Business Research Report: Advantages and Disadvantages of Outsourcing

This report delves into the advantages and disadvantages of outsourcing in business operations within the current global environment. It begins with an introduction to outsourcing and its significance, followed by a project overview and scope that outlines the report's objectives and methodology. A comprehensive literature review examines the benefits of outsourcing, such as cost-effectiveness, manufacturing aid, core area focus, recruitment assistance, and time zone advantages. Real-world examples like Apple and Samsung are used to illustrate these points. The report also critically analyzes the drawbacks of outsourcing, including hidden costs, pricing issues, synchronization deliverable issues, and the risk of exposing classified information. The analysis draws on peer-reviewed journal articles and provides a balanced perspective, concluding with a summary of the key findings and implications of outsourcing in the contemporary business landscape.

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Business Research
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Table of Contents
Introduction................................................................................................................................2
Project Overview........................................................................................................................2
Project Scope..............................................................................................................................3
Literature Review.......................................................................................................................3
Advantages of outsourcing business..........................................................................................3
Cost-effectiveness and aid in the process of manufacture......................................................3
Core area focus of Business...................................................................................................5
Assistance in the process of recruitment of employees..........................................................5
Time zone advantage..............................................................................................................6
Disadvantage of outsourcing business.......................................................................................6
Involvement of hidden cost and pricing issues.......................................................................6
Synchronization deliverable Issues........................................................................................7
Risk of exposing classified information.................................................................................7
Conclusion..................................................................................................................................8
Reference....................................................................................................................................9

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Introduction
Outsourcing business process can be defined as an important strategy, where a
business organisation set up official contract with third party agencies in order to carry out
important operational function and responsibilities. In many cases the business organisation
hires suppliers in order to get access to raw materials and other important resources. Large
scale companies and multinational corporations have been using the technique of
Outsourcing business process that are needed to deal with the various challenges related to
operational activities. It enables the company to achieve organisational flexibility and also
reduce the cost of business operation. There are several examples of multinational companies
using Global talents with the help of outsourcing unit.
Considering the significance of outsourcing in business operation of current days, the report
aims to analyse the advantages and drawbacks of this system in the global environment.
Project Overview
In the current era of globalisation, most of the multinational corporations preferred to
work in business partnership. This can help them in the process of expanding the business.
This can provide the companies access to wide range of workers having effective skills.
Other hand there is various examples of large scale companies but they have suffered loss
due to Outsourcing business from third party agents. Hence, it is important to analyse both
the positive and negative aspects of outsourcing business in order to understand its impact in
the current Global Business scenario.
The current project will aim to discuss the existing literature that is related to outsourcing
business unit and thereby highlighting the advantage and disadvantages associated with this
process.

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Project Scope
The current project will provide literature review from the peer-reviewed journal articles that
are related to the Research work of business Outsourcing process. There will be some real life
examples provided that will help to highlight upon positive and negative aspects of
outsourcing business process. It is essential for all business companies to have Outsourcing
partner in order to deal with the challenge of resource shortage and efficiency of skilled
labours.
The current project will also highlight upon the importance of the most parts that are
related to the outsourcing business. The limitation and the existing gap that exist within the
literature will also be discussed within the current project.
Literature Review
Advantages of outsourcing business
Cost-effectiveness and aid in the process of manufacture
Javalgi et al. (2011), have mentioned that with the help of Outsourcing business
process it is possible to decrease the overall expenditure of the company. This is mainly due
to the fact that the large-scale multinational corporations are able to hire workers from third
party organisations at much lower rate. This is evident from the fact that most of the
American and European in MNCs recruit workouts from the Asian countries including India
Bangladesh and China, where the cost of labour is much lower. Hence it is possible for the
organisation to carry out all the major operational tasks at much lower rate. It is also
important to mention that extreme low cost labour rate in China have resulted in the fact that
most of the electronic manufacturing join have set up their manufacturing unit in the nation
(Lacity and Willcocks 2013).
As the companies are able to hire candidates from foreign Nations, it is also possible for them
to bring about innovation within the manufacturing and operational process. There are also no

