HI6008 Assignment 2: Outsourcing Business Functions Report

This report examines the advantages and disadvantages of outsourcing business functions, particularly within the context of the Australian automotive industry. It explores the impact of globalization and the adoption of cost-reduction strategies, with a specific focus on the outsourcing of non-core functions. The report delves into the project objectives, scope, and utilizes a comprehensive literature review to establish a theoretical framework. It addresses key research questions related to the motivations behind outsourcing, the types of business processes commonly outsourced, and the extent of outsourcing within the Australian automotive sector. Furthermore, the report analyzes both the positive impacts, such as cost savings and focus on core competencies, and the negative consequences, including job losses and industry slowdowns. The methodology includes an overview of the research philosophy, approach, and design, along with data collection and analysis methods. The report also acknowledges research limitations and provides a time schedule for the project. The conclusion summarizes the findings, highlighting the complex interplay of benefits and challenges associated with outsourcing in the automotive industry.

Advantages and Disadvantages
of Outsourcing Business
Functions
Assignment 2
Student Name: Student ID:
Subject Name: Student ID: HI6008
Date Due: Professor Name:
1 | P a g e

Executive Summary
Globalisation has increased transfer and sale of goods across nation’s leading to increased
competition. Corporations in order to establish their competitive advantages has adopted
varied cost reduction and savings techniques to focus more on their expertise or core
competencies. A recent trends across multiple industries across nations includes outsourcing
of their non-core functions. Outsourcing is not limited to any industry and is currently
providing several advantages across multiple industries along with their relevant challenges.
The scope of the current report discussion extends to analysing outsourcing benefits in
Australian automotive sector. Australian automotive industry post deregulation and opening
up of markets for imports have seen tremendous outsourcing of manufacturing jobs. While
there are, various positive effects of such outsourcing, negatives are also immense in nature.
Losses of various jobs, slowing down of the industry, shut down of various multiple
warehouses are some factors that are negatively affecting this industry. A comprehensive
literature review highlights various journal and articles that have provided theoretical and
conceptual framework for development of the study. Time schedule and research limitations
for the study have been included to depict relevant project outcomes for the same.
2 | P a g e

Table of Contents
Executive Summary...................................................................................................................2
1. Introduction.........................................................................................................................5
1.1 Background of the Study..................................................................................................5
2. Project Objective.................................................................................................................5
3. Project Scope......................................................................................................................6
4.Literature Review....................................................................................................................7
5. Research Questions/Hypothesis...........................................................................................10
6. Research Design and Methodology.....................................................................................11
Research Philosophy............................................................................................................12
Research Approach..............................................................................................................12
Research Design...................................................................................................................12
Research Methods................................................................................................................13
Methods of Data Collection.................................................................................................13
Data Analysis Methods........................................................................................................13
7. Research Limitations............................................................................................................13
8. Time Schedule (Research plan)...........................................................................................14
9. Conclusion............................................................................................................................15
Reference Lists.........................................................................................................................16
11. Appendix............................................................................................................................18
3 | P a g e

1. Introduction
Globalisation and advent of technology has put immense competitiveness on businesses. In
order to extend their core competencies and become more competitive in their businesses,
more and more companies are outsourcing some of their non-core functions (Chadee, 2009).
Globally it is an emerging trend to diversify major business functionality to a low cost
destination that allows cost savings to a significant amount. There are positive as well as
negative aspects associated with outsourcing of business functions that are discussed in the
study by taking example from Australian automotive industry (Haveckin, 2012).
1.1 Background of the Study
Australian automotive companies are primarily importing components and parts from China
at low costs. Though there are several challenges in regards to quality of such products and
components imported companies are devising strategies such that those challenges can easily
be succumbed to. Companies are incurring high costs in reagrds to training and developing
staffs and employees present offshore. Often their investments are rendered useless due to
staff incapacity and labor related challenges. The most prominent challenge in outsourcing to
a developing economy is cultural challenge.
2. Project Objective
The aims and goals of the study can be attained by means of the following objectives for the
study.
4 | P a g e

