Business Performance: Impact of Outsourcing Functions - Woolworths Plc

This report examines the impact of outsourcing functions on business performance, specifically using Woolworths Plc as a case study. It begins by defining outsourcing and exploring its effects on profitability, referencing prior research on the topic. The paper then details the project's objectives and scope, highlighting how outsourcing enables companies to focus on core business activities and reduce operational costs. A comprehensive literature review covers the benefits of outsourcing, such as cost reduction, improved resource allocation, and access to specialized expertise, while also addressing potential risks and factors to consider. The report outlines the research questions, methodology (including qualitative and quantitative approaches), and limitations. It concludes by summarizing the key findings and implications of outsourcing for business performance, with recommendations for minimizing challenges and maximizing benefits within the context of Woolworths Plc.

Running head: IMPACT OF OUTSOURCING FUNCTIONS
Evaluating the Impact of Outsourcing Functions in Business Performance
Name of the University:
Name of the Student:
Authors Note:

1IMPACT OF OUTSOURCING FUNCTIONS
Table of Contents
1. Introduction..................................................................................................................................3
2. Project Objective.........................................................................................................................3
3. Project Scope...............................................................................................................................3
4. Literature Review........................................................................................................................5
1.1. Outsourcing and Profitability............................................................................................5
1.2. Benefits of Outsourcing....................................................................................................7
1.3. Risk and Factors to Consider before Outsourcing............................................................9
1.4. The Outsourcing Process................................................................................................10
1.5. Research Gap..................................................................................................................13
1.6. Summary.........................................................................................................................13
5. Research Questions/Hypothesis.................................................................................................14
5.1. Primary Question................................................................................................................14
5.2. Secondary Questions..........................................................................................................14
6. Research Design and Methodology...........................................................................................14
6.1. Qualitative Research...........................................................................................................14
6.2. Quantitative Research.........................................................................................................15
7. Research Limitations.................................................................................................................16
8. Time Schedule...........................................................................................................................17

2IMPACT OF OUTSOURCING FUNCTIONS
9. Conclusion.................................................................................................................................18
Reference List................................................................................................................................21

3IMPACT OF OUTSOURCING FUNCTIONS
1. Introduction
The paper intends to analyse the impact of outsourcing functions within the business
performance of Woolworths Plc. The paper is also focussed on analysing previous researches on
outsourcing and its effect on profitability of an organization. Outsourcing is characterized as
"getting of administrations or items from an outside provider or maker all together to cut costs".
As indicated by Agrawal, Singh and Murtaza, (2016) outsourcing implies that the physical or
potentially HR identified with an association's capacities or divisions will be given as well as
oversaw by an outer specific provider. Awino and Mutua, (2014) additionally characterize
outsourcing as having work which was done previously inside company carried out within the
association. The merchant, in the future the outsourcer what's more, outsource are, separately,
considered as merchant and consumers can remain autonomous substance or a completely
attained auxiliary. Interestingly, in sourcing implies implementing outsourcing's order to internal
manufactures, frequently along with making them contended with outer providers.
2. Project Objective
The primary objective of the research is to recognise relevance of strategic evaluation
along with its effect on outsourcing performance.
3. Project Scope
Outsourcing enables companies to focus on major business and can offer support by
decreased operational costs. The magnificence of outsourcing is an organization might outsource
an overall capability or just a part of the same. For example, one might outsource administration
view of a framework yet keep end-client bolster. This can give a connection a decent adjusts of