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risks of violating the legal rules related to protection of intellectual properties as they inherit
and apply the innovative ideas in the business process.
Lacity and Willcocks (2012), have mentioned that with the help of the Outsourcing
business process it is possible for the companies to provide better quality of after Sales
Service. The overall Lead time of product delivery can also be decreased. The companies will
be able to implement better level of value proposition that is achieved with the help of faster
delivery of the service. The companies are able to implement the policy of foster innovation
that is possible with the help of improved level of skill of the workers.
In the current days the companies have to spend huge amount on setting up the
technological infrastructure that is needed in the manufacturing unit. With the implication of
outsourcing business process it is possible to lower the cost of technological infrastructure as
the third party agencies are responsible for majority of the manufacturing work (Bharadwaj et
al. 2010).
One of the popular examples of this type of business outsourcing in the process of
manufacturing is the partnership between Apple Inc. and Foxconn, who is the biggest
manufacturing partner of Apple. The Foxconn is responsible for manufacturing all the major
smartphones that are being sold under the brand name of Apple. With the help of this
manufacturing outsourcing, Apple has able to increase up on their manufacturing units.
Hence, in the present days the iPhone has a strong foothold in the smartphone market of the
Asian countries. It has thereby allowed Apple to expand the market and increase the level of
sale in the respective Nation.
There is also the example of Samsung, which is one of the largest electronic giants of
the world. Most of the Products that are sold under the brand name of Samsung have a
definite period of warranty. There are various third party agents, who have set up partnership
with Samsung in order to provide after sale service to all the manufacturing defects that are

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encountered by the customers after buying any product. The BPO units of the Samsung
company has helped to provide better customer support and sales service, which is one of the
major reason for high brand value and healthy reputation of Samsung.
Core area focus of Business
Implementation of business plan involves various secondary activities that are an
essential part of the overall business operation. It is important for the company to conduct
high level of marketing research and collect information that are necessary in the process of
making business plan. It is important to mention that with the fast changing scenario of
business environment, these essential for all business units to have the latest information of
the consumer market. This can help them to maintain sustainability and have healthy
competitive advantage.
Carnahan and Somaya (2013), have mentioned that with the help of various marketing
research firms, it is possible for large scale company to collect the necessary marketing data
that are needed in making business plan. With the primary raw data available for the
marketing and sales managers, it is possible for them to focus upon the core business
processes that include making of the blueprint of marketing plan. It is also possible for the
companies to save the time that is needed in making up the marketing plan with the help of
advanced forms of marketing research.
Assistance in the process of recruitment of employees
With the shortage of skilled labour and employees, one of the major challenges that
are encountered by all companies is to select and recruit the perfect candidate for the job.
There are cases, where companies outsource workers from consulting agencies in order to
reduce the burden of the selection process (Böhm et al. 2011). It is also possible for the large
scale companies to recruit workers from all parts of the globe as they outsource them from all
parts of the globe.

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Time zone advantage
With the high demand of product and services for the large scale industries, it is
essential that the business operational unit are active for 24 hours in a day. Lacity et al.
(2010), have mentioned about the time zone advantage that are associated with the business
operations that allows the business to operate in all time of the day according to the time zone
of different parts of the globe. This is mainly possible due to the fact that the companies are
able to hire workers from all parts of the globe. Hence it is possible for the customers and
clients to contact to the company at any time of the day. With the advancement of
globalisation in business, it is essential that all business operational process are continued for
24 hours in order to sustain maximum production.
Disadvantage of outsourcing business
Involvement of hidden cost and pricing issues
One of the main purposes of outsourcing business unit is to reduce the overall
expenditure of the company. The research paper of Nadkarni and Herrmann (2010), have
highlighted the fact that there are various hidden cost that are involved due to Outsourcing
business operational process. This is mainly due to the fact that large scale companies have to
set up an official business contract with the third party agencies. The cost of setting up this
business contract and also the legal procedures that are associated with this function is often
neglected as a part of company’s expenditure. There is cost of hiring Legal Experts in order
to ensure that there are no unfair or unethical ways implemented in the overall outsourcing
business. These costs are generally excluded from the financial reports of the company and
are therefore form a major part of the company’s hidden cost.
As the business firms hire resources and raw materials from the outsourcing unit, in
most of the occasion they have no control over the pricing that are demanded by the

