Benefits and Risks of Offshoring and Outsourcing: M&S Case Study

This report provides a comprehensive analysis of offshoring and outsourcing strategies, focusing on Marks and Spencer as a case study. It begins with an overview of globalization and its impact on businesses, particularly in relation to offshoring and outsourcing practices. The report explores the background and rationale for the research, outlining the aim to determine the benefits and risks associated with these practices for organizations seeking a competitive edge. The literature review delves into the concepts of offshoring and outsourcing, differentiating between the two and examining their impact on companies like Marks and Spencer. It also examines the risks and benefits, such as cost reduction, business expansion, and improved productivity, while also acknowledging potential drawbacks like cultural differences and communication issues. The report emphasizes the importance of offshoring and outsourcing for Marks and Spencer, highlighting how these strategies contribute to cost savings, market expansion, and operational flexibility. Finally, the report recommends strategies to mitigate the negative outcomes associated with offshoring and outsourcing, offering insights for businesses seeking to optimize their global operations.

Research Project
:

Table of Contents

TITLE:
“The benefits and the risks of offshoring and outsourcing.” A case on Marks and Spencer.
INTRODUCTION
Overview of Research
Globalisation is considered to be a process of creating integration among economies by
removing the cross border barriers with an aim to increase trade flow among countries. The
anticipation of globalisation proves to be boom for several companies which are trying to expand
their practices for increasing their profitability as well as market value among the customers
(Tate and Bals, 2017). Globalisation also promoted the practices of offshoring and outsourcing
in order to provide business an opportunity to standardize their operations as well as services.
This in turn also supported toward increasing the customer base as globalisation support an
organisation to avail the opportunity of hiring expertise for performing production related
activities in more effective and positive manner. For performing this investigation Marks and
Spencer will be considered which a larger multinational retailer that offer product or services
related with lifestyle and household need. By performing investigation over such a giant retailer
it would be easier to determine the benefit as well as challenges present within the offshoring and
outsourcing.
Background of Research
Globalisation is referring to interaction and integration of economies, people as well as
business by simplifying the cross border practices. This has brings up several opportunities in
front of business to expand their operations, bring up standardisation in practices, simplifying the
production process or increasing the productivity. For conducting investigation over this Marks
& Spencer is consider, a British multinational retailer which is headquartered in Westminster,
London. It offer variety of products such as high quality apparels, luxury food items and home
products. Marks & Spencer utilise the outsourcing practices in order to reduce its production cost
by maintain stores throughout the world. This brings up several benefit to the company as by this
it become able to improve productivity, increase unit of production, standardisation of
operations, achieving economies of scale (Graham and et. al., 2017). Despite of all these benefits
it also brings up several kinds of issues or risk factors such as lack in quality of product, not
1

fulfilment of customers demand, not proper interaction among company and production unit etc.
these all may affect business image as well as value in marketplace.
Rationale of Research
The main purpose of conducting investigation is to determine the benefits as well as risk
that offshoring and outsourcing functions provides to an organisation that help it in achieving
competitive edge. By performing investigation over this researcher would be able to enhance its
knowledge regarding the use of outsourcing and offshoring along with risk or benefits involve in
this practice. Despite of all this, investigation when get published may also be used for
academical purpose which support in enhancing the knowledge of students by studying over real
based examples. In addition to this, information presented within the investigation will be more
authenticated and reliable which can also be beneficial for Marks & Spencer as it provide
information regarding several risk company may face so that proper strategies can be formulated
for future practices (Rodríguez and Nieto, 2016).
Research Aim
“The benefits and the risks of offshoring and outsourcing of functions for an
organisation.” A case on Marks and Spencer.
Research Objectives
 To understand the concept of offshoring and outsourcing.
 To analyse the risks and benefits of offshoring and outsourcing for Marks and Spencer.
 To determine the importance of offshoring and outsourcing for Marks and Spencer.
 Recommend some ways through which negative outcome from offshoring and
outsourcing can be minimised.
Research Questions
 Do you understand about the concept of offshoring and outsourcing ?
 How the risks and benefits of offshoring and outsourcing affects Marks and Spencer?
 Why offshoring and outsourcing is important for Marks and Spencer?
 How the business can minimise the negative outcome of offshoring and outsourcing?
2

Gantt Chart
It is referring to the graphical representation of number of activities that are involved
within a particular project or investigation in a more systematic manner along with time taken by
them to ensure smooth flow of operations on sequential and timely manner so that objectives can
get accomplished.
3

