A Dissertation Exploring the Role of Outsourcing in Global Economy

This dissertation investigates the role of outsourcing in the global economy, examining its positive and negative impacts on international markets. It begins by defining outsourcing and highlighting its increasing prevalence among multinational organizations. The research employs a secondary research methodology, critically evaluating peer-reviewed articles, journals, and books to analyze outsourcing trends, motivations, and effects on economic factors like inflation, exchange rates, and GDP. The study explores the reasons behind outsourcing, such as cost savings and access to specialized skills, and discusses related concepts like offshoring and crowdsourcing. Ultimately, the dissertation aims to provide a comprehensive understanding of outsourcing's complex role in shaping the global economic landscape, considering both its benefits and drawbacks.

ROLE OF OUTSOURCING IN GLOBAL ECONOMY

Table of Contents
ABSTRACT........................................................................................................................2
1.0 INTRODUCTION.........................................................................................................3
1.1 AIMS AND OBJECTIVES........................................................................................4
2.0 LITERATURE REVIEW...............................................................................................6
2.1 INTRODUCTION......................................................................................................6
2.2 OUTSOURCING AND ITS ROLE IN GLOBAL ECONOMY....................................6
2.3 GLOBAL TRENDS IN OUTSOURCING..................................................................9
2.4 POSITIVE ROLE AND IMPACTS OF OUTSOURCING IN GLOBAL ECONOMY11
2.5 NEGATIVE ROLE AND IMPACTS OF OUTSOURCING IN GLOBAL ECONOMY
.....................................................................................................................................13
2.6 CONCLUSION.......................................................................................................15
3.0 RESEARCH METHODOLOGY.................................................................................16
3.1 INTRODUCTION....................................................................................................16
3.2 RESEARCH PHILOSOPHY...................................................................................18
3.3 RESEARCH APPROACHES.................................................................................20
3.4 RESEARCH DESIGN............................................................................................21
3.5 RESEARCH METHODS........................................................................................22
3.6 DATA COLLECTION METHODS..........................................................................22
3.7 MEASUREMENT ISSUES.....................................................................................23
3.8 BENEFITS AND LIMITATIONS OF SECONDARY DATA RESEARCH...............24
3.9 SAMPLING.............................................................................................................25
3.10 ETHICAL CONSIDERATIONS............................................................................26
3.11 CONCLUSION.....................................................................................................26
4.0 DISCUSSION AND FINDINGS.................................................................................28
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5.0 CONCLUSION...........................................................................................................39
6.0 REFERENCES..........................................................................................................42
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ABSTRACT
Today is the world of outsourcing and many of the top multinational organizations in this
contemporary world exploit the procedure of outsourcing in order to achieve their
organizational goals and objectives. The following research project depicts the
outcomes of research on the role of outsourcing in global economy. The role of
outsourcing is highly imperative and thus it has both positive as well as negative
impacts on the global economy. There is a wide range of multinational organizations
present in the international market that carries out the process of outsourcing within
their workplaces so as to gain an assortment of diverse benefits of this notion. The
subsequent research report depicts the outcomes of research that has been carried out
to analyze the role of outsourcing in the global economy. There is an assortment of
different research methodologies present that can be used to accomplish the aims and
objectives of a research, but the research methodology that has been used in this
research study is “secondary research”.
In the methodology of secondary research, the peer reviewed articles, journals, books,
and literatures of the several well-known researchers from all across the world have
been critically evaluated and their outcomes have been utilized for the findings of this
research study. In the literature review section of this report, the peer reviewed
literatures that are proposed by the researchers regarding the topic has been analyzed
critically and deliberated. The next section of this research study depicts the research
methodology and an assortment of different aspects that are allied to it. In the section of
research methodology, the different facets such as; sampling, data collection, ethical
consideration, research design, measurement issues, research philosophies, research
approaches, benefits and limitations, etc. has been critically assessed. This research
study most appropriately explains about the concept of outsourcing and its role with
respect to the global economy. The positive as well as negative impacts of the
outsourcing on the global economy has been also effectively discussed and explained
with examples in this subsequent research study.
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1.0 INTRODUCTION
In business, ‘Outsourcing’ can be defined as an agreement in which the part of an
internal activity of one organization gets contracted out to another organization. The
contracting out of activities from one organization to another includes non-core functions
of a company such as facility management, call center support, manufacturing;
business and operational processes such as claims processing, payroll processing, etc.
The following research project depicts the outcomes of research on the role of
outsourcing in global economy. The major motive behind carrying out this research was
to critically evaluate the positive and negative impacts of the outsourcing on the global
economy and the international market. The rate of outsourcing in the entire world has
been drastically enhanced in the last few years, and thus it became highly important to
analyze the changes that have been occurred due to the outsourcing in all over the
world.
