Business Research Report: Outsourcing Business Functions Analysis

This report provides a comprehensive analysis of business outsourcing, exploring its advantages and disadvantages. The introduction defines outsourcing and its purpose in reducing costs. The project overview highlights the importance of collaborative business processes in globalization. The literature review delves into the benefits of outsourcing, such as increased efficiency, focus on core business processes, and 24-hour operations. It also discusses the disadvantages, including hidden costs, security risks, loss of managerial control, and political/cultural disadvantages. The report cites various research papers to support its findings, including the impact of outsourcing on innovation, customer satisfaction, and market share. The report also addresses the potential risks associated with data leakage and the importance of maintaining managerial control. Overall, the report offers a detailed examination of the strategic implications of outsourcing in the modern business environment.

Running head: BUSINESS RESEARCH
Business Research
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction:....................................................................................................................................2
Project Overview.............................................................................................................................2
Project Scope...................................................................................................................................3
Literature Review............................................................................................................................3
Advantages of Outsourcing business...............................................................................................3
Outsourcing business process for increasing efficiency..............................................................3
Focus on the core business process..............................................................................................5
Advantage working 24 hours a day..............................................................................................6
Disadvantages of Outsourcing Business..........................................................................................6
Involvement of hidden cost..........................................................................................................7
Security risk related to exposure of sensitive data.......................................................................7
Loss of Managerial Control.........................................................................................................8
Political and cultural disadvantage..............................................................................................8
Pricing issues................................................................................................................................9
Conclusion.......................................................................................................................................9
Reference.......................................................................................................................................10

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Introduction:
Outsourcing is the process of business which involves obtaining goods or service by
means of business contract from outside suppliers. The main purpose of practicing Outsourcing
business by different companies is to reduce the cost of labor and transportation. Hence, it is
important to effectively use the Outsourcing business process in order to implement a cost
effective strategy. Nevertheless, there are certain disadvantages of this business outsourcing.
The aim of the current report is to highlight upon the existing literature related to
advantages and disadvantages of Outsourcing business functions. All the relevant theory models
related to Outsourcing business will also be highlighted upon in the current literature.
Project Overview
In the current age of globalization, it is important for all multinational organization to
form collaborative business process in order to improve upon their rate of production. This can
also help them to bring about innovation of business and help in the process of marketing. In this
context, it is essential for all major business organization to explode the opportunities of
Outsourcing business. Additionally, it is also essential for the organization to explore the
negative aspects of outsourcing business process that may include compromising on the quality
of the manufactured products or service. The aim of the current project is to discuss in details
about the positive and negative aspects of outsourcing process in business. The project will
highlight up on all the major existing relevant literature related to Outsourcing business that will
help to evaluate the positive and negative aspects of outsourcing business.

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Project Scope
The scope of the current project is to focus up on all the major relevant literature related
to Outsourcing business process. The entire major past research work relevant to the topic will be
discussed. All the major databases are included in the search process. The past journal articles
that are published after 2010 are chosen for the literature review.
All the major positive and negative process that is encountered by the large scale
multinational organizations due to outsourcing business will be provided in the project.
Literature Review
Advantages of Outsourcing business
Outsourcing business process for increasing efficiency
The research paper for Weerakkody and Iran (2010), have indicated upon the fact that the
total number of private organizations that outsource business process have increased
significantly in all parts of the globe. The total value of the market of business process
outsourcing is estimated to be around 309 billion-dollar in the financial year 2016. The major
business outsourcing process that has been included in recent activities includes finance and
accounting along with the process of human resource management. Mani et al., (2010), have
added in the context that legal procedure is also one of the major business Outsourcing units. The
overall growth rate of the business Outsourcing process market is estimated to be around 25%
annually.
There is also a high level of expectation from the senior management of an organization
regarding the service quality of the business Outsourcing Processing Unit. There is also the

