Outsourcing allows company to reduce their cost and gain a competitive advantage and this idea is strongly adopted by companies all over the world. Outsourcing is an agreement in which one company contracts-out a part of their existing internal activity to another company. Outsourcing benefits company because it maximizing company’s resources, more efficient output and make legal agreement for performance guarantees.
Telstra is Australia’s leading telecommunications and information service company (telco). Telstra has been using BPO (Business Process Outsourcing) which creates substantial business across Asia, North America and Europe. For home country, owners earn ...view middle of the document...
For host country, it save a large capital cost, rising knowledge inflow, hence, it bring bad effect to environment and make it harder for infant industry to compete as the drawback.
With the development of technology nowadays, it is important for company to have a knowledge in outsourcing to conduct themselves in global marketplace (Snieška V, Drakšaitė Aura 2007). Outsourcing allows company to reduce their cost and gain a competitive advantage and this idea is strongly adopted by companies all over the world (Nonaka, Peltokorpi, 2006). Outsourcing provides greater over-all benefit for company compared to vertically integrated organization and become a vital instrument of entity’s strategy (Linder 2004).
This report discuss about concept of outsourcing process adopted by three companies in three different scope of industries; Telstra, Nike, and Boeing, and why outsourcing become an important instrument by considering advantages and disadvantages both for home and host countries. Each company will focused on two aspects of advantages and disadvantages, two points for each home country and host country. And finally, make a conclusion, recommendation and speculation about outsourcing adopted by companies in the future.
Concept of outsourcing:
Outsourcing is an agreement in which one company contracts-out a part of their existing internal activity to another company. Its not limited on buying goods and services from external parties of entity, but also transfers the responsibility of the physical business function and often the associated knowledge (tactics and codified) to external organization, driven by transaction cost reward (lower cost), functional competitiveness, strategic development and global competition that alter company’s strategies and performance, and boundary of modern manufacturing entity (McCarthy, Anagnostou 2003). Outsorcing considered as ‘offshore outsourcing’ when the company’s function is delegated to overseas vendor (Sabherwal 1999).
nowadays, business process outsourcing (BPO) represent approximately 25% of total service in the market.
Common areas of companies that is outsourced into other parties are: (1) internal functional service of a company which usually performed inside (or in the ‘house’) company it self such as accounting, IT, finance ; (2) complementary or additional activities which roles is to help and support main ‘house’ company activity and (3) disciplines, subsystems, or system which the company itself cannot possess and found external parties have more capabilities in those area. (Quinn 1999a). Good outsourcing management enable company to reduce innovation cycle times and cost by 60 per cent to 90 per cent and decrease investment and risks by equal amount by providing flexibilities for producer ( better resources allocation, Fixed overhead, bureaucracy, myriad...