Discuss about the Literature Of Outsourcing Business Functions.
Outsourcing is one of the major parts of the business functions of the modern global environment, where the multinational companies are dependent on the outside business units in carrying out operational activities. The outsourcing can be a major part of the business strategy. The Outsourcing business has become a significant trend, what large scale multinational companies are able to hire marketing and human resource. This can include practice of job function from areas outside the company. This can help the company to deal with the challenge of hiring expertise. Operational cost can also be reduced as the company is able to get the supply of the same at much lower price from third party agents. Nevertheless, certain negative effects are associated with Outsourcing business units, which mainly includes compromising on the quality of operational service.
In a given context, the aim of the existing project is to discuss on both positive and negative side of outsourcing business function. The purpose of this project is to analyze the existing literature of outsourcing business functions, which will help to evaluate both positive and negative sides of the same critically. It will, therefore, be possible to analyze the effectiveness of outsourcing business strategy in the context of the modern day Global Business Environment.
The scope of the project is mainly limited to reviewing the literature that is most relevant to discussing advantage and disadvantage of outsourcing business function. It will, therefore, be possible to highlight upon the existing gaps of the literature and provide recommendations for improving implementation of Outsourcing business functions.
Gaining competitive advantage by reducing cost and gaining skills
According to Smith and Smith (2016), most obvious and visible advantage of implementing Outsourcing business process is associated with reducing operational cost. This is added to the fact that efficiency can also be increased as the company is able to hire new talents from outside agents. Gerbl et al. (2016), have added the fact that with the help of outsourcing operation it is possible to achieve working flexibility. This is mainly due to the fact that the companies are able to hire workers from different cultural background. Cost effectiveness is also increased as the employees are being hired at much lower salary. The example for the same can be given from the fact that multinational companies in Europe and American region are able to hire cheap skilled labour rates from Asian countries. The additional benefit that is associated with this Outsourcing is the improvement of the economic condition of the developing countries, which is able to gain higher level of employment.
Employees also possess greater diversity in the knowledge management field, what is mainly needed to deal with Complex Outsourcing projects. With advanced form of knowledge related to business operations, it is possible to bring about innovation for supplementing greater effective competitive advantage policy. Gerbl et al. (2015), have highlighted the fact that Change management is highly crucial in the context of the current operations of Global Business Environment. Nevertheless, one of the major challenges in implementing Change management is due to high level of resistance that every company received during implementing innovative strategies. It is therefore easily possible to overcome this challenge by recruiting workers from outside unit. It Outsourcing business function it is, therefore, possible to achieve higher level of accuracy in Change management process for gaining greater level of competitive advantage in Global Business scenario (Lacity et al. 2015). High end leverage knowledge is also required in the process of making most use of the existing skills for improving the level of supply chain management. Companies are also able to hire recruiters, depending on the subject area of expertise. It is therefore possible for the company to provide higher level of focus in the core business operations by improving the quality of work function outcome.
One of the major challenges for multinational corporations in implementing effective Global business strategy is associated with difference in the time zone across various parts of the globe. In the given context, the Outsourcing business function can provide the opportunity of hiring workers from different nations. It is, therefore, possible for the operations to be functional for 24 hours (Sople 2016). Nevertheless, it can be an initial hurdle for the Logistic operation, as people are forced to work in night time shifts. However, with increase in automation in operational process it is possible to provide better quality of customer service.
According Chou et al. (2015), as the companies are able to overcome the challenge of working around the clock; it is effectively possible for them to improve their productivity. This is an essential factor in increasing the efficiency of business profitability, where the business organizations are able to outperform small scale business firms. It is also possible for them to achieve better level of business communication. Nevertheless, companies have to deal with the challenge of recruiting more number of workers, who are able to work both at night and day shift. With round the clock business operation it is also possible to achieve a better level of coordination, with every group of stakeholders in different parts of the globe. The companies will, therefore, be able to achieve more efficiency with the onsite working agents, who will be able to meet up the demand of the local clients.
As the company and able to focus on cooperation and function with Outsourcing business unit, it is also possible for them to deal with the challenge of providing effective quality of customer service. The level of customer satisfaction is an essential parameter in the modern day business environment, where there is used degree of difficulty due to frequent change in consumer behavior. It is important for business to collect latest information from the primary market, which can be achieved by direct interaction with the target customers. Essential marketing research is also required in the context where the company will be able to predict new changes that occurred in the consumer market (Liu et al. 2017). With Outsourcing business operation it is possible to gather essential data from the primary market, which will help the multinational companies to change their business strategy according to the need and demand of the external business environment. As primary data are being collected from the Outsourcing unit, the companies will be able to understand their internal strengths and weaknesses. They can work accordingly to overcome the external threats of business rivals.