LITERATURE REVIEW
Concept of offshoring and outsourcing
As per the views of Jonathan Webb, 2017, in current competitive marketplace the term
offshoring and outsourcing been a common phenomenon which contains its own positive and
negative impact over organisation productivity. In addition to this, the statement offshoring is
frequently connected with outsourcing as they require each other support. However, outsourcing
mention to the resettlement of occupation and procedure to extrinsic supply irrespective of
supply positioning, on the other hand offshoring signifies resettlement of line of work and
process to any overseas state without identifying whether the supplier is external or connected
with establishment (Dutta, Gwebu and Wang, 2017). Along with this, outsourcing may therefore
comprise transferring of job inside and between countries, while offshoring states only to global
relocations. The trends related to offshore outsourcing are growing over past decades with
entities ranging from multitude of industries that are enjoying the benefits at large aspects. Few
factors contributing towards the concept are cheaper labour costs, freedom to focus on core
business concerns, lack of professionals in particular business tasks and availability of educated
business specialists. For both, the ordinary disincentive is to decrease reimbursement of concern
by capitalise on existent comparative cost advantages peculiarly labour. In today's digital age,
many businesses have begun realising that offshoring and outsourcing can play a role in
accomplishing new level of competitiveness. Businesses that moves forward with the concept of
offshore addition with outsourcing, primarily reap benefits related to short term addition to long
term as these allows the managers to emphasise on strengthening business growth by taking off
activities including marketing addition to accounting without worrying about decline possibilities
in work quality (Peck, 2017). Likewise, these two concepts help Mark and Spencer to cut down
its costs as it enable them to leverage and collaborate with a team based in other geographical
location utilizing digital communication technology. Furthermore, whether it is long or short
term solution, outsourcing and offshoring help Mark and Spencer to stay globally competitive in
existing rapidly dynamic concern landscape. Apart from this, it alter them to analyze
contemporary or emergent trend of industry and founded on that make disciplinal course of
action in order to gain competitory benefit in an innovative or creative style.
4

Risks and benefits of offshoring and outsourcing that affect Marks and Spencer
According to Gino Lisondra, 2019, Although the generalization and roles among
offshoring and outsourcing are related, the carrying into action or executing and its repercussions
towards economy are contrary. However, offshoring comprises setting up corporal structure in
some other location whereas in outsourcing, there is no requirement of corporal transferral of
possession as they only prefer legal instrument or delegating of services to some other function
that could be situated in other part or nation. Offshore and outsourcing generally provides huge
benefits to an entity in terms of lowering costs, attaining business expansion, exercising more
control, emphasising towards developing practices and lowering down the associated risks
(Smith, 2017). In addition to this, the foremost advantage which Mark and Spencer experience
with the implication of these two aspects are reduce the cost of company as it enable them to
optimal utilisation of resources for obtaining maximisation of profit in a better way. Further,
these terms provides benefits to the selected organisation through reduces operational costs,
improving productivity together with improving business flexibility to manage time horizon
differentials. Moreover, it assist company to enhance its productivity level as it empower Mark
and Spencer to create new competence and ability sets that influence them to imply as a
competitive advantage in order to survive among industry for longer period of time.
Additionally, it give business more flexibility in staffing, manpower management which aid
them to prevention costs and can also choice the best personnel to endeavor entire organisation
center function in an impressive or productive style (Kaur, Singh and Majumdar, 2019).
Furthermore, outsourcing and offshoring aspects impact negatively over Mark and Spencer
business operation as it influence them in terms of cultural or social differences, communication
problems, security issues and so on that may reduce establishment proficiency ratio. In addition,
various challenges related to offshore outsourcing comprises of risk of exposing information
along with data that are confidential, lack of customer involvement or engagement, calibration
and synchronisation. These terms also causes communication problems, social together with
cultural differences and various security issues. Along with this, implementing best strategic
decision and planning effectively may lead Mark and Spencer to adopt best position within
combative industry as well as help them to improve their overall performance in an productive
style within desired time period.
5