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expectation of the companies to implement innovation in the Outsourcing business process.
There are several companies that initiated Outsourcing business as a part of their operational
activities. This can help the company to bring about regular innovation by hiring the talent from
various external sources.
The hiring of the third party vendor in the manufacturing sector can help the business
firms to increase upon the efficiency. This can in turn help in the companies to focus on
innovation. This in turn has been one of the major results of high customer satisfaction. In case
of electronic and automobile industry, hiring of third party organization has helped them to
provide better quality after sale service (Lacity & Willcocks, 2012). This is mainly helpful for
the companies to repair the defective products at much quicker rate. This is believed to help the
company to help to improve upon their innovation.
Lacity and Willcocks (2013), believes that by hiring these third party business
organization also can help in the process of reducing the overall expense of the company due to
the fact that cost of hiring the workers though the third party business organization is much
lower. The BPO service providers also do not require high level of incentives to deal with the
extra pressure at the workplace. It is also possible for the large scale multinational organization
to purchase new innovative ideas at much lesser rate from the third party organizations. There
are also no major risks of violating the legal rules relating of patents and intellectual property
(Javalgi et al., 2011). It is also possible for the leaders of the organization to foster innovation
that is one of the important parts of business sustainability in the current global market
environment.

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The partnership between the Apple Inc and Foxconn is one of the major examples of
advantages of the outsourcing business. The manufacturing contract of Apple with Foxconn has
helped them increase the rate of iPhone production. This has helped Apple to increase their
market share in the smart phone industry in the regions of Indian Subcontinent and south Asian
countries.
The BPO units of other manufacturing giants like Toyota and Samsung have helped them
to provide better quality of customer support service. All the major issues that are encountered
by the clients have been easily resolved by the services that are provided by the BPO workers.
Focus on the core business process
There are several elements of large scale business that needs full focus in order to fulfill
the business objective. Nadkarni and Herrmann (2010), have highlighted upon the fact that in
many cases, the companies tend to invest huge time on all non-core business activities. This can
ultimately affect the prime activities related to business. In the current days of business process,
it is essential for the companies to constantly gather the extra information that is needed in the
process of implementing the business plans and bring about regular modification in the
marketing strategies. By setting up the partnership with the outsourcing unit, it is possible for the
companies to save precious time that is needed for the process of secondary information
gathering. The BPO units can thereby provide valuable assistance in the process of marketing
research that can help in the process increasing the branding techniques. This enables the
employee of the organization to focus upon the major business process and thereby also help
them to reduce the work pressures.

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It is important to mention in the context as per said by Lacity et al., (2010), that the core
competency of an organization is to focus upon the values of sustainability. This will help the
companies to improve upon the process of strength and simply the overall work process of the
company.
Advantage working 24 hours a day
Due to the increased effect of globalization, all major multinational corporations have
their market share in all parts of the globe. With the help of outsourcing business process, it is
possible for the multinational corporation to hire workers from different time zones. The
companies in the Western nations often hire workers from the eastern countries, which enable
them to continue their business process 24 hours in a day. Nedbal et al., (2011), have highlighted
upon the challenge that many multinational corporations has to encounter due to difference in the
time zone. As the companies are able to hire workers from other third party business
organizations, it is possible for them to continue the official business work in all time of the day.
Due to the effect of globalization, it is possible for the major multinational business
organizations to hire workers from all across the globe. This is mainly done with the help of third
party recruitment groups. One of the major challenges that are encountered by Global companies
to hire workers from different regions is to search for the perfect talent that is needed in the
workplace. With the help of outsourcing business process, it is possible for the organization to
get good quality of human resources in the form of skilled workers. As workers that are more
talented are hired from different nations, it is possible to increase the cultural diversity of the
nation.
Disadvantages of Outsourcing Business