4IMPACT OF OUTSOURCING FUNCTIONS
on location for workers (Yang and Zhao, 2016). Companies use outsourcing as a major action
activity for improving client administration, quality along with decreasing costs. Outsourcing
might be a changeless or transitory plan for dealing with any hurdle in staffing, for gathering
better quality strategies or maintaining change in defective items.
Outsourcing is among the major development companies of a particular chance. In recent
era, the outsourcing of selected hierarchal actions is a necessary part of corporate system
Outsourcing has turned into a noteworthy feature of present day inn administration. The idea of
outsourcing can be considered ahead of schedule as 'The abundance of Nations', Adam Smith
stated; "If a remote nation can offer with a ware or management that is less expensive than might
be able to make or offer it. David Ricardo, a British business analyst, focussed on Smith's
thought, in standard of aggressive advantage, accentuated that all the nations ought to have
practical experience in aspects in which they are excellent and is a substitute with others so as to
deal with such issues. Such enhanced competition in increasing worldwide economy has make
lodging business outsource greater part of its in-house noncore benefit capacities to researcher
organizations (Solli-Sæther and Gottschalk 2015). Outsourcing activities can be understood as a
course of action in which a company requested that other company play out its non-centre
exercises, for instance, cleaning, security, preparing, auto rental, data innovation, support and so
on. The outsourcing idea non-centre exercises have been held onto by numerous as changed
methodology for managerial productivity.
The reasoning is that companies can divert thoughtfulness regarding centre exercises.
Business associations and organizations both private and open considers outsourcing non-centre
exercises that considers better esteem might be offered at bring down cost to intensity of the
companies. Outsourcing has turned into a genuine and complex business administration

5IMPACT OF OUTSOURCING FUNCTIONS
procedure of expanding significance to mission achievement (Schwarz 2014). Outsourcing has
turned into an imperative methodology that can help associations to use their aptitudes and assets
to accomplish more noteworthy competiveness. It is hence, a quickly developing part of the
world economy. Outsourcing has been a vital piece of each economy and each business
substance. The total structure of globalization has facilitated many organizations to outsource
certain non-centre exercises to researcher co-ops in addition, concentrate on their centre ability.
4. Literature Review
1.1. Outsourcing and Profitability
Basically outsourcing addresses the issue in the matter of whether any company should
develop or purchase mainstream inputs; a problem which has a long practice in financial aspects,
considering the research work by Chou, Techatassanasoontorn and Hung, (2015) on a firm’s
limits. In consideration to same, a collection of research was concerned with investigating certain
aspects of such "make-or-purchase choice", focussing on an aspect of deficient contracts,
resources and exchanges expenses. More or less, firms might prefer "purchase" as disagree with
to "make" as long as the cost of outsourcing is less in comparison to in-house creation.
Consequently, outsourcing might be used for managing generation cost and work cost by
replacing in-house manufacture with the purchasing certain parts. The cost of outsourcing ill not
be dictated by the purchase cost in segments, yet in addition to exchange costs due to transport
and fragmented contracting costs, and the conceivable ramifications of advantage specificity for
provider as well as client.
As the report investigate concentrates on assessing impact of outsourcing functions
within the business performance of Woolworths Plc has connected the deductive way to deal

6IMPACT OF OUTSOURCING FUNCTIONS
with direct the research. This is on the grounds that researcher has utilized quantitative
examination for attaining results from the exploration. The quantitative examination is carried
out by evaluating reactions attained from the respondents (Raassens, Wuyts and Geyskens,
(2014). Furthermore, positivism approach is identified with quantitative research, in which
certain information gathered has been evaluated with support of past patterns and certain models
and demonstrated realities. In this way, deductive approach was deemed to be most pertinent one
in order to attain genuine after-effects of the reaserch.
In a current paper, Creon, Grover and Teng, (2017) gave an exhaustive hypothetical
examination of firms outsourcing choices. In their model, firms choose whether to be vertically
incorporated or to outsource generation of parts to specific makers. This includes a seek process,
whereby last great makers look for subcontractors and the other way around. There is deficient
data – subcontractors cannot without much of a stretch flag their quality – and consequently a
potential for a hold-up issue emerges. Eva et al. (2014) demonstrate that the suitability of
outsourcing is dictated by the conveyance of dealing power between the two gatherings included,
the level of rivalry in the market, and the number of potential accomplices in the market.
Taking this as a hypothetical foundation, one may anticipate that the advantages from
outsourcing are not generally the same, in any case, specifically rely upon the qualities of the
firm also, industry being referred to. Expansive firms might be in a superior position to
accomplish high dealing power versus providers and may henceforth be better ready to profit by
outsourcing. Additionally, substantial firms may bring down track costs as they might be better
settled in the market and have better learning of competitors and providers than little foundations
(Chou, Techatassanasoontorn and Hung, 2015). As far as industry attributes, if there are more
potential subcontractors in the business, if the haggling control is tilted towards the last great