As per the view point of Wiesmann and et. al., 2017, offshoring and outsourcing brings
up several benefit to an organisation such as it help in expanding the business the practices,
reduce the cost of the company in term of transportation and production etc. With the adoption of
Offshoring M&S get numerous of benefit such as it become able to enlarge its customers base
and also get a easier medium to expand its business practices in new market. These practices
directly affect the profitability of the company as it get increased with the increase in
productivity. On the other side, offshoring also brings certain risk like cultural adoption,
changes in customer demand etc. these risks have direct impact over the market value and
performance of Marks & Spence which may leads to negative publicity.
Offshoring and outsourcing importance to Marks and Spencer
As per the views of Pamela Leri, 2019, As the company develop or enrich in status of
their attribute and service diverseness, it get along ineluctable that they are centring much on
their enterprise affiliated core state. In emerging scenarios, Outsourcing with offshoring plays
important role of saving costs, managing risks, speeding up procedures related to embracing
innovative technologies, freeing internal resources as well as redirecting tasks or activities that
are more valuable, focusing towards management of distinct operations with activities in
effective manner. In addition, these concepts also increases operational performances, helps
businesses to deal with shortages of talented personnels at various organisational destinations
and results in setting plans for overcoming issues of seasonal workflows (Smith, 2017). In
context of Mark and Spencer, outsourcing and offshoring brings in a lot of flexibility and
financial problem which enhance firm's profit margin and brand image in an sensational or
productive style. Moreover, it assist establishment to examine all emerging or upcoming
challenges or threat and also help them in implementing foremost conclusion in order to adopt
sustainable profitableness ratio without any hindrances. Along with this, it empower Mark and
Spencer manager to analyse market situation as well as to make use of available platforms which
lead them to grow or enrich its potentiality to attain increased level of sales performance or
proficiency rate. Apart from this, it encourage firm to adopts modern or latest technologies and
novel ideas which help them to stand out on the ground of research and development.
Furthermore, with offshore and outsourcing, entities easily emphasis towards development
oriented operations, labour intensive functions, value adding tasks, leveraging procedures,
cultivating teams with strong bondings at another localities, aligning local operations that
6

directly embeds with the business. However, with the application of outsourcing and offshoring
it improves its overall performance as well as help them to maintain an efficacious working
culture by rendering information in clarity or transparent way. Due to this, it said Mark and
Spencer to overcome over all conflicts or mismanagement of functional area as in order to
execute pre-determined goal or objective in an trenchant or prompt way in a desired time period
(Wiesmann and et. al., 2017). In addition to this, it help organisation to give best contribution
towards economic growth as it aid them to expand their market share or size in relation of
generating tremendous occupation possibility which enrich individual life standard in a better
manner. Henceforth, it has been evident that in order to survive in competing marketplace,
outsourcing and offshoring plays a vital role in enlarging its brand value as well as to obtain best
position within industry in an advanced and inventive mode.
As per the view point of Sobinska and Willcocks, 2016, offshoring and outsourcing
plays a crucial role within the growth and success of an organisation as it help in improving the
operational practices by making it easier availability of resources. In case of Marks & Spencer,
offshoring and outsourcing help it in reducing its manufacturing and marketing cost. This is
because a decade ago the major reason behind the loss M&S faces in the market is that it prefer
to manufacture its product or services in home country instead of host country for the quality
work . This make it more costly process as company is not gaining appropriate amount of profit
to cover operational and production cost. Hence, the offshoring and outsourcing proves to be
more beneficial for the company as with the help of adopting such activity Marks & Spencer
become able to reduce its production, transportation and marketing cost which in turn help in
reducing the overall cost of the company. This is the reason company maintain a customer base
of world wide business as it maintain its production house and retail outlets in different countries
for becoming more approachable to the customers.
Ways to minimise negative outcome from offshoring and outsourcing
In the views of Stephanie Overby, 2017, As outsourcing and offshoring are considered as
one of the integral elements for every organisation in order to obtain sustainable proficiency ratio
and also to cope up with all upcoming challenges or rivalry in an innovative and creative style.
Yet, it impact negatively over establishment functional area which directly influence its
potentiality in acquiring high level growth and ability to make decisions in order to gain
competitive advantage. Moreover, it has been noticed that the outsourcing send shivers down the
7

spine of current manpower as it generate a sense of uncertainty and induces them to hunt for
several development opportunities. If an organisation wants to overcome from the impacts of
domain expertise that offshore and outsourcing has then they should find suitable technologies
that can help in implementing projects along with carefully quantifying as well as qualifying the
accomplishments. In addition, other impact is confidentiality as well as intellectual property, to
overcome the impact an organisation should opt information technology enterprise working in
compliances to multinational security standards that can dispel security concerns (Zalewski,
2018). Thus, in order to tackle with such issue Mark and Spencer should takes an initiatory to
provide different kinds of training or development program which help an individual to adopt
any business environment and can put full share towards an attainment of business goal or
objective in a better manner. Along with this, on a frequent basis Mark and Spencer should
makes an attempt to determine marketplace trend or customer demand or need and make
restorative course of action which led them to overcome over internal or external business
environment in an awful or cost-effective mode (Sobinska and Willcocks, 2016). Furthermore,
adoption of advanced technologies or novel ideas will generate increased of productivity as well
as help them to maximise its profit margin in a better style for extant within industry for longer
period of time. Moreover, to avoid any future legal complications, the contracting parties i.e.
Mark and Spencer must conform to the local legislations which enable them to enrich their
brand value as well as improve its general execution in an impressive or amentaceous mode
without any obstacles.
As per the view point of Robby Gupta, 2018, there are number of issues that basically
found by a business while they perform activities like offshoring and outsourcing. These includes
poor performance, delay in product delivery, inappropriate communication, incompatible
outsourcing partners, overestimation of saving cost etc. These all leads to negative influence over
the image as well as performance of employees. Hence, these issues must be rectified by Marks
& Spencer in order to maintain its market value among the eyes of customers and staying
competitive. In order to reduce the negative outcome of offshoring and outsourcing, M&S must
focuses toward smooth flow of communication to all the staff members that are involves ion
such practices. They must also work toward conducting periodical meeting between off-shore
and on-shore team to have a check over the planned and actual performance so required
improvement can be made. This analysis of planned and actual performance also support in
8

