Offshore Outsourcing
Using examples, discuss the potential advantages and disadvantages of offshore outsourcing for A) western companies, B) emerging market companies C) the workforce of western countries D) the workforce of emerging market countries.
Offshore outsourcing is defined as “Geographical relocation of specific business functions abroad ... to be performed by contractually outsourced independent party” (Prasad and Prasad 2007 cited in Javalgi et al. 2009,p.157).
INTRODUCTION Context: Western companies: Clients (Importers of the services/products)
Emerging market companies: Vendors (Service providers/Product manufacturers/Exporters).
Outsourcers:Western companies
Business Service providers/ Product Suppliers:Companies from
Emerging/developing countries like Mexico,Philipineees,Indonesia,China,India etc
ADVANTAGES AND DISADVANTAGES OF OFFSHORE OUTSOURCING TO WESTERN COMPANIES AND WORKFORCE OF WESTERN COUNTRIES
ADVANTAGES TO WESTERN COMPANIES
The process of Offshore outsourcing benefits the outsourcer to have an edge over the other competitors in terms of gains in productivity,reduced production and company costs and increased profits for shareholders by relegating support functions to other countries and concentrating mainly on their core business. The exploiting of geographical location advantages such as low cost(lower prices for input),availability and quality of resources, larger pool of skilled labours, transportation costs, trade restrictions such as tariffs and quotas creates a repositories of valuable rents thus enhancing productivity(Prola 2004; Bunyaratavej 2008;Bahrami 2009).According to Kaplinsky(2000), the dynamic rents can be a part of the effective value chain.Many of the US companies like IBM, General Electric, Citibank,JP Morgan outsource part of their internal software development,back office or call-center operations (IT-related business processes) to India due to availability of cheap labour,ample number of educated English-Speaking
Offshore outsourcing is defined as “Geographical relocation of specific business functions abroad ... to be performed by contractually outsourced independent party” (Prasad and Prasad 2007 cited in Javalgi et al. 2009,p.157).
INTRODUCTION Context: Western companies: Clients (Importers of the services/products)
Emerging market companies: Vendors (Service providers/Product manufacturers/Exporters).
Outsourcers:Western companies
Business Service providers/ Product Suppliers:Companies from
Emerging/developing countries like Mexico,Philipineees,Indonesia,China,India etc
ADVANTAGES AND DISADVANTAGES OF OFFSHORE OUTSOURCING TO WESTERN COMPANIES AND WORKFORCE OF WESTERN COUNTRIES
ADVANTAGES TO WESTERN COMPANIES
The process of Offshore outsourcing benefits the outsourcer to have an edge over the other competitors in terms of gains in productivity,reduced production and company costs and increased profits for shareholders by relegating support functions to other countries and concentrating mainly on their core business. The exploiting of geographical location advantages such as low cost(lower prices for input),availability and quality of resources, larger pool of skilled labours, transportation costs, trade restrictions such as tariffs and quotas creates a repositories of valuable rents thus enhancing productivity(Prola 2004; Bunyaratavej 2008;Bahrami 2009).According to Kaplinsky(2000), the dynamic rents can be a part of the effective value chain.Many of the US companies like IBM, General Electric, Citibank,JP Morgan outsource part of their internal software development,back office or call-center operations (IT-related business processes) to India due to availability of cheap labour,ample number of educated English-Speaking
References: (Ref: Doh, J.P. 2005. Offshore Outsourcing: Implications for International Business and Strategic Management Theory and Practice.Journal of Management Studies.42(3), pp.695 | Farrell, D Kedia, B.L. and Mukherjee, D. 2009 . Understanding offshoring: A research framework based on disintegration, location and externalization advantages. Journal of World Business. 44 (3), pp. 250-261. | Khan, et al.2003 Kotabe M and Mudambi R. (2009). Global sourcing and value creation: Opportunities and challenges. Journal of International Management. 15 (2), pp 121-125. | Prola,R.F.2004.Hands across the sea.Smith Business 5(2),pp Shao, B.B.M. and David, J.S . 2007. The impact of offshore outsourcing on IT workers in developed countries. COMMUNICATIONS OF THE ACM. 50 (2), pp. 88-94. |