7IMPACT OF OUTSOURCING FUNCTIONS
makers or if the level of rivalry is high among subcontractors, last large manufacturers will
probably discover outsourcing a reasonable technique.
In other investigations by Gerbl, et al. (2015), who utilize the information for huge
organizations to analyze advantages of outsourcing. It is gathered that organizations that focuses
on materials outsourcing knowledge benefits, in terms of expanded returns per empoyee, while
administrations outsourcing incites a negative impact on measured returns. This, they deduce, is
expected to the non-straightforward route in which outsourced administrations are valued
opposite inputs that are more substantial. They reason that while the business sectors for halfway
items seem to work, outsourced administrations might be liable to specific inefficient aspects. In
related work Gunasekaran, et al. (2015), gathered that inadequately profitable companies
(decreased surplus to deals and low esteem gathered to deals) will utilize subcontractors, in
investigation of Australian hardware fabricating industry. It is revealed that is advantages are
most noteworthy for those organizations that do not get associated with a subcontracting,
regardless of whether as a provider or as outsourcer. Such outcomes, in like manner, comply
with the research for Australia.
1.2. Benefits of Outsourcing
As indicated by Ho and Lu, (2015) associations swing to outsourcing for various reasons,
the most noticeable of which is taken a toll tax. Kim, et al (2013) underpins this affirmation
when he expressed that organizations settle on the choice to outsource for an assortment of
reasons yet cost decrease tends to be one of the essential drivers. Thusly, outsourcing is believed
to be fruitful when such money related financial desires as the accomplishment of a money
imbuement, cost decrease, creation and exchange cost economies, bring down prizes for
consumers monetary slack or, on the other hand even expense favourable circumstances are

8IMPACT OF OUTSOURCING FUNCTIONS
secured. Different advantages of outsourcing to organizations as per Kitcher et al. (2013)
incorporate augmenting assets, making administration enhancements and arranging for in-house
staff to concentrate on more vital staffing issues, for example, workforce profitability, authority
advancement and progression arranging. Another normal explanation behind falling back on
outsourcing is a company's want to concentrate its assets on those exercises that are viewed as its
qualities, frequently alluded to as centre capabilities. Additionally, König and Spinler, (2016)
opine that supervisors ought to apply their experience and learning to centre skills and outsource
exercises in which they are less skilled and can profit by merchants' aptitude. Manufacturers can
supply ability and best in class innovation and increment the adaptability and nature of
administrations. Organizations additionally bolster their outsourcing choices by thinking that
sellers have economies of scale that are inaccessible to an individual firm.
Economies of scale can bring down expenses because a seller can supply, run and refresh
for example programming required for a basic application, for example, traditionally finance and
offer registries and disseminate costs over numerous customers. By acquiring administrations at
a settled cost for each exchange, a customer can stay away from money related instability.
Outsourcing information handling may diminish the likelihood of interruptions to
administrations or potentially the probability of being presented to lawful activity it purchases
protection and in addition administrations from the merchant. One of the key reasons
associations outsource their exercises is to take advantage of the broad learning and specialized
experience that a merchant may offer. Besides, factor and fragmentary request of merchandise
and benefits by the customer advertise is another purpose behind outsourcing by a few
organizations particularly little firms as expanded interest for little firms normally slack request
as new limit is gained or new staff are selected and prepared henceforth the requirement for

