Outsourcing

Advantages of Outsourcing



According to M2 Presswire (2006), “over the last three or four years there has been steady growth in the number of telecoms operators outsourcing specific business activities and, in some cases, the entire operation of their networks” ( Research and Market , para.1). Why is this outsourcing being success? As business is evolving, many companies have to concentrate on their responsibilities. In the center of business development, outsourcing is one of big issues. So, how do owners control their companies? Do they control all part of business for their responsibilities? How do they find solution? Before outsourcing came up, some companies tried to handle all of their business. However, they could not control when their companies were getting bigger. Definitely, it was impossible. Nowadays, most of major companies take up outsourcing because it can save companies’ cost, companies’ to concentrate on their core competencies and enhances globalization.
The Small Business Encyclopedia defines “outsourcing occurs when a company purchases products or services from an outside supplier, rather than performing the same work within its own facilities, in order to cut costs” ( outsourcing , para.7). After 1970’s in the United States, outsourcing got started by distinguishing companies’ priority that companies concern about what the best profit is firstly. In The Ethics of In-house vs. Outsourcing mentions “ The origin of outsourcing in America dates back to the 1970’s when IBM developed the IT industry in India. Later, the Internet and telecommunications boom encouraged outsourcing as a means of promoting capitalism” (para.2). When outsourcing was expanded, companies outsourced especially domestic. However, Business Wire (2006), “now domestic outsourcing is shrinking and changing due to lower costs in offshore locations with strong quality levels” ( Learn about the Advantages of Using Outsourcing for Both Investors and End-Users , para.5). According to M2 Presswire (2006) mention “Outsourcing can be a powerful strategic and competitive weapon” ( Research and Markets , para.2). As we look around, these days, most major companies subcontract to small firms and contract abroad owing to several reasons.
First of all, outsourcing can save companies’ cost. Because companies outsource to other companies that specialize in a given function and performs that function more efficiently than the companies could. For example, in Korea has some ‘Kimchi’ which is traditional Korean food factories. Most of ‘Kimchi’ factories outsource to fermentation factory as ‘Kimchi’ need special fermentation for taste. If the factories make fermentable facility, it costs a lot of money even though they can get many profits. Accordingly, ‘Kimchi’ companies can save unnecessary cost and fermentation companies can earn income. Also, companies can control cost of labor by means of outsourcing. As we can see, if some company is getting bigger, the owner has to deeply consider whether this business has to expand or not. When the company enlarges a part of business, it costs lots of money to establish new facilities, new hiring. Thus, the good solution is outsourcing in terms of saving cost of labor.
In addition, outsourcing allows companies’ to concentrate on their core competencies because it can eliminate distractions. In Small Business Encyclopedia, said that outsourcing can free the entrepreneur from tedious and time-consuming tasks, so that he or she can concentrate on marketing and sales activities that are most essential to the company’s long term growth and prosperity ( Advantages of Outsourcing n.d.). Definitely, this is the best proof that outsourcing is able to get rid of obstacle. Another reason is that outsourcing can overcome some companies’ weakness. Now, conglomerates lead many different business fields. However, as one might expect, big enterprises have their own weak part of business, even though they earn a lot of profits because companies’ owners cannot control the same level of business profit easily. At that time, owners have to make their mind whether their companies have to keep the weak part of business or not. Of course, this is not easy to decide to conglomerates owners. Yet, fortunately, advent of outsourcing is helping these weaknesses. For example, ‘Samsung’ that is one of the most huge companies in Korea usually makes digital electronic stuff or commodities which are main products. Also, ‘Samsung’ has lots of other business. How does ‘Samsung’ handle their other business? The answer is that ‘Samsung’ truly chooses outsourcing such as repair service and commodities’ sales.
Finally, outsourcing enhances globalization. Nowadays, many companies move out their outsourcing companies because it is cheaper than domestic and can expand their business. As many companies interconnect, they can encourage economic power each other. For instance, B2B Telemarketing Company which is one of the famous telemarketing companies in United States is outsourced by other companies and it also outsources other countries’ companies. This company usually is in charge of other companies’ customer service. By this service, the company is able to listen different countries customer’s viewpoint because different countries customers have different viewpoint. If the company overcomes this problem that is different viewpoint, it can succeed its business and influence other countries economic benefit. Thus, outsourcing has this advantage of globalization.
Opponents of outsourcing’s advantages claim that outsourcing makes big economic gap between countries. Specifically, they argue that outsourcing has bad effect on poor countries. However, it is just the tip of the iceberg because poor countries have lots of chances to improve their economic situation by passing through outsourcing. As business is getting complicated, companies cannot avoid outsourcing. For example, China was one of poor countries. Reason is why many companies from other countries usually outsourced Chinese companies to manufacture some industrial commodities because China had pretty cheap labor. Of course, still outsourcing exists in China however, compare to China before, China now has lots of economic power and no one ignores Chinese economic system. Accordingly, outsourcing decreases countries economic gap.
In conclusion, nowadays, our industry is getting changed very fast. Thus, big companies’ owners have to accept this variation. Outsourcing which is one of industrial alteration in business is business strategy. Conglomerates now cannot avoid this strategy if conglomerates’ owners want to manage their company efficiently. Some people still ask about outsourcing’s merits and argue that it has some problems such as poor quality control, decreased company loyalty. However, outsourcing helps globalization and getting benefits in business because it is based on companies activities that companies establish abroad and interconnect with companies from other countries. Therefore, all things considered, outsourcing should be adopted by companies in order to have a lot of benefits for doing business.





















References


Outsourcing (n.d.). Small Business Encyclopedia. Retrieved September 21, 2007, from www. Answers.com
Learn about the Advantages of Using Outsourcing for Both Investors and End-Users (2006, May 31). , Business Wire. Retrieved September 20, 2007, from www. researchandmarkets.com/reports/c37779
Research and Markets (2006, February 13). M2 Presswire. Retrieved September 20, 2007, from www. researchandmarkets.com/reports/c32826
Advantages of outsourcing (n.d.). Small Business Encyclopedia. Retrieved September 21, 2007, from www. Answers.com
Economy of scale (n.d.). Retrieved September 27, 2007, from www. InvestorWords.
com/1653/economy_of_scale.html

The Ethics of In-house vs. Outsourcing (2006), Insight Business, Retrieved September 25, 2007, from www.usc.edu/org/InsightBusiness/archives/fall2005/TheEthics…