According to Solli-Sæther and Gottschalk (2015), the multinational corporations can also hire third party agents for providing better quality of customer service. This is mainly provided in the section of after sale service. The example of Samsung Company can be given under the current circumstances. Currently, Samsung is one of the top selling brands of Smartphone in the Global market. However, with increased sales it is also important for the company to provide better quality of after Sales Service which is required to maintain their brand value. The company is able to provide franchise to Outsourcing units, who are able to provide after sale service to the customers, who are facing issues in the Smartphone. The Outsourcing unit also needs to have access to replace the product as a part of the agreed guarantee period.
With effective primary Research, it is possible to directly relate to consumer behavior, this possible for the company to focus about the exact issues that are faced by the customers while using their respective product or service. The Outsourcing business partner can, therefore, provide essential information about the cause of customer dissatisfaction.
One of the major factors for business sustainability in the context of the current business environment is the ability of the company to foster innovation. As discussed in the earlier section with Outsourcing business function it is possible for the multinational companies to improve upon their talent diversity that is one of the major factors of implementing innovation in the workplace. There are additional factors that include hiring third party unit for manufacturing products, as the design of the same is being used by the companies (Gurung and Prater 2017).
The example of Foxconn and Apple business partnership can be given under the current circumstance. Foxconn is the biggest manufacturing unit of Apple’s product. As the Apple Company design the plan of new product including iPhone or Mac Book, the same is being provided to the Foxconn manufacturing unit, who uses the design to manufacture the devices for commercial purposes. As the Apple Company do not have to take the burden of manufacturing iPhone on Mac books, it is possible for them to focus the business operation in the design of new products.
With third-party manufacturing unit, it is also possible for the company to produce number of products which can help in the process of market expansion. In case of Apple, with the business partnership of Foxconn, it is possible for them to produce number of iPhones, which has helped them to quickly increase their market share in a Smartphone segment of the Asian market.
Alongside the positive impact, it is also important to focus on the negative sides of outsourcing business, which can help the multinational corporations to improve upon their existing business strategies by overcoming the challenge of the same.
Efficiency of the Outsourcing unit is highly dependent on the ability of the companies to share more vital information. However, as important information of multinational companies is being shared with Outsourcing unit, that is higher level of risk in data leakages (Mann and Graham 2016). The Outsourcing business partners can also unethically share important classified information to public domain, which can increase the risk of financial loss. This is more relevant under the current circumstances increasing business rivals, where the small scale companies are implementing unethical strategies to hack important information from the multinational corporations.
There are additional risks of sharing information about detailed feature of any product or service. In case of Apple Company, for example, the Foxconn can leak the design of the latest iPhone, which can be a major advantage for all Apple’s rival and the Smartphone segment. This can have a serious impact on the market popularity of the latest iPhone or Mac Book.
There is also the additional risk of spreading false information related to the quality of a product or service to the target customers. This can be a major financial loss for the company as customers will lose their trust in particular brand mostly due to false information.
As mentioned earlier, one of the major prime advantages of outsourcing business is reducing the operational cost. Nevertheless, Lacity and Willcocks (2014), have mentioned about the hidden cost factor that is mostly ignored by the companies while they outsource business functions. One of the important factors of having effective Outsourcing business function is strictly following the legal procedures, which can mainly include hiring workers from foreign Nations. Due to the different type of legal policies in various parts of the globe, companies have to bear the extra cost of dealing with the legal challenges as they hire workers from different nations. The company therefore has to be at the extra cost of recruiting legal Advisors, which can help them to set of ethical business partnership with Outsourcing units. There is also another major challenge, where the management of the company can lose control over core business function, as essential business operational activities are allocated to the Outsourcing units. This can lead to business communication challenge, which can be a major issue for providing high end deliverable to the clients.
