Globalization and increase in expansion of businesses PDF
Added on 2021-12-17
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Define and discuss advantages and
disadvantages of outsourcing and the
role it plays in a global context.
Managing
Across
Borders
Institutional Affiliation(s)
Student Name
disadvantages of outsourcing and the
role it plays in a global context.
Managing
Across
Borders
Institutional Affiliation(s)
Student Name
P a g e | 1
Discussion
With globalization and increase in expansion of businesses to foreign countries, many
organizations are unable to produce every required element of their own. Outsourcing
proves to be one of the best solutions that allows organizations to focus on those
activities which they are capable of and outsource the others which can be performed
by others in cheaper, faster and superior quality manner. Outsourcing has also become
a successful business trend whenever global business context is discussed, especially
while managing businesses across border nations. According to Somjai, (2017),
“Outsourcing is a modern management adopted in responding business units’
requirement of enhancing competitiveness” (p.157). Indeed, many experts believe that
outsourcing provides with those managerial powers that enables growth in business in
speedy and sustainable manner. However, few drawbacks behind implementing
outsourcing function in core business activities can also be seen after analyzing
practical business examples for which many companies lack confidence in accepting
such kind of business concept. Therefore, this paper intends to find out such
disadvantages and advantages outsourcing provides businesses along with finding out
what role it plays in global context.
Tayauova (2012) have broken the word outsourcing into two parts- ‘out’ and
sourcing in which the author describes that sourcing is an act in which organization’s
transfers work and responsibilities to someone else. Companies sources work so that
it can be performed in cheaper and faster way since the allocation of work also
transfers the risk and responsibility behind performing the allocated work or service to
another entity. Putting succinctly, outsourcing can also be defined as a business
course of delegating business operations or responsibilities to third party, who
Discussion
With globalization and increase in expansion of businesses to foreign countries, many
organizations are unable to produce every required element of their own. Outsourcing
proves to be one of the best solutions that allows organizations to focus on those
activities which they are capable of and outsource the others which can be performed
by others in cheaper, faster and superior quality manner. Outsourcing has also become
a successful business trend whenever global business context is discussed, especially
while managing businesses across border nations. According to Somjai, (2017),
“Outsourcing is a modern management adopted in responding business units’
requirement of enhancing competitiveness” (p.157). Indeed, many experts believe that
outsourcing provides with those managerial powers that enables growth in business in
speedy and sustainable manner. However, few drawbacks behind implementing
outsourcing function in core business activities can also be seen after analyzing
practical business examples for which many companies lack confidence in accepting
such kind of business concept. Therefore, this paper intends to find out such
disadvantages and advantages outsourcing provides businesses along with finding out
what role it plays in global context.
Tayauova (2012) have broken the word outsourcing into two parts- ‘out’ and
sourcing in which the author describes that sourcing is an act in which organization’s
transfers work and responsibilities to someone else. Companies sources work so that
it can be performed in cheaper and faster way since the allocation of work also
transfers the risk and responsibility behind performing the allocated work or service to
another entity. Putting succinctly, outsourcing can also be defined as a business
course of delegating business operations or responsibilities to third party, who
P a g e | 2
performs the role more properly and in desired manner. Nevertheless, the level of
control while performing outsourcing business functions can be separated on external
and internal types. In internal outsourcing function, the business functions are
reallocated for saving control over the overall performance. In external outsourcing
function, the work performance is delegated to external agents who acts as a separate
entity and undertakes sole responsibility behind performing the job under mutual
understanding (Troaca & Bodislav, 2012). For example, external outsourcing may
include joint servicing, cooperation, production, participation in capital. Internal
outsourcing may include short-term and long-term partnership. Outsourcing can
further be divided into two types depending upon the effective use of resources and
risk allocation types i.e. full and partial outsourcing types. Full outsourcing involves
delegation of set of functions separately to an outsourcing company after showing
complete trust on it and providing full responsibility to complete the job. Under
partial or selective type of outsourcing function, delegation of certain business activity
is given to the outsourcer in which mutual related function is performed by the
outsourcing company itself.
There are many reasons or advantages of outsourcing for which more and more
companies are considering outsourcing in their core business operations and
organizational strategies (Bera, 2017). In fact, they have started realizing that without
outsourcing, to perform with excellence has become very difficult in this global
competitive world and therefore companies decide to make fundamental changes in
their businesses after outsourcing few activities to third party outsourcing agencies.
