benefits and facilities that BPO of Morrison give the customer services
 To create brand image and reputation
In order to give a constant threat to current market Morrison has to follow value
proportion strategy for making a different image of their products as well as services. India is
chosen for starting outsourcing. As a result, various environmental analyses of India is conducted
for evaluating its political and technological factors.
6.2 Product features and statements:
In order to run business process outsourcing the organization should have in-depth
knowledge about the needs and demands of the customers. The experts like to add specific
features on product based on customers’ level of interest. It has already been observed that India
is constituted with those kinds of people who are having average level of income. Therefore, the
business experts have focused to follow low cost strategy in order to draw the attention of low
cost customers (Steven, Dong and 2014). In addition, products of Morrison have diversified
features. Morrison has not targeted customers from a specific backgrounds and attitudes. The
customer service system of BPO of Morrison is very much liberal. The primary product features
that Morrison wishes to follow for achieving image and reputation are as follows:

14DEVELOPING ENTERPRISE
 The current BPO sector of Morrison will provide technological support to the multinational
companies in order to expand their business process
 The customer service providers have multi-lingual backgrounds and attitudes. With the help
of multi-lingual flexibility the organization can gain the attention of customers from various
cultural backgrounds
 The BPO sector is constituted with proper management hierarchy based on which customers
do not have to face challenges in dealing with the concerned persons
6.3 SWOT analysis:
Strength Weakness
 Strength of human resource
 Strength of physical equipments as well as
technological resources
 Effective business environment both
internal as well as external
 Smooth operational process
 Lack of proper infrastructure in India
 Political instability
 Employees from diverse cultural
backgrounds and attitudes
Opportunities Threats
 To expand the business process in various
developing countries
 Make an awareness of the outsourcing
service
 Competitors’ market threat
 Rapid change of government rules and
regulations as per the interest level of
political parties
 Changing process of technology
Table 5: SWOT analysis

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(Source: Lee, Ching Yeung and Hong 2012)
6.4 Porter’s five force:
Before staring outsourcing, the business experts have focused to make an effective
industry analysis by using Porter’s five force:
Buyer’s Power  Low
Supplier’s Power  High
Threats’ from substitute  Less market threat from substitute companies
Threat of new entry  Major threat while entering in new market
Competitors’ rivalry  Low
Table 6: Porter’s Five Forces
(Source: Chung and Khan 2012)
Analysis:
In order to maintain outsourcing in the market of India the power of the supplier is high
due to limited number of distributors. As a result, the buyers do not get opportunities for
bargaining with the organization due to limited availability of products as well as services.
Automatically the organization like Morrison would not have to face major threats from its
substitutes like BPS, KPO and so many. It is undeniable that Morrison while entering in the new
market India has faced immense difficulties for drawing the attention of customers. There are
large number of BPOs in India which have already occupied a prestigious place in customers’

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mind (Katz 2012). Therefore, Mission would have to face huge challenges in gaining the trust of
people. As a result, the organization would have to focus on effective promotional plans and
activities for drawing customers’ attention.
Morrison would not have to face immense difficulties in running their business amidst
competitors. The number of BPO sectors in the market of India is very low. As a result, Morrison
would not have to face challenges in establishing their BPO sector in the soil of India.
Figure 2: Porter’s five force
(Source: Sarifuzzaman 2012)
5. Risk analysis:
Before entering in the new market of India, Morrison should make an effective risk analysis plan
for protecting the business process from any kind of sudden crisis. The risk factors that Morrison
can face after launching the business in Indian market are as follows:

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 High rate of Employee turnover
 Financial risk
 Data security and privacy
 Government regulations and acts
 Promotional risk
It has been analyzed that Morrison is an UK based company intending to run their
outsourcing business from the market of India. The business culture between UK and India
differs from each other. Therefore, employees hired from India may not be accustomed with the
organizational culture (Butler and Callahan 2014). In this kind of situation, the rate of employee
turnover could be increased. The organization after expanding entire business wings in the soil of
India may have to face challenges financial crisis. The entire operation process of BPO sector is
highly dependent on technological devices. As a result, the organization may have to face
challenges data security issues. Due to the rapid change of government rules and regulations of
India, Morrison may have to face difficulties in running their business successfully.
The primary method of promotion that Morrison tends to follow for achieving brand
image and reputation includes social media promotion. People of India belonging to middle age
may not feel comfortable in being accustomed with social media promotion. In this kind of
situation, the customers may not show their interest for using services (Glaister 2014). However,
in order to overcome these risk factors Morrison should provide an effective promotional
training to the employees for enhancing their promotional competency.

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6.6 Competitors’ analysis:
In comparison to European countries, Asian pacific regions do not have to face that much
of threats from its competitors (Dolgui and Proth 2013). However, based on the business strategy
of other BPOs, Morrison should deal with following strategies while making competitors’
analysis:
 Identify the competitors
 The products and services with which they deal
 Overview about the market share of competitors
 Overview about the current strategies of competitors
 Evaluate the strength and weakness of those competitors
 Identify the potential threats and opportunities of those competitors
After identifying those several factors, Morrison would have to focus on making their
business strategies and policies in order to grab the attention of customers.
7. Conclusion:
The entire study has provided an in-depth overview about the impact of business
outsourcing process on the overall profitability of organization. Morrison is chosen as the
selected company, which wants to start outsourcing in the region of Asia. The organization has
selected India for launching their business outsourcing. As a result, the study has conducted an
effective environmental analysis for evaluating political, economic, socio-logical, technological,
environmental and legal factors of India. The study has made an estimated cost analysis as well
before making the entire marketing plan. India is a growing country in terms of both

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economically as well as technologically. As a result, the organization like Morrison would not
have to face challenges in operating the advancement of technology.

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Reference List:
Anwar, S., 2013. Outsourcing and the skilled–unskilled wage gap. Economics Letters, 118(2),
pp.347-350.
Benaroch, M., Webster, S. and Kazaz, B., 2012. Impact of sourcing flexibility on the outsourcing
of services under demand uncertainty. European Journal of Operational Research, 219(2),
pp.272-283.
Butler, M.G. and Callahan, C.M., 2014. Human resource outsourcing: Market and operating
performance effects of administrative HR functions. Journal of Business Research, 67(2),
pp.218-224.
Chung, H.M. and Khan, M.B., 2012. The effects of outsourcing of information technology on the
employment of computer professionals in the United States. International Journal of
Management, 29(3), p.371
Dhar, S., 2012. From outsourcing to Cloud computing: evolution of IT services. Management
Research Review, 35(8), pp.664-675.
Dolgui, A. and Proth, J.M., 2013. Outsourcing: definitions and analysis. International Journal of
Production Research, 51(23-24), pp.6769-6777.
Giustiniano, L. and Clarioni, G., 2013. The impact of outsourcing on business performance: An
empirical analysis. Journal of Modern Accounting and Auditing, 9(2), p.153.
Glaister, A.J., 2014. HR outsourcing: the impact on HR role, competency development and
relationships. Human resource management journal, 24(2), pp.211-226.