Research Paper on "Outsourcing Business Operations Hold"

Research Paper 8 pages (2583 words) Sources: 8

[EXCERPT] . . . .

Outsourcing

Business operations hold the objective of maximizing profits on each and every transaction undertaken . To achieve this, economies of scale are sought and decisions on how best to maximize the same preferred Brooks, Weatherston and Wilkinson ()

Increase in this realization and embrace of the notion of efficiency has seen a trend towards outsourcing those services that companies inefficient to undertake. They concentrate on those services that are efficient and don't bear too much weight on cost outlay. Shenkar ()

define outsourcing as the art of turning a part of business activity to an outside vendor. They go ahead and say that the actions are a measure to cut cost and improve efficiency in operation Shenkar ()

International business involves business activities that cross borders. This being and aspect of globalization does not exclude small companies neither does it only occur when a company set up operational base Ozimet ()

. The company can also attain a global perspective through outsourcing services example establishing call center in India. The key consideration for assessing globalization is to assess the integration and connectivity between two different parts of the country. Shenkar ()

says, a feature that distinguishes international business is that firms in international business hold their operations in highly uncertain environments Knight G.A. And Cavusgil ()

. The rules and regulations are highly volatile; at times contradict each other and uncertainty hangs in the air. Decision making in the global market based on dynamism unlike in the domestic markets.

Figure 1 Growth in World Trade Proportions

Figure one above shows the proportion of world traded taken up through globalization by countries in the world. The growth of globalization has meant that many of countries will increase their involvement in world trade.

Link between Globalization and Outsourcing

With the notion of outsourcing growing, globalization that has come in place in the past few decades. Globalization comes in the form of trade relations robert ()

. This gives ideas to local companies to concentrate in those products that offer cost effective advantage. The aspect of globalization is fueled by technological efficiencies that further are driven by the need to specialize and exploit efficiency. Companies embrace globalization to access the cheaper raw materials and as is the case of Foxconn (Apple factories in China) cheaper labor force. This is also seen as a measure to outsource. The outsourcing aspect is also seen to help the corporations such as apple to move operations to lower cost region. In turn, the corporation is expected to afford the community improved living standards and proper working conditions and contributes in whatever way to the betterment of the community.

It is evident from discussion above to draw a clear cut line to show where globalization starts and where outsourcing begins. Clearly they go hand in hand complementing each other in terms of goals sought. The two are said to be a measure of exploiting the existing and non-existing advantages in a bid to make more profits. It should be noted that core to their existence is an opportunity to increase efficiency at a lower cost.

Effects of the trends observed

Globalization is argued to have led to companies' outsourcing services and raw materials. The view advance is that by breaking the barriers between countries, the organization discovers opportunities and valued resources otherwise unavailable in their country of origin Agrawal et al.()

. It is observed multinational corporations have shifted base to many of the developing. The reason mostly given for this is because of availability of raw materials cheap labor. The one and only perspective that needs to be highlighted when talking of globalization and outsourcing are the saving on cost and profit.

Touting globalization as the mover of outsourcing is easy to pick out since globalization means trading in foreign tuff. The operations in foreign turf may require partnering with local inhabitant to make ease of familiarizing Agrawal et al.()

. This in one way sets in the aspect of outsourcing (hiring local knowhow to direct in operations). To avoid conflict between the local and foreign the cultures will need to learn and understand them. This forms a relation with the locals. In order not to be seen as just exploiting the local resources, the corporation needs to have a Corporate Social Responsibility outlook. Cap Gemini Earnest and Young research show that with the growth of globalization, outsourcing has become possible. The growth of outsourcing has become so eminent that regulations on operation have had to be considered.

The growing trend in globalization is a concern owing to the emerging challenges and to large extent negative externalities. When one looks at globalization, the aspect it has is integration and unification of world economies. Globalization has the potential to make the world a single market Yip ()

. However, what about the linkages of problems faced in one country to a country or continent far away? How best can we attend to linked global recession, price increases and the financial order that is out of control? Again looking at what outsourcing seeks to achieve an economic edge, there are other aspects that crop out.

Labor exploitation as the report on Apple industries by David Pogue presented is a negative outcome. Other outcomes include failure to incorporate the eternal costs in a company's cost structure. The growth of globalization as well as out sourcing leads to an increase in social cost. Owing to the fact that the operations of the foreign corporation are themselves foreign conceptualization of these costs is missed out. These new trends in the business world need to be looked into and measures devised to counter or prevent externalities. The convictions we all need to hold is that globalization and the resultant outsourcing are here to stay. Ideally there is need to determine what needs to be done.

Globalization and outsourcing affects the level of competition by either creating healthy competition or even creating a monopoly Anderson ()

. The occurrence of either of the two is dependent on the efficiency obtained and the resultant effective combination of resources. Assuming the corporation through globalization is in a position to obtain control of valuable resources. This resource being available for corporation cuts down its cost substantially increasing it operational cost. The company will thus be in a position to hold sown competition. If the competitive aspect gained makes it impossible for competitors remain in the market, then a monopoly may be created. This will then again bring in inefficiencies in the market and further costs borne to the society.

Outsourcing contributes to growth and development benefits but much credit goes to the originating country. Outsourcing being a measure of going global a corporation intends to incorporate efficiency. The corporation is torn apart by it need to have efficiency and uphold standards of operation. In many instances, it is observed that these standards are not kept resulting in even more negative externalities to the host country. There is need o address the negative effects as the trends in outsourcing continue.

Ideal measures for globalization and outsourcing

The corporation needs to identify which process in it operation are to be outsourced. Outsourcing need to be on areas that are non-core to the corporation's operations Anderson ()

. These will first mean that the corporation will not stand an opportunity to loss due to instabilities in host countries. It is also essential while considering outsourcing that goals and objectives be defined. In coming up with the objectives and goals, the corporation will need to assess the time period of outsourcing. There is a need to determine whether the outsourcing venture will contribute to the company's core objective and also add value to globalization venture.

Impetus to globalization is learning and adopting to host country cultures. Emphasis need to be made to corporations to keenly considered the cultures of the host country this will also assist in outsourcing for economies of operation since it will make ease of incorporation of these cultures into its operation Anderson ()

. The host country will also be in a position to reap benefits and own up to a process initiated there by creating avenues for longer term relations.

Selection of the ideal candidate for partners in globalization and outsourcing will help the organization pick the partners according to the suitability with the company's objectives. This will also give the company opportunity to learn how best they can tune the outsourcing provider to suite their need. The selection will also give globalization process an assurance of long-term relation.

Outsourcing initiative adopted by Apple is also a globalization strategy of globalization where it hires local labor force to produce. The Foxonn industry hires local labor force from china to assist in assembly of their iPhones and iPads. The labor force engaged in the productive activities is vulnerable owing to their background and low standards of living. Reports on exploitation and taking undue advantage cannot be substantiated due to lack of evidence and threats… READ MORE

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