Outsourcing Analysis Essay
This article is mainly concerned with everything about outsourcing. A rather unique method in global business economy, many aspects are under discussion here. These include the compromises made while outsourcing, its merits and demerits and even a successful example that owes its auspicious achievement to the very method of outsourcing. Conclusively a recommendation of the best outsourcing country at the moment will also be looked upon. Research is obviously focused towards the business and marketing strategies of various brands and services which operate on a large scale throughout the globe.
Tradeoffs between inputs for sake of productivity
We know that Outsourcing is a method best used when needed and when it has its purpose. Tradeoffs are inevitable. However, they all are not disadvantageous. We know, that labor is a primary input. While the local labor might be more familiar and better educated , third world countries are offering highly skilled labor at the fraction of the cost of a local labor for the same task done equally as well or in many cases , even better. The foreign labor is often found more willing and more dedicated to working the same task a local labor finds ordinary and redundant. In terms of material tradeoffs, there can be problems. We know that, as is often the cases , companies prefer to have their materials obtained from the same country they are outsourcing to. This, of course, is a hit or miss situation. A negative example emanates from the subcontinent. When Toyota and Suzuki, automobile giants of Asia, decided to outsource their assembly and manufacturing to Pakistani companies called Toyota Indus Motors and Pak Suzuki Motors, the result was a disaster. The cars manufactured there were no better than tin-cans on wheels. Simple collision would put dents several inches deep. In the end, it was found to be the use of below par materials, like substandard steel from the local steel mill , which contributed to the debacle. So, while the compromises made while outsource may seem well-meant and beneficial at first, the stakeholder must keep all factors in mind when making a final decision to avoid similar failures.
Advantages and Disadvantages
Outsourcing, being a vital business economy component on a global scale has its plethora of advantage. However, as with every other thing in real life, it also has its share of drawbacks. The chief advantage is minimal labor expenditure, especially with labor wages being at a premium in the US. This helps keep the company’s expenses down and the profit margin rather large. In fact, outsourcing gets work done with better quality and can save as much as 60% in costs. (Benefits Of Outsourcing, n.d). Another massive advantage is operational control. We have witnessed several companies who have been over-burdened with projects , with the concerned departments being ill-equipped yet awarded an unfairly hefty budget. Outsourcing easily solves this issue , as an outsourcing company will bring improved management skills to the table. This inturn will cause the decaying departments to come to life and react rapidly due to the improved management. This will cause control to regenerate in the concerned departments , making them efficient and productive once again (Bucki, n.d). For all its wonders , outsourcing is not without its flaws. Outsourcing can actually cause a negative reputation.A commonly unnoticed fact is that, the business fraternity is a fragile and delicate community. Employees , clients and partners may not take it as a positive change and start thinking about considering alternative to your business. This is very common in the US, where companies outsourcing is openly taken as a sign of terminating domestic operation. (Outsourcing Drawbacks, n.d). Company security is another issue involving outsourcing. Vital and critical information like employee wages and confidential information is shared when outsourcing. Although most companies implement an NDA , it is rather challenging to keep critical data private. (Root, n.d)
The best example on outsourcing that comes to mind is Nike’s venture in Vietnam. Commencing in 1995, Nike moved to Vietnam to take advantage of Outsourcing. It turned out rather amazingly well. Nike’s business flourished more than ever and Vietnam also took advantage, with Nike contributing to 5% of the total GDP. Vietnam eventually became the largest Nike Producer, overtaking industrial power-houses China, by gaining a 37 percent share in Nike’s global production by the end of the fiscal year in 2010. This example points us towards the textile production, which has taken a major step forward in the Asian nation. Vietnam is already the second largest cloth supplier to the USA (Good darning Vietnam, 2011) and only time will tell how much the textile sector will grow in the country, with all credit due to outsourcing. Major companies like Intel, Nokia and Samsung have also invested billions in Vietnam to manufacture their signature devices there. (Vietnamnet, 2014) Hence , from humble beginnings in the textile sector , a large transition is at work in a relatively backward and financially destitute country , all courtesy of Outsourcing.
Although China are considered as the most potent up and coming economic and industrial giant in the world , outsourcing has even more greener pastures just a border across. If there’s one country to qualify for a top recommendation for outsourcing , it has to be , without doubt , India. We have seen the Indians’ rise to prominence in the Information Technology sector. They are one of the few countries in the South Asian region to be blessed with a rich talent pool of software developers and IT specialists. However chief reason for Outsourcing to India is the ease , that comes with outsourcing there. You just need to find a suitable service provider and sign an outsourcing contract. (7 Reasons why Outsourcing To India is good for your business, n.d). The next reason for the recommendation is rather obvious. Cost-effective solution are part and parcel of the package. India has a rather huge work-force which is technically gifted , thus making it ideal for technical skill-intensive labor that major companies demand. This is due to the extensive educational system present in the country which focus mostly on maths , engineering and related scientific disciplines. Add to that the fact that special attention is given to vocational training , reinforces the fact that Indian workforce is in truth , ideal for outsourcing. And with ridiculously low-costs , that makes outsourcing to India a very attractive option. (Why Outsource to India, n.d). One very vital advantage that Indians will forever hold over their European and American counterparts is the timezone differences. This means , when it is night in the US , it is day in India. Critical tasks that have to be completed within a limited time-frame can be outsourced to an Indian partner. This ensures that while America sleeps , progress on work appointed will continue in India , which opens up a very innovative method of completing vital tasks. (Why Outsource To India, n.d). Thus , it is India , which tops the recommendation list for the best outsourcing country.
While outsourcing is the order of the day in modern global business economy, people must realize it has its limits. This in no way suggests that it is a tightly restricted venture, but that it is a very tricky maneuver. At times, productivity will appear only after a certain period of time, which suggests patience is key. It has merits and demerits like any other method. Yet, it is indeed an exciting option for major and growing companies to explore. It also helps in connecting the world economy, hence doing honor to the “global village” pseudonym. While a bit challenging to handle, it is safe to say Outsourcing will shape a large portion of the future of the world economy.
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Root, G. N. (n.d). Advantages and Disadvantages of Outsourcing Services. Retrieved April 14, 2015, from Chron: http://smallbusiness.chron.com/advantages-disadvantages-outsourcing-services-18839.html