The notion of outsourcing was derived from the American Glossary which was proposed
in the year 1981. The name of that American Glossary was ‘Outside Resourcing’. The
concept of outsourcing is very much similar to that of the concept of “Offshoring”, and is
thus many times both the terms get confused with each other. However both of these
concepts can be distinguished from one another and the following research project
portrays those differences between both the notions. For this project study, the research
methodology that has been utilized is ‘secondary research method’.
The peer reviewed articles, journals, books, and research papers that are published by
the well-known researchers of the world, are reviewed and analyzed critically for this
research study. The sources that have been used for the secondary research in this
project are highly reliable and valid as all the articles that have selected are peer
reviewed ones. The validity of the outcomes that are depicted in this subsequent
research study is very high, as the entire project is based on the secondary sources that
are the peer reviewed articles and journals.
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For this particular research study, all the ethics have been properly considered and the
details of these ethical considerations have been also deliberated in the further section
of this research report. The literature review on the topic has been also discussed in this
project. In the section of literature review, the summaries of the key findings from the
peer reviewed articles and journals have been discussed effectively. These articles and
journals are the research work of several well-known international researchers who
have carried out different researches on the same topic in an assortment of different
contexts. The studies that have been selected for the literature review to analyze the
role of outsourcing in the global economy are based on the mixed research
methodologies that have been carried out by the researchers from all across the world.
The last sections of this research project depict the discussion, findings, conclusions,
and recommendations of the project. In these sections, the overall outcome of the
research that has been carried out on the basis of secondary research methodology is
portrayed and has been discussed effectively. This following research project also
sought to critically evaluate the trends of outsourcing in the global business sphere with
respect to an assortment of different subsets. The importance of outsourcing in the
global economy has been also discussed in this following research project.
1.1 AIMS AND OBJECTIVES
There are several different aims and objectives of this subsequent research study on
the role of outsourcing. The research methodology that has been used to achieve aims
and objectives of this research study is secondary research. The major aim of this
particular research study is “To critically analyze the role of outsourcing in global
economy”. Along with this major aim of the research project, there is an assortment of
different objectives too that have been fulfilled in this subsequent research study. These
objectives of the research are as follows:
 To evaluate the impacts of outsourcing on the economies of different nations.
 To assess the advantages and disadvantages of outsourcing at global level.
 To critically review the secondary literatures related to the research topic.
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 To identify the changes occurred within the economy to the outsourcing of
different businesses.
In order to achieve the key aim and objectives of this research, the secondary data has
been utilized effectively and along with it the published articles, journals, and literatures
has been also reviewed.
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2.0 LITERATURE REVIEW
2.1 INTRODUCTION
In this chapter of the research project, the research works of the well-known
researchers from all across the world has been analyzed and the outcomes of their
research studies have been discussed effectively. The major aim of this research study
is to critically analyze the role of outsourcing in global economy. There are several
researchers in the world who have carried out different types of research methodologies
to disparagingly and censoriously assess the importance and significance of
outsourcing at the global level. The section of literature review here also depicts the
identified gaps within the research and the findings of authors that fulfill the gaps of this
research study.
2.2 OUTSOURCING AND ITS ROLE IN GLOBAL ECONOMY
According to (Klare, et al. 2017), today is the world of outsourcing and many of the top
multinational organizations in this contemporary world exploit the procedure of
outsourcing in order to achieve their organizational goals and objectives. In support to
this, (Morschett, et al. 2015) states that the need of outsourcing within the associations
of the several nations have been enhanced drastically, and it has now became a
contemporary trend in the international market. Ranging from research and
development to marketing, distribution and sale to after-sales services, from designing
of products to its assembly, the firms in this modern international market carries out
subcontracting of an ever expanding set of different activities (Milberg, et al. 2013).
Due to the adaptation of the concept of outsourcing within the business, several
multinational organizations of the world have become virtual manufacturers and started
creating their own designs for an assortment of different product range (Upadhya, et al.
2012). According to the annual report of World trade Organization (1998), there are
many organizations in the United States that carries out the process of outsourcing at a
high level. For example; the production of an automobile in America is outsourced in
various different nations in such a way that; 18% of the car’s value is outsourced to
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Japan for the advanced technology and components, 4% to Singapore and Taiwan for
production of minor parts of the vehicle, 7% to the Germany for the designing of car,
approximately around 1.5% to Barbados and Ireland for the processing of data, and
about 2.5% to the United Kingdom for the marketing services and advertisement of the
products. From this statistical data it can be analyzed that only about 37% of the
production value is only generated within the United States of America (Sassen, 2014).
There is an assortment of different reasons and motivations for the organizations to
carry out the procedure of outsourcing within their workplace. Out of those reasons and
motivations, the major reason of motivation for several organizations to do outsourcing
is financial savings from lower international rates (Haufler, 2013).