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Outsourcing suppliers (Massini and Miozzo 2012). With variation in the pricing of raw
materials needed in manufacturing process, it is not possible for the company to have a fixed
price of their branded product. Moreover, there is also no fixed regulation that can control
over the pricing of resources. This is one of the major drawbacks of outsourcing business as
the companies could not have a fixed budget over the expenditure and earnings.
Synchronization deliverable Issues
It is essential for the large-scale multinational corporations to hire reliable source of
third party agent in order to get the supply of resources in the form of outsourcing. According
to Mani, et al. (2010), one of the significant challenge that are encountered in the context is
due to the fact that in most of the occasions, it is not possible for the managers to have total
control of the activities of workers of third party agents. Hence, it is not possible for the
business and Outsourcing you need to have synchronisation within their activities of business
operation. This can ultimately compromise upon the organisational performance and rate of
production.
Risk of exposing classified information
As the large scale business company hire Outsourcing unit in order to carry out their
operational activities, they have to share all the company detail company information with the
third party agencies. Bustinza et al. (2010), have mentioned about the risks that are involved
in the context due to the fact that there is the risk of information being leaked to public
domain. As the companies lose the data within the public domain, they also have the risk of
losing competitive advantage to the business rivals. There is also the risk that the information
related to the financial performance of the company can be misused that can ultimately cause
financial loss to the company.

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Conclusion
In the conclusion note it can be said that the major advantages the companies enjoy in
the current period due to Outsourcing business process is due to the fact that they are able to
reduce the overall expenditure of business operation has the cost of labour is low.
Nevertheless, there are many hidden cost that can lower the profit level of the company.
Additionally, due to lack of control in pricing, it is not possible for the company to have a
fixed cost of the products or services.
With the help of outsourcing business it is possible to operate the business for 24
hours. Hence, with the help of the outsourcing business, it is possible to deal with the
challenges that are related to the business operation. On the other hand, there is the risk of
sensitive data being leaked to public domain that can compromise upon the level of business
performance and also have the risk of losing competitive advantage.
The current literature have the very well described the Positive and negative aspects
of outsourcing business. Nevertheless, the major gaps that exist in the current literature are
due to the fact that it has not able to suggest proper intervention ways to deal with the
drawbacks of outsourcing business.

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Reference
Bharadwaj, S.S., Saxena, K.B.C. and Halemane, M.D., 2010. Building a successful
relationship in business process outsourcing: an exploratory study. European Journal of
Information Systems, 19(2), pp.168-180.
Böhm, M., Leimeister, S., Riedl, C. and Krcmar, H., 2011. Cloud Computing–
Outsourcing 2.0 or a new business model for IT provisioning?. Application management,
pp.31-56.
Bustinza, O.F., Arias-Aranda, D. and Gutierrez-Gutierrez, L., 2010. Outsourcing,
competitive capabilities and performance: an empirical study in service firms.
International Journal of Production Economics, 126(2), pp.276-288.
Carnahan, S. and Somaya, D., 2013. Alumni effects and relational advantage: the impact
on outsourcing when a buyer hires employees from a supplier's competitors. Academy of
Management Journal, 56(6), pp.1578-1600.
Javalgi, R.R.G., Gross, A.C., Benoy Joseph, W. and Granot, E., 2011. Assessing
competitive advantage of emerging markets in knowledge intensive business services.
Journal of Business & Industrial Marketing, 26(3), pp.171-180.
Lacity, M. and Willcocks, L., 2012. Outsourcing business and IT services: the evidence
of success, robust practices and contractual challenges. Legal Information Management,
12(1), pp.2-8.
Lacity, M.C. and Willcocks, L.P., 2013. Outsourcing business processes for innovation.
MIT Sloan management review, 54(3), p.63.
Lacity, M.C., Khan, S., Yan, A. and Willcocks, L.P., 2010. A review of the IT
outsourcing empirical literature and future research directions. Journal of Information
technology, 25(4), pp.395-433.

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Mani, D., Barua, A. and Whinston, A., 2010. An empirical analysis of the impact of
information capabilities design on business process outsourcing performance. Mis
Quarterly, pp.39-62.
Massini, S. and Miozzo, M., 2012. Outsourcing and offshoring of business services:
challenges to theory, management and geography of innovation. Regional Studies, 46(9),
pp.1219-1242.
Nadkarni, S. and Herrmann, P.O.L., 2010. CEO personality, strategic flexibility, and firm
performance: The case of the Indian business process outsourcing industry. Academy of
Management Journal, 53(5), pp.1050-1073.