9IMPACT OF OUTSOURCING FUNCTIONS
outsourcing. In expansion, "Social contrasts can frequently cause contact amongst staff and
administration" and outsourcing may permit the "disposal of an inner aggravation".
The current research has focused on analysing the working challenges of the Woolworths
professionals by exploring the problems in outsourcing functions within the business
performance of Woolworths Plc. Therefore, the current research also contains a detailed
description of the factors influencing the impact of outsourcing functions within the business
performance of Woolworths Plc (Tjader, et al. 2014). Thus, the study focuses on exploring the
impact of outsourcing functions within the business performance of Woolworths Plc. Along with
this; the researcher also focuses on developing a list of recommendations for minimising the
problems at the end of the research. Thus, the researcher has applied the descriptive research
design for conducting the entire research. The other designs cannot be applied because they fail
to depict the reasons and issues behind the research effectively.
1.3. Risk and Factors to Consider before Outsourcing
Krush, Sohi and Saini, (2015) attest that outsourcing is a progressive succession of
choices with the choice as to regardless of whether to outsource a business procedure or capacity
being the most key. This is the most essential of a grouping of activities and choices recorded in
keeping up the relationship. For the most part outsourcing ventures are powerless to different
sorts of dangers including monetary, lawful, and administrative control issue. As expressed by
the advantages of outsourcing cannot be accomplished if the related risks are not legitimately
recognized and supervised. Without alert contemplations of different risks related with
outsourcing, any pick up can be more than balance by huge losses not just in monetary terms yet
in addition in the regions of person protection and information security among others. As
expressed by Marshall, Ambrose, McIvor and Lamming, (2015) a standout amongst the most

10IMPACT OF OUTSOURCING FUNCTIONS
vital parts of any outsourcing bargain is the agreement. The contract portrays the administrations
that a seller is to give, talks about budgetary and lawful issues and turns into the outline for the
life of the understanding. Since the agreement commits the firm and the seller to each other,
broad endeavours must be taken to guarantee that everything about the outsourcing game plan is
explained in the agreement (Raassens, Wuyts and Geyskens, 2014). A solitary supplier is
regularly liked to numerous merchants for various reasons. In the first place, it is less demanding
to arrange a superior understanding if various arrangements are being purchased from one
merchant. It is likewise more straightforward to oversee one merchant, so less time speculation is
required by inner (HR) staff. Having coordinated arrangements over the organization is
additionally a gigantic advantage of having a solitary merchant, who is additionally better ready
to heat for a customer's worldwide needs (Raassens, Wuyts and Geyskens, 2014).
1.4. The Outsourcing Process
Outsourcing can be understood as contracting out of certain important business functions
of a company to an external services or goods offered (Raassens, Wuyts and Geyskens, 2014).
This process is deemed to be collaboration between two distinct companies in which one
company is a specialist in certain technology and has a considerable contribution to other
through offering human or physical resources over a time period for attaining a determined
objective (Chou, Techatassanasoontorn and Hung, 2015). The companies those get involved in
the outsourcing process for all their secondary business activities attains an actable and long term
association. In such situation, the supplier turns out to be a strategic supplier in which there are
exchange relationships within independent companies.
In the recent years, business process outsourcing either involves ITO or BPO (Raassens,
Wuyts and Geyskens, 2014). ITO can be termed as information technology outsourcing that

11IMPACT OF OUTSOURCING FUNCTIONS
involves a third party who is contracted in order to manage a specific business function and
encompass all associated software upgrades and server networks. Business process outsourcing
is deemed to feature a third party organization that deals with overall business processes like
procurement, accounting and HR (Ho and Lu, 2015). Outsourcing process can be termed as a
strategic decision that focuses on external contracting of certain determined non-strategic
business processes that is necessary manufacturing provision of services and goods through
means of contracts or agreements with increased capability organizations for undertaking such
business processes and activities along with attaining and enhancing competitive advantages
(Raassens, Wuyts and Geyskens, 2014).
Within the market place certain socio-techno-economic aspects are gradually changing, it
is not possible for a company to develop competitiveness along with sustaining the same at every
stages of the value chain. Certain drivers of outsourcing which might be external and internal to
the company and this have been the major focus of research by certain researchers in previous
years. The key drivers encompass financial concerns such as gathering additional profits,
reducing costs along with decreasing capital outlays along with periodic payments (Ho and Lu,
2015). Outsourcing can be done by the companies in order to enhance operational performance,
timeliness, quality along with productivity through obtaining technologies, skills, and innovative
ideas along with expertise. Outsourcing also involves management along with control of
operational processes that encompass risk management along with enhancing credibility through
linking with superior providers. In order to become more highly dynamic and flexible to address
certain changing opportunities through eliminating fixed cost of the internal staff and moving
function to certain suppliers (Ho and Lu, 2015).