Outsourcing Strategy Assignment | Business Organization
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Added on 2020-02-24
Outsourcing Strategy Assignment | Business Organization
Added on 2020-02-24
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Running Head: OUTSOURCING 1Outsourcing
Outsourcing 2Introduction Outsourcing of the business functions refers to the process wherein a company purchases a product or service from an external vendor instead of performing the business operations in the business facilities of the organization. The outsourcing strategy is commonly adopted by the business organization to cut the operational cost of the organization. The outsourcing decision is a strategic decision of the organization as the organization has to tradeoff between the potential cost saving and the loss of control over the manufacturing of the product or service. In the recent years, outsourcing industry has observed immense growth in the outsourcing industry with the changing business philosophy of the business organizations. Previously, large companies used to invest in a large number of unrelated businesses to reduce the comparative risk (McIvor, 2010). However, several of these companies have realized that operating a large number of unconnectedbusinesses have limited advantages. Consequently, the companies have started developing core competence and all other supporting activities are outsources. Today, outsourcing is the most common phenomenon with the companies of all size and industries indulging in it. Outsourcing provides numerous benefits such as cost savings and focus on the core competency of the organization. Project ObjectiveThe primary aim of the following project is to explore the phenomenon of outsourcing and its numerous benefits and challenges for the business organizations. Today, most of the companies have undertaken outsourcing activities to reduce their cost of operations. However, there are several challenges in the successful implementation of outsourcing. The current literature review will examine the different challenges of the outsourcing activities for the
Outsourcing 3organization. The business organizations face the risk of information breach, less efficiency and decrease in customer satisfaction with the outsourcing activities. Project ScopeThe project will discuss the outsourcing activities of different companies. The project will discuss the benefits and thee drawbacks of the outsourcing activities. However, the scope of the current project is limited to the secondary sources. In the present research, all the informationis obtained from the secondary sources so the success or the failure of the project is dependent upon the viability and the credibility of the secondary resources. The current research project will only focus on the benefits and the drawbacks of the outsourcing activities. Therefore, it will not provide any additional information provided by the research scholars. Literature Review According to Gospel and Sako (2010), outsourcing refers to the process wherein a business organization transfers it’s associated or auxiliary operations to a third party vendor so that it can focus on its core competency. It also reduces the overall cost to the organization and increases the organizational efficiency. Today, most of the business organizations have expanded their operations overseas in different developing and developed nations. These organizations adopt the outsourcing business model to reduce their cost and exploit the differences in the labor and the manufacturing cost in different countries. The information technology companies are pioneer in adopting outsourcing business model and it has been crucial in saving a significant amount of cost of these organizations.
Outsourcing 4Outsourcing can be defined as the transfer of duties, operations and the authority to someone outside the usual workplace. In the perception of Lientz (2009), the primary reason for the outsourcing activity is often cited as the development of competitive advantage. The side-operations of the organization which increases the workload of the employees unnecessarily highand deviate their mind from the core business activities of the organization are transferred to some other organizations. However, only those activities are transferred to an external organization which cannot be used against the organization in some negative manner. Moreover, if any data breach occurs in these activities, the negative impact on the organization is minimal. With the challenges and the risk associated with the outsourcing activities, there have been numerous options available for the outsourcing. For instance, a business organization can outsource a part of the process or a whole process to a third party vendor. According to Schniederjans (2006), the outsourcing activities of a business organization are dependent upon increasing the customer service quality and reducing the overalloperational costs. The outsourcing activities also allow the business organization to enter the market of a foreign country. With these processes, they can temporarily create employment and contribute to the local economy. It can also increase the access of the organization to the skilled labor and manufacturing technology. If a business organization does not have the labor equipped with the desired skills, the organization can outsource the activity to an expert organization. Along with it, the organization can also address the issue of manpower shortage with the outsourcing activities. If a business organization suddenly gets bulk order and it does not have the manpower to handle the project, it can outsource the business activities to the external organizations.
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