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Involvement of hidden cost
In spite of the fact that Outsourcing business process are mainly believed to reduce the
overall expenditure of business, the research paper of Massini and Miozzo (2012), have
highlighted up on few of the major hidden cost that are involved with the implementation
process. Outsourcing manufacturing unit from third party organization involves extra official
work. There is also involvement of extra legal work that are the part of business contract made
between two organizations. All these processes involved expenditure that is easily neglected in
many occasions. Moreover, these expenditures are not included in the official financial report of
the organization. Hence, it is difficult to keep a track of these hidden expenditures.
Security risk related to exposure of sensitive data
One of the major risks that are encountered in the modern days by all major business
organization is the threat of data leakage. It is essential for the organizations to implement high
level of security to protect the valuable and classified data related to business planning.
Nevertheless, when the large scale multinational organization form Outsourcing business
contract with other third party agencies, they have to provide valuable information related to the
business process. Hence, they are exposed to the sensitive data that can be a major threat to the
competitive advantage of the organization. There is also a major risk that the third party agencies
can help to misuse the information and leak them in the public domain. The data related to the
financial performance and future marketing plan are few of the vital information related to the
performance of the business of the organization. According to Bustinza et al., (2010), there are
major threats that can be faced by the companies due to the leakage of these data.

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An example for this threat can be found from the business outsourcing partnership
between Apple Inc and Foxconn. It is important for the smart phone manufactures like Apple to
not reveal the features that are there in the latest phone model until they are being launched in
public. Nevertheless, as the Foxconn is responsible for the manufacturing of the Apple’s smart
phones, they are provided with the blueprint of the phone from beforehand. Hence, there is the
risk that they might expose the information related to the features of the phone to public domain.
This can give a major competitive advantage to the rivals of Apple Inc.
Loss of Managerial Control
When a company is signing Outsourcing business contract with third party agency, they
are transferring some of the management power to the third party agency. One of the major
issues in this case can be from the fact that the management control of the Outsourcing agency
may not be same as the mother organization. There is a potential risk of organizational conflict
between the two companies that can ultimately compromise upon the business performance and
the rate of production (Bharadwaj et al., 2010). There is also the risk of conflict between time
management between the two organizations that can ultimately result in delayed in the
manufacturing process. The difference in the leadership philosophy can be the result in the major
issues between two organizations and harm upon the reputation of both the organization.
Political and cultural disadvantage
With most of the outsourcing unit are being derived from different parts of the globe,
there can be major issues related to political and cultural difference between these units. The
unstable political scenario in many nations can be one of the major issues that can compromise

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up on the business performance. The difference in the culture can also be a major source of
communication issues between different organizations. It may not be possible for one
organization to respect the cultural the aspects of the different nations that is needed to deal with
challenge of business globalization. Böhm et al., (2011), have mentioned about the importance of
mutual success that is one of the major elements of business success in the outsourcing business.
Due to the cultural conflict and communication issues, it is never possible for different
organizations, which are a part of the outsourcing process to maintain the process of mutual
success.
Pricing issues
In the outsourcing process, most of the resources of the manufacturing unit of the
company are hired from different third party sources. In most of the cases, the price of gathering
the resources can vary significantly. The pricing can vary due to the fact that in most of the
occasions there is no regulation pricing that is claimed by the third party agencies. Hence, the
company cannot fix upon a particular cost of a particular product (Carnahan and Somaya, 2013).
Conclusion
In the Concluding note, it can be said that it is important for an organization to evaluate
the both positive and negative aspect of outsourcing business process in order to ensure that
maximum benefit is achieved. Implementation of innovation is one of the major advantages of
business process outsourcing that can help a large scale organization to make use of talent from
workers all across the globe. It can also save the organization to save valuable time that is needed

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to conduct business research. The MNCs also get the opportunity to hire workers to work for 24
hours as they are able to recruit the workers from different nations from all across the globe.
On the other hand, the security threat that can leak valuable company information to
public domain is one of the major disadvantages of outsourcing business process. There is also
the issue of cultural and political conflict between different organizations. The loss of control of
the manager of the organization is also one of the major issues. There is the chance of conflict
among the managers within the workplace, who are working in different parts of the globe. The
pricing issues can also be raised due to the fact that it is not possible for the large scale
companies to have control over the pricing of the third party organizations. The pricing of the
products are also raised due to the fact that there are many hidden costs that are involved that are
not taken into account.
It is important that the future research related to the outsourcing business process need to
focus upon improving upon the negative aspects that can help to have high level of coordination
among the workers of Mother Company with that of the BPO.