Quoting from one reliable source, “Outsourcing begins with an understanding of your business’s core identity. If you can understand your unique competitive advantage, you are positioned to consider what you are doing that others or third party could perform much better at reasonable cost for you”. The bottom line and main objective one can understand here is basically on the cost reducing factor.
When we discuss about outsourcing locally or globally, the subject matter can never be very much different and far away from what others are quoting. It is all about the benefits that could be earned from the outsourcing process. No firm or organization would do such process if the benefit is less ...view middle of the document...
Powerful marketing and advertisement plan pictured them apparently to be the real manufacturer but actually, the truth fact was none other than just a virtual manufacturer. This is another advantage from what an outsourced activity can offer your business identity.
Indeed, what we are paying is more for the brand instead of the product that is manufactured solely by the company itself. Most of the popular brands usually outsourced their product manufacturing activities elsewhere so that they can save more on the operational and production activity. Let’s take an example “ Feenstra (1998), citing Tempest (1996), describes similarly the production of a Barbie doll. According to Feenstra, Mattel procures raw materials (plastic and hair) from Taiwan and Japan, conducts assembly in Indonesia and Malaysia, buys the moulds in the United States”. As a matter of fact, when we use the term of “globalization”, it is actually means a manufacturing process that is very similar to what Feenstra and World Trade Organization (WTO) have described.
Outsourcing term dates back in 1970’s when manufacturing companies seeking efficiency began hiring outside firms to manage less-than-essential process. Initially it only involved to IT-related issues, but gradually more and more enterprises realized that they could not be experts in more than one or two fields. This conclusion made them get rid of various areas of activity and entrust them to the specialists.
GENERAL REASON FOR OUTSOURCING
There are many reasons on why a company decided to practice outsourcing. Basically, it is to avoid paying higher at a certain cost i.e high taxes, energy, excessive government regulation, production and labour. Furthermore, another advantage is the ability to reduce the management capacity by tentatively transferring it to the engaged company. Additional increase of its expertise, quality and production capacity would be another bonus once outsourced activity being implemented. In some country like USA, there are incentive provided to the companies due to unusually high corporate taxes and mandated benefits like social security, medicare and safety protection (OSHA regulations).
THE TERMS OF OUTSOURCING
As a matter of fact, the word “outsourcing” can be described from a few perspectives. In other word, a company or party is engaged to assist or help out in a certain criteria for a good reason. It is also defined as the delegation of business functions totally or partly to another company along with part of the administrative and operational control. It can be of any task, operation, job or process that could be performed by the company’s employee but instead contracted it to another party for a significant period of time. Therefore, it is established between two companies basically, a supplier and a customer, with a contractual relationship that is governed by service agreement.
As the current business environment becomes more and more...