 Project Objective 1: To understand the key objective behind
outsourcing of business functions
 Project Objective 2: To analyse the business processes that are
primarily outsourced
 Project Objective 3: To understand the scope of outsourcing in
Australian automotive industry
 Project Objective 4: To analyse the positive impacts associated with
outsourcing of jobs
 Project Objective 5: To analyse the negative aspects of job
outsourcing on the company and industry
3. Project Scope
The project scope offered analyses factors that lead to outsourcing along with its several
advantages and disadvantages. Analysing the concept related to outsourcing might appear to
be vague and inconsistent to present hence the study has adopted concept related to a specific
industry within Australia, which is the automotive industry (Fisher, 2008). The project scope
is theoretical in nature hence has limited application in practical aspects. Further, the project
has adopted secondary data analysis hence it includes limitations as well as scope of such
secondary data. Primary data has been excluded in totality from the project. Quantitative
technique analysis has also been excluded from the scope of discussion of the current project.
However, the project scope can be extended to provide more relevant insights into the topic
(Holcomb, 2007).
5 | P a g e

4.Literature Review
The research through the literature review aim to attain the following research questions;
 Project Question 1: Why does a business outsources its functions?
 Project Question 2: What are the business processes that are
outsourced?
 Project Question 3: How much has the Australian automotive
industry outsourced?
 Project Question 4: What are the positive impacts associated with
outsourcing?
 Project Question 5: What are the negative impacts associated with
outsourcing?
Business scopes of outsourcing are immense and have tremendous potential to provide parent
company with profits (Penter, 2009). Various developed countries have adapted the process
of business outsourcing that can render effectiveness of their core business processes and
reduce overall costs. Reduction in costs of non-core business functionalities as HR, finance
and so on can have tremendous impact on the profitability of businesses and allow it to be
competitive. For the scope of the current study, a literature review has been incorporated,
these literary sources have been effective in providing central theoretical and conceptual
framework to the development of the study. A. Banerjee (2009) article, International Service
Outsourcing: Using offshore analytics to identify determinants of value-added outsourcing. In
6 | P a g e

the Strategic Outsourcing: An International Journal, pages 68 to 79 identifies the key values
or benefits provided by outsouricng of business functions (Banerjee, 2009).
P. K. Broedner (2009) article, Productivity effects of outsourcing: new evidence on the
strategic importance of vertical integration decisions. In the International Journal of
Operations & Production Management, pages 127 to 150 provides useful insights into the
topic (Broedner, 2009). This journal provides relevant insights into the prospects associated
with outsourcing. Apart from large corporations outsourcing their business functions, small
and medium scale enterprises can also undertake outsourcing for gaining technical expertise,
as gaining knowledge and skills in IT or ERP often indulges a high amount of costs (Javalgi,
2009). With outsourcing of such business fucntionality they are able to save on costs as well
as expertise. SMEs automotive companies in Australia often outsource manufacturing of
small parts and then makes final assembling in their warehouse, which not only saves costs
but also expertises. D. Brown (2007), The Black Books of Ooutsourcing: How To Manage
The Changes, Challenges, and Opportunites. Published by John Wiley & Sons (Brown,
2007). Outsourcing however requires tremendous amounts of changes to be made in the
parent company. As multiple Australian automotive plants have already shut down due to
outsourcing. Federal government in Australia have opened market, hence automobile
companies are rather importing parts and assembling them prior to marketing them. M. S.
Lacity (2011), Business process outsourcing studies: a critical review and research directions.
In the Journal of information technology, volume 26(4), pages 221 to 258 provides a crtical
view on the topic (Lacity, 2011). This article provides a critical perspective in the research
direction as the negative aspects have been analysed by very few. It becomes critical to
analyse the losses to job and loss of employee morale from outsourcing of such jobs.
7 | P a g e

Another prominent article that provides relevant study in the field is G. D.-K. Beverakis
(2009) article, Taking information systems business process outsourcing offshore: The
conflict of competition and risk. In the Journal of Global Information Management, volume
17(1), page 32 provides key insights into the several risks involved in outsouricng of business
functions (Beverakis, 2009). This article is critical as it effectively hihlights the possible risks
not only the positive imapcts from outsourcing. AS outsourcing is often done to a ofshore
country, it becomes critical to evaluate the effectiveness of such outsouricng activities against
the plausible risks that they poses. While there are certainly benefits, some key risks
associated with outsourcing is loss of brand value to the parent business. Closure of the
offshore company, hence loss of investment. Low skilled employees and staffs who lack
proper education as well as training to match up to parent company profile. C. P. Lin (2007)
article, Issues and recommendations in evaluating and managing the benefits of public sector
IS/IT outsourcing. In Information Technology & People, volume 20(2), pages 161 to 183
discusses the various issues and benefits in managing outsourcing (Lin, 2007). This article
highlights the key issues and recommendations that corporations can include in order to
overcoem relevant challenges in regards to outsourcing. C.Sheehan (2009) article,
Outsourcing HRM activities in Australian organisations. In the Asia Pacific Journal of
Human Resources, volume 47(2), pages 236 to 253 provides insights into the prospects of
outsourcing HRM activities in Australia (Sheehan, 2009). A large number of Australian
companies including automobile companies are outsourcing their HR functions offshore.
Such offshoring of business fucntions in HR are allowing them to develop technical
expertises and conduct appraisal, performance analysis in an easy method. J. J. Wang (2012)
doctoral dissertation, Examination of outsourcing of components and finished products from
Australia to companies in China: inter-firm business problems, solutions and business success
factors (Doctoral dissertation, Victoria University) (Wang, 2012). China, India, Philipines
8 | P a g e