Chou et al. (2015), have mentioned about the challenge of cultural diversity, where companies are planning to hire workers from outside Nations. Due to the difference in the cultured lifestyle and language companies have to face greater level of challenge in maintaining higher level of coordination at the workplace. Additional human resources are required in order to overcome the cultural difference and to improve the level of efficiency. This can also have a major impact on the overall productivity of the company. Liu and Deng (2015), have added about the political problems, which can vary depending on the external business environment in different parts of Globe. The companies therefore have to implement different type of business policies depending upon the change in political and economic environment. The extra time also has to be spent in order to deal with the challenge of understanding the cultural difference. This is also related to the issue of understanding the variation in consumer behavior in different parts of the globe.
There are additional challenges, which include compromise on the quality of product or service that are being provided by the Outsourcing units (Mann and Graham 2016). The example of Samsung has been given earlier, the example of Samsung has been given earlier, while company recruits outsource business partner for providing Sales Service. Nevertheless, it is not possible for the management of the Samsung Company to track the quality of customer service that is being provided by the Outsourcing units. This can also be a challenge for the Apple Company, where they are not able to implement proper quality control process in order to ensure higher level of customer satisfaction for iPhone and Mac book users. The quality issue can have a serious impact on the level of brand reputation.
Gaps and Conclusion
The concluding note it can be said that it is important for multinational corporations who are implementing Outsourcing business function to consider both positive and negative aspects of the same. In spite of the fact that it Outsourcing business function can reduce business operational cost, the additional legal challenges, which can be a major factor in hidden cost. Hiring what cards from foreign Nations can help to improve the cultural and talent diversity of the workplace. Nevertheless, it is associated with the issue of cultural difference which can be a major challenge for effective business communication and coordination within different parts of the globe.
It is also possible for the company to improve their productivity as in many cases manufacturing activities are carried out by Outsourcing business. There are however additional risk of essential company information being leaked at public domain, which can cause major benefit to the business rivals.
The major gap in the existing literature is associated with the fact that it has not provided essential recommendations that can be implemented by the multinational companies to improve on their Outsourcing business policies by neutralizing the risks. It is however recommended to implement the theory of multicultural Management at workplace to deal with challenges of business communication in different parts of the globe (Gurung and Prater 2017). It is also important for the companies to understand the latest trends in the Global Business Environment, which can help them to implement change in their Outsourcing business policies to achieve greater level of business sustainability.
References
Chou, S.W., Techatassanasoontorn, A.A. and Hung, I.H., 2015. Understanding commitment in business process outsourcing relationships. Information & Management, 52(1), pp.30-43.
Gerbl, M., McIvor, R. and Humphreys, P., 2016. Making the business process outsourcing decision: why distance matters. International Journal of Operations & Production Management, 36(9), pp.1037-1064.
Gerbl, M., McIvor, R., Loane, S. and Humphreys, P., 2015. A multi-theory approach to understanding the business process outsourcing decision. Journal of World Business, 50(3), pp.505-518.
Gurung, A. and Prater, E., 2017. A research framework for the impact of cultural differences on IT outsourcing. In Global Sourcing Of Services: Strategies, Issues And Challenges (pp. 49-82).
Lacity, M. and Willcocks, L., 2014. Business process outsourcing and dynamic innovation. Strategic Outsourcing: An International Journal, 7(1), pp.66-92.
Lacity, M.C., Solomon, S., Yan, A. and Willcocks, L.P., 2015. Business process outsourcing studies: a critical review and research directions. In Formulating Research Methods for Information Systems (pp. 169-251). Palgrave Macmillan, London.
Liu, S. and Deng, Z., 2015. Understanding knowledge management capability in business process outsourcing: a cluster analysis. Management Decision, 53(1), pp.124-138.
Liu, S., Wang, L. and Huang, W.W., 2017. Effects of process and outcome controls on business process outsourcing performance: Moderating roles of vendor and client capability risks. European Journal of Operational Research, 260(3), pp.1115-1128.
Mann, L. and Graham, M., 2016. The domestic turn: Business process outsourcing and the growing automation of Kenyan organisations. The Journal of Development Studies, 52(4), pp.530-548.
Smith, A. and Smith, H., 2016. An international survey of the wellbeing of employees in the business process outsourcing industry. Psychology, 8(01), p.160.
Solli-Sæther, H. and Gottschalk, P., 2015. Stages-of-growth in outsourcing, offshoring and backsourcing: Back to the future?. Journal of Computer Information Systems, 55(2), pp.88-94.
Sople, V.V., 2016. Business process outsourcing a supply chain of expertises. PHI Learning Pvt. Ltd..
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