International Commerce Report: In-House vs. Outsourcing Analysis

This report delves into the realm of international commerce, exploring the critical decision between in-house manufacturing and outsourcing. It begins by comparing the advantages and disadvantages of both approaches, considering factors like cost, skill, risk, and control. The report provides real-world illustrations, such as Apple's outsourcing practices, to support the comparison. It then summarizes the recommended option based on the analysis, emphasizing the importance of expert labor availability, customer satisfaction, and the strategic use of outsourcing. The conclusion highlights the significant role of outsourcing in modern business and the need for careful consideration of its pros and cons.

International Commerce
INTERNATIONAL COMMERCE
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International Commerce
Table of Contents
Introduction....................................................................................................................3
a) Critically compare the advantages and disadvantages of manufacturing the
component in-house with outsourcing the manufacture to an independent supplier.....3
b) Provide illustrations to support your comparison......................................................5
c) Summarize the option you would recommend, giving the reasons for your
recommendation.............................................................................................................5
Conclusion.....................................................................................................................6
Reference.......................................................................................................................6
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Introduction
International commerce is the concept of trade between two companies in different
countries. It adds a competitive advantage to the business organization and helps to
facilitate one another with the means of outsourcing the services and goods. The
higher level of globalization plays a critical role in the management and working of
these type of services. Outsourcing plays a key role in the growth of the organization,
but at the same time, the company must have to pay special attention before
outsourcing any work as it adds competitive advantage to the business environment.
a) Critically compare the advantages and disadvantages of manufacturing the
component in-house with outsourcing the manufacture to an independent
supplier
The firm has the entire right to decide whether the item should be manufactured in
their own country or they would outsource it from another country where they are
getting effective price. Business is all about making a profit and the firm always
search for various aspects in which the company can maximize its profit and create an
opportunity for a better outcome for the organization. (Oshri et al., 2015) Stated that
manufacturing the parts of the component with itself plays a very critical role for the
organization but sometimes it becomes difficult when the company does not get
effective labour and even the price of the services is high. Outsourcing then becomes
the only option left for the organization in which a specific process of the business is
sent to the external service provider (Schniederjans et al., 2015). It also happens that
business cannot handle all the working of the organization by itself and in the
meantime does not want to hire any professional to commemorate the teaks. After the
task has been outsourced to some other service provider, it is now the responsibility of
the other to manage the entire process. In this way, the company can focus on some
other important things like handling the employees or looking into financial areas.
Thus, it enables to carry out the work more effectively (White and James, 2017).
Indeed, for every manufacturer, it is important to analyze the advantages and
disadvantages of outsourcing to other organization. It has been observed that
sometimes outsourcing plays a crucial role in the success of the organization and add
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a variety of benefits to the organization. However, it creates a certain disadvantage if
the program is not authorized to the appropriate service provider.
Advantages of outsourcing to that of manufacturing it in-house
It has been observed from the view of Mangan et al., (2016), that outsourcing adds a
variety of benefits to the working and management of the organization and it
overshadows the disadvantages related with it.
Skill- It has been observed many a time that works are being outsourced to other
organization who are experts in this field and has a lot of experience in this regard.
The in-house department might not have special equipment to manufacture the certain
item, and thus the work is outsourced to a better management organization where the
right equipment is present to manage the overall working. It adds extensive advantage
to the organization and tasks can be completed with better quality and effective
technique (Gillespie and Riddle, 2015).
Managing the major process in comparison to support, anyone- Outsourcing helps
the organization to manage the specific process, pay attention to the core areas of
development, and implement better ways to manage the working of the organization.
The task outsourced can provide effective time for the management to look for a new
opportunity for the betterment of the organization.
Distribution of Risk- One of the most important or significant factors that can
determine the result of the operation is the risk- examination. Outsourcing is a type of
assured element of any corporation method, which can help the corporation to shift
some responsibilities to the outsourced seller. From the outsourced seller who is an
expert, they only can make planning for the migration of risk in a better way.
Diminish operational and employment prices- Outsourcing can avoid the basic need
to rent the particulars in-house; although staffing and equipped prices can be get
reduced to a greater level. This can be the main advantage of offshore outsourcing.
The company will not to pay the extra money as rent for the migration of in-house or
factory of the corporation; they will create a good profit only if they choose to
outsource.
Disadvantages of outsourcing to that of manufacturing it in-house
Risk of revealing private information- Whenever any corporation has outsourced the
HR, Payroll and the Recruitment facilities, it is indulged with a risk too regarding the
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revealing of private data to any another party. So it is better to do the production in in-
house so that the information of any unique idea or planning can be safe and create a
good amount of profit for the company (Enderwick and Buckley, 2017).
