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Definition of Outsourcing (Essay Sample)

While the general readings for Module 3 are about International HRM, in the case for module 3 we are going to focus on outsourcing, a major phenomenon of international business that affects employment in a very significant way. Outsourcing means that companies contract out activities previously performed in-house. We focus on international outsourcing. Companies are increasingly contracting out various functions in order to take advantage of lower labor costs in other countries. Outsourcing started with manufacturing. Nowadays, IT is being increasingly outsourced to Asian countries, especially India and China. The movie industry has increasingly used outsourcing, by finding less and less expensive movie locations! Companies have also moved "call centers" to other countries, as well as other service-related functions. Outsourcing is a controversial phenomenon. Companies perceive it as a cost-cutting strategy that enhances shareholder wealth. Opponents examine number of jobs lost in the United States. There is also concern about outsourcing strategic functions, such as IT. Case Assignment Write a 2-3 page paper and post it to CourseNet about outsourcing from the perspective of a multinational firm (Yes, this may be a hypothetical firm), be sure to answer the following questions: 1. What are the advantages of outsourcing? 2. What are the disadvantages of outsourcing? Discuss why these are advantages and disadvantages and to whom. Please read the following articles. Please go to the TUI Library Page, then to ProQuest to find these articles: Into Thin Air, Fast Company, Boston, April 2004, Issue 81, Pages 76-83 by Jennifer Reingold. A TEMPEST OVER OUTSOURCING American legislators are accusing India of stealing tech jobs Business Week, New York, June 16, 2003, Pages 20-21 by Manjeet Kripalani and Bruce Einhorn in Bangalore and Paul Magnusson in Washington Supplementary readings: "MOVE OVER, INDIA, China is rising fast as a services outsourcing hub", Business Week, New York, Aug 4, 2003, Issue 3844, Pages 20-21 "Software: Will outsourcing hurt America's supremacy?"Business Week, 3/1/2004 Issue 3872, Pages 84-93, by S Baker, M Kripalani, R.D. Hof, and J. Kerstetter source..
Definition of Outsourcing
This is a process which involves acquisition of products or services, such as motor vehicle manufacturing parts from outside manufacturers or suppliers with the aim of cutting costs. It may also refer to subcontracting or purchasing from sources or suppliers from outside. Outsourcing involves transferring or delegating functions or processes to service providers who are external, which would have been an in-house process. The aim in this case is usually reduction of incurred costs.
Outsourcing advantages
These are benefits which are enjoyed by companies which practice outsourcing. Outsourcing has various advantages which accrue to those who practice it. For instance, core activities focus is an outsourcing advantage. In fast growth periods, companies’ back-office processes also increase (Manjeet & Bruce, 2003). The expansion may utilize resources at expense of the companies’ core activities. Outsourcing of the activities would allow the company to concentrate on important business activities without service or quality sacrifice.
Secondly, efficiency savings and cost are advantages experienced by outsourcing companies. A company may have complicated back-office functions which may not be achievable at reasonable and consistent costs due to small company size. Outsourcing of the activities would be an advantage to the company. A doctor’s office which is small in size may decide to accept many insurance plans. This may turn out to be very expensive and therefore it would be cheaper to outsource to firm which deals purely with medical billing.
Thirdly, internal staff development is an outsourcing advantage. For example, a company may intend to undertake a project and realize that it does not have qualified staff. Outsourcing enables the company to get skilled individuals from which its staff may learn from.
In addition, outsourcing companies have the likelihood of benefiting from reduced overheads. In cases where companies find out that costs incurred in back-office activities are very high, it would be better for the companies to outsource the functions which may easily be moved.
Moreover, risk management and continuity are enjoyed by those who practice outsourcing. High workers turnover periods add inconsistency and uncertainty to operations. Continuity in this case is likely to result from outsourcing as well as reduction of uncertainties which would have occurred to the company. For example, when a company’s manager goes on sick leave and administrative assistants shift for other jobs, outsourcing management function r...
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