determining the gap between cost estimation so that proper financial budget can be made for
reducing the chances of error.
RESEARCH METHODOLOGY
Research philosophy- There are two types of research philosophies which is
interpretivisim and positivism. Based on current study, interpretivisim philosophy will be use by
researcher because it will assist them by providing accurate amount of data. On the other hand,
positivism philosophy is not appropriate because it takes additional period of time of any of the
particular organisation. In the chosen study area interpretivisim philosophy has been
implemented by the researcher as it is effective in providing suitable guidance to the
investigation to gather valuable information via he opinion and views analysis of authors and
writers. Thus philosophy is mainly appropriate in developing theoretical framework.
Research approach
Inductive and deductive are regard two main kind of research approach which is used for
analysing impact of study. According to current study, inductive approach will be used because it
helps researcher by providing reliable and valid information. On the order side of a coin,
deductive formulation is not useful for study because it takes additional resources and does not
give actual result. Here, inductive research always begins with the process of observation
whereas it is concluded with hypothesis due to which chances of obtaining accurate results
increase as it is totally based on observation (Gurung and Prater, 2017).
Research Design: Under this concept, it is relating with those framework or method
which enable an investigator to combine several types of components in inquiry in a reasonable
or logical manner so that they can be able to provide best solution for research problem in an
accurate manner. However, most of research design is classified into several categories like
exploratory, descriptive and casual in order to get better outcome for improving the overall
performance of study. For this report, exploratory design has been considered as it enable a
researcher to define the problem or issue in a clear way with an innovative and valuable
information or data.
Data Source: This aspect signifies that collection of information or data from various
sources in order to make study more impressive and informative in a improved mode (Albertoni
and et. al., 2017). In addition to this, there are two types of data collection i.e. primary and
9

secondary in which it contain unique set of purpose and roles. Hence, primary methods
comprises gathering information from first-hand that means direct interaction with respondents
on the other hand secondary collection encompasses with acquiring data from various second
hand sources like journals, magazine, newspaper, articles. However, in context of this research,
both the sources has been regraded i.e. gathered data through questionnaire and articles or
journals in order to render detail information with a clarity and transparent way (Johansson and
Olhager, 2018).
Sampling technique: It is a process or procedure in which an investigator select sample
size from the larger number of populations. Along with this there are several techniques through
which a researcher choose respondents that is probability and non- probability as well as each of
this is again sub divided into different kinds like cluster, random sampling, quota and so on in
order to enrich the quality of project . Henceforth, to complete this study, random sampling has
been utilised in which an investigator select respondents from the wider range of population for
obtaining accurate data without any chance of bias or unethical information (Patrucco, Scalera
and Luzzini, 2016).
Sample Size: To conduct this research, 30 respondents has been considered who contain
sufficient amount of information and are sensible about the conception of offshoring and
outsourcing. Due to this, it help an investigator to enhance the effectiveness of study.
Ethical issues: Under this factor, it is regarded as one of the crucial component to which
researcher puts their full contribution in order to gain high level of project without any obstacles.
In addition to this, while conducting this research, an investigator ensure that all information or
data collected by them should be unbiased and transparent in order to generate intense level of
satisfaction to targeted personnel. Moreover, the primal risk which researcher undergoes is that
loss of data because of information is gathered through electronic format (Kasemsap, 2016).
Research limitation: While conducting any of research, researcher do faces number of
problems such as time, lack of fund, improper behaviour of respondents and many more. All
these are major limitation which directly impacts on researcher while completion of each
activities of research. Along with this, time is considered as major limitation because topic
requires additional period of time. As a whole, proper time period will be needed to for
completion of investigation.
10