Coordinating the deliverables- In this scenario, the corporation does not choose the
right colleague for outsourcing, certain problematic areas can indulge with the
extension of the delivery time frames, substandard quality output and wrong
classification of the responsibilities. At this time, it is very easy to formulate these
kinds of factors in the inner part of the corporation rather than with the outsourced
colleague. If the outsourced place does any another party's work, them probably they
will not be capable of giving the production on right time by which the corporation
can break their trust, and also they create a bad effect on the prestige which is not
good for the corporation (Yeo and Saboori-Deilami, 2017).
Concealed prices-However the outsourcing can be many times very cost-successive at
the times of the concealed prices which is indulged with in the signing a bond
diagonally the overseas limitations may be pretence a severe risk.
Deficiency of consumer’s focus- An outsourced seller can do catering to the skilled
needs of various corporations at the time. In this circumstance, the seller may
diminish an entire focus on the corporation’s work that is not at all good for the
company’s image. This can reduce their demand and ultimately their profit will be
less, and their expenses will be high. Thus, the option of in-house production is far
better than outsourcing (Wachira et al., 2016).
b) Provide illustrations to support your comparison
It can be illustrated with the fact that big multinational companies are no exception.
Even the biggest companies like Apple outsource their work to be effective. The
company manufactures various electronic products and is the world's leading
organization. Although, they outsource some of their product and its manufacturing
with other companies. iPad is among the best selling product of Apple, but the
company prefers to manufacture it from its biggest competitor Samsung. Samsung
manufactured the iPad version 4 Retina Display under the name of the company
Apple. It can also be justified with the evidence that Samsung manufactures the retina
display used in every Apple device. The product of various multinational
organizations such as Microsoft, Apple and among the organization prefers to
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outsource their work and manufactures its product in China, Taiwan and other
countries (Kotabe and Kothari, 2016). It is because skilled labour is not available in
the US and are easily found in the above-mentioned countries. Companies need to
depend upon others to produce well in a competitive price and with effective means
(Gylling et al., 2015).
However, the risks associated with it are not less and can add competitive advantage
in various fields. Being the only manufacturer of retina and AMOLED display
Samsung has recently increased the price of its service, and the cost has surge high in
various means. Apple and other companies have raised their voice in this concern but
came up with no conclusion. However, various companies have taken strict action
against this and have now invested a huge sum of money in LG so that this company
can manufacture the displays. Moreover, the term of outsourcing remains the same as
the company needs to depend upon one thing or another. Even the hidden cost
associated with each of the product and the delivery charges adds up more burden for
the organization and makes the price of the commodity higher in the long run
(Thatcher and Evia, 2017).
c) Summarize the option you would recommend, giving the reasons for your
recommendation.
Pros and cons are always related to outsourcing, and it is important to consider all the
factors before consulting a service provider. It is also important to specify the task
that should be outsourced and does not create any factor for the smooth functioning of
the organization. However, some recommendations can help to manage the work
effectively with the functioning of the organization.
 The option of outsourcing the work to other organization should always be
concerned when expert labours are not available in the organization or in the
entire city to manage the working of the firm in an effective manner.
 It is even important not to compromise with the quality of output of the
product with cheap labor facility as customer satisfaction plays a key role in
the business environment. It has been observed that because of the cheap
availability of outsourcing company fails to provide efficient service to the
customer and thereby lose the good will of the market.
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 It can be recommended only to outsource those works that are not accessible
within the limited time and with the available workforce. Outsourcing of work
should be done only in an important situation when no options are left to be
taken care of.
 It is important to concentrate on work that is more essential and manage the
business process in the meantime while other management or organization is
doing the work.
 Sound communication, expert servicing and dependability is the most
important factor in case of outsourcing. The highly advanced management
team needs to be developed to take care of each task effectively and provide
efficient service for both the company and the customer.
Conclusion
Thus, it can be concluded with the fact that outsourcing plays a critical role in the
management and working of the organization. Various multinational firms use to
outsource their work to other companies in various countries. Although outsourcing
plays a vital role in the working of the management, but it has some disadvantage as
well, which company should follow before outsourcing and analyze the pros and cons
efficiently.
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Reference
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evolutionary paths to building a competitive advantage from emerging markets to
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Schniederjans, M.J., Schniederjans, A.M. and Schniederjans, D.G., 2015. Outsourcing
and insourcing in an international context.
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