The basic advantages that business gains due to outsourcing includes market
competitiveness, cost reduction, access to superior class quality work, risk sharing,
accumulation of resources and time saving. There are many areas that can also be
performs the role more properly and in desired manner. Nevertheless, the level of
control while performing outsourcing business functions can be separated on external
and internal types. In internal outsourcing function, the business functions are
reallocated for saving control over the overall performance. In external outsourcing
function, the work performance is delegated to external agents who acts as a separate
entity and undertakes sole responsibility behind performing the job under mutual
understanding (Troaca & Bodislav, 2012). For example, external outsourcing may
include joint servicing, cooperation, production, participation in capital. Internal
outsourcing may include short-term and long-term partnership. Outsourcing can
further be divided into two types depending upon the effective use of resources and
risk allocation types i.e. full and partial outsourcing types. Full outsourcing involves
delegation of set of functions separately to an outsourcing company after showing
complete trust on it and providing full responsibility to complete the job. Under
partial or selective type of outsourcing function, delegation of certain business activity
is given to the outsourcer in which mutual related function is performed by the
outsourcing company itself.
There are many reasons or advantages of outsourcing for which more and more
companies are considering outsourcing in their core business operations and
organizational strategies (Bera, 2017). In fact, they have started realizing that without
outsourcing, to perform with excellence has become very difficult in this global
competitive world and therefore companies decide to make fundamental changes in
their businesses after outsourcing few activities to third party outsourcing agencies.
The basic advantages that business gains due to outsourcing includes market
competitiveness, cost reduction, access to superior class quality work, risk sharing,
accumulation of resources and time saving. There are many areas that can also be
P a g e | 3
developed in business by outsourcing like technology, productivity and quality.
Productivity can be enhanced if an external provider is appointed through which
activities can be measured and targeted. Only quality and experienced parties are
generally selected for outsourcing job and thus gaining quality work and on time
becomes more feasible. Specialized vendors and agents offer high degree work
efficiency and so they also help in reducing cost of production or human resource
management. By outsourcing, highly qualified staff can be hired who may not be
available for client’s companies or exploiting the supplier’s investments, specialists’
capabilities and innovations (Dolgui & Proth, 2013). McDonalds is one fine example
that proves how outsourcing can help business expand globally. Through outsourcing
its supply chain activity, McDonalds achieve success over its competitors efficiently.
The strategy used by the company shows that it outsources its supply chain activity by
implementing franchise chain of restaurants in global countries. The company gives
ownership to its franchise partners while the basic food recipe and name is kept with
the company against commission basis. In this way, the company has established its
chain of restaurants in more than 120 countries operating in nearly 1,50,000 chain of
restaurants under one common name (Vitasek, 2016).
Technology is certainly an advantage that is provided by outsourcing function. At
some point of running, organizations have to make advancements in technological
terms according to changing business demands. Getting new talent may become
difficult or prove costlier for firms which they outsource IT or technology related
function to vendors who specializes in such activities. The vendors, in return
completes the work in more updated and cost-effective manner since they perform
similar jobs for many companies simultaneously. Medium sized business owners are a
great example that can be given here who are unable to hire technical experts for
developed in business by outsourcing like technology, productivity and quality.
Productivity can be enhanced if an external provider is appointed through which
activities can be measured and targeted. Only quality and experienced parties are
generally selected for outsourcing job and thus gaining quality work and on time
becomes more feasible. Specialized vendors and agents offer high degree work
efficiency and so they also help in reducing cost of production or human resource
management. By outsourcing, highly qualified staff can be hired who may not be
available for client’s companies or exploiting the supplier’s investments, specialists’
capabilities and innovations (Dolgui & Proth, 2013). McDonalds is one fine example
that proves how outsourcing can help business expand globally. Through outsourcing
its supply chain activity, McDonalds achieve success over its competitors efficiently.
The strategy used by the company shows that it outsources its supply chain activity by
implementing franchise chain of restaurants in global countries. The company gives
ownership to its franchise partners while the basic food recipe and name is kept with
the company against commission basis. In this way, the company has established its
chain of restaurants in more than 120 countries operating in nearly 1,50,000 chain of
restaurants under one common name (Vitasek, 2016).
Technology is certainly an advantage that is provided by outsourcing function. At
some point of running, organizations have to make advancements in technological
terms according to changing business demands. Getting new talent may become
difficult or prove costlier for firms which they outsource IT or technology related
function to vendors who specializes in such activities. The vendors, in return
completes the work in more updated and cost-effective manner since they perform
similar jobs for many companies simultaneously. Medium sized business owners are a
great example that can be given here who are unable to hire technical experts for
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