offer tremendous amount of labour force that can highly benefit any type of industry
however, they challenge in these cases is the cultural challenge that needs to be overcome.
For any business fucntion to be smoothly communicated and translated is requring
tremendous capability from the business investments. Such investments are often burdening
the parent company and leaving the entire endevour as cost inefefctive. Hence, stakleholders
of the company prior to evaluating the positives associated with outsourcing needs to
consider the potential downfallls that can arise and implement appropriate control measures.
Certain companies have already icnroproated certain Key Perforamnce Measures (KPI) for
evalutaing and allocating tasks to business processes. Businesses needs to look at outsourcing
as their strategic alliance rather than treating them as costs effctive units only. Hence,
approach towards such units needs to be similar to that of an extended business unti such that
effectiveness in a susrtenable manner can easi;y be established. This can redner the entire
business effective and efficnet in all form creating a sustenable future for the same.
5. Research Questions/Hypothesis
In order to attain project aims and objectives, the below mentioned research questions or
hypothesis needs to be answered.
 Research Question 1: Why does a company outsources?
 Research Question 2: What are the business processes that a company
generally outsources?
9 | P a g e

 Research Question 3: To what extent the Australian automotive
industry adapted outsourcing.
 Research Question 4: What are the positive impacts of outsourcing?
Research Question 5: What are the negative aspects of outsourcing in
the industry?
6. Research Design and Methodology
One of the most essential aspects of any field of study is the Research methodology. In this
part of the research, research methodology’s comprehensive sketch has been adopted by the
scholar in order to complete the study successfully while meeting all the objectives and
obtaining answers to the research issues recognized (Bradley, 2007). The study at first
explains the diverse aspects of research methodology and then provides a clarification for
selecting various methods to complete this study.
10 | P a g e

Research Philosophy
A research philosophy ascertains the overall structure of the study by describing the
underpinning aspects. Ontology, epistemology, axiology and rhetoric research philosophy are
the four research philosophies that can be used by the scholar. Here rhetoric research
philosophy has been used (Gallagher, 2009). The Rhetoric research philosophy is used in
studies with the main aim being the in-depth inspection of all the problems and exploration of
all other related aspects for the elucidation of the results so as to form judgments.
Research Approach
The decision made by the researcher related to the adoption of the inductive approach is a
part of research approach. In this approach, at first, the observations are pursued and then
studied. It is because of this that the results are derived and theories are therefore formulated
(Creswell J. W., 2017).
Research Design
The research design is regarded as one of the most essential components of research
methodology. It aids in determining the efficiency and functionality of the methodology and
thereby establishes an operational research process. There are four types of research design
which a scholar can choose from: explanatory, descriptive, predictive and exploratory
(Creswell J. , 2013). A scholar adopted the exploratory research design wherein there was a
shortage of information and hence it had to be researched from varied sources in order to
form concrete solutions.
11 | P a g e

Research Methods
There are a number of tools that a researcher can adapt to gather information to support their
research design. For this project, Quantitative secondary data has been utilized. Tools like
observations, focus groups, questionnaires and interviews can be adopted (Cline, 2011). Out
of these tools, a researcher can use any tool as per their requirement. However, for qualitative
secondary data, data is collected from newspapers, magazines and periodicals.
Methods of Data Collection
Either primary or secondary means can be used to gather data. The qualitative secondary data
includes the data that has been published already. This is the data that has been found put by
some other researcher and can be utilized (Corbin, 2008). Sources like books, journals,
magazines, newspapers, periodicals and the internet are great sources. These are rich sources
of information and can assist people in perceiving as to how they are to view varied subject
matters.
Data Analysis Methods
Qualitative data that has been acquired using secondary sources have been examined vividly.
7. Research Limitations
The only thing that limits this study is the sample’s size. The size that has been used is very
small as compared to that of the population (Hirschheim, 2009). Therefore, the sample cannot
12 | P a g e