Figure: 1. Reasons for Outsourcing
[Source: Locke, et al. 2013]
According to (Helpman, et al. 2010), during the process of outsourcing, two or more
than two associations get involve into a contractual agreement regarding the expertise,
exchange of services, and payments for the processing. In addition to this, (Sassen,
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2013) stated that because of the concept of outsourcing, several multinational
organizations of the international market performs well in a variety of different aspects
such as; fuel innovation, core competencies of the business, shortage of skills, etc.
There are many more similar concepts like outsourcing such as; crowdsourcing, near-
shoring, offshore outsourcing, multi-sourcing, etc. that are used by the organizations
from all across the world to enhance the level of profitability of their respective
businesses in the international market.
The global economy gets influenced too due to this outsourcing of the businesses
(Locke, et al. 2013). The concept of outsourcing came into action in the early 21 st
century and since then it has been drastically enhanced at the global level. An
assortment of different benefits is associated with the concept of outsourcing as it
enables the companies to pay for the business functions and services, offers the
organizations with greater control and budget flexibility, the needs and requirements of
specialized staff gets reduced, operation capital of the workplace gets reduced,
operating expenses and risks gets minimized, and it also brings in fresh engineering
expertise (Gereffi, et al. 2012). With respect to the global economy, in the last couple of
years it has been noted that the outsourcing at an international level possess both
positive as well as negative influence on the different economic factors worldwide.
According to (Contractor, et al. 2010), these different economic factors which get
influenced due to outsourcing include; rate of inflation, currency exchange rates, GDP of
a nation, import and export costs of the resources, etc.
In the late 1990s, the legendary management consultant “Peter Drucker” has proposed
a tagline that has become the first coined and developed internationally recognized
business tagline in the international market (Drucker, 2014). This business tagline was
“Do whatever you can do best and outsource the rest”. According to Drucker’s
business tagline, the concept of outsourcing allows the organization to internally carry
out all the operations and business activities in which the company excels, and leave
rest of the operations to be done through outsourcing. From the perspective of the
author it can also analyzed that an organization should only seek to outsource its
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business activities to only those areas that could not demonstrate any type of special
ability, and also the associations must utilize the different advantages of knowledge
provided by the specialist providers of the international market (Farndale, et al. 2010). In
support to this, (Lambin, et al. 2011) added that the major reason behind the
outsourcing of resources and business activities by several organizations in the market
is to reduce the costs of the business such as; non-core business costs, peripheral
costs, production costs, operation costs, labour costs, high energy costs, and high
taxes. The authors in their literature have also depicted that, because of the mandated
benefits such as; safety protection, social security, etc. the companies of United States
may get greater incentive to outsource.
2.3 GLOBAL TRENDS IN OUTSOURCING
There is an assortment of subsets and trends in global business sphere of outsourcing
that have been identified by the researchers from all across the world (Kang, et al.
2012). Along with the trends and subsets of outsourcing, the problems surrounding the
concept of outsourcing have been also determined by connecting the professional and
academic opinions. Regardless of the size and location, outsourcing is extremely vital
for every business in this contemporary world. According to (Barrientos, 2010), one of
the strategic goals of almost every multinational organization is to do outsourcing as a
part of their business activity. The author of this literature study further added that the
importance of outsourcing is not only limited to the organizations but also have
significant importance to the citizens of a nation in which the concept of outsourcing is
utilized by the companies. There are several different factors that may hinder the
modern economic practices of outsourcing, as the government of a nation looks towards
the increment of its own prosperity (Gereffi, et al. 2013).
According to (Oshri, et al. 2015), the latest trends in the concept of outsourcing are not
limited to the standardization of intermediate goods and the purchasing of raw
materials, as it has now been extended to the building up of bilateral relationship with
other multinational firms to commence relationship-specific investments in order to
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satisfy the particular needs of a firm regarding the production and development of goods
or services.
Figure: 2. Outsourcing Market
[Source: Oshri, et al. 2015]
From the findings of the authors in their literature study, it can be analyzed that the
trends in outsourcing at a global level has been changed continuously since the last few
years. From the above depicted statistical figure, it can be observed that the
outsourcing market in the categories like business process outsourcing and information
technology outsourcing has been enhanced drastically over the years since 2000 to
2013 (Oshri, et al. 2015). In addition to this, (Escaith, et al. 2010) stated that there are
several terms and conditions that are to be taken care off while making an outsourcing
contract between the two firms as ignorance of these terms and conditions during the
outsourcing might result in a very heavy loss for a firm or for both the firms in contract
with one another. Out of all the industries that are present in the international market,
the industries that have experienced rapid expansion in the international specialization
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