Essay Assignment on Outsourcing

Outsourcing

Outsourcing is a good business strategy when used in the right manner. This is because the strategy is cost effective. For example, Dell Company that deals with the manufacture of computer outsources some of the components from rival companies instead of manufacturing them internally. This gives it an edge in the market.

Some of the ways through which outsourcing has been carried out in the recent past is offshore contracting. Multinational companies such as Coca-Cola prefer foreign contracting by relocating business operations to foreign countries that present lower rates in form of labor and capital. Another company that has applied this kind of strategy is general electric company based in the United States but shifting its operations to china due to the reduced cost of power and low labor costs (Haugen, Musser, & Lovelace, 2010). In addition, large corporations engage in outsourcing because of higher corporate taxes that are charged in the United States than other countries such as china. Ethical issues are prevalent for those companies that engage in this kind of an endeavor. This happens because of business mistakes. An example of a real situation is when solid works corporation; a United States Software Company reported misconduct by one of its employees who tried to make a deal with the company’s competitors. The Indian company was an outsourced partner of the parent company. Thus, business secrets are not in save hands when outsourcing.

There are several risks associated with outsourcing that includes loss of business strategy and knowledge, failure by the venders to deliver to the expected standards, non-compliance with government regulations and low turnover by these institutions as well as business personnel. This puts businesses at risk of losing its customers and operations.

References

Haugen, D. M., Musser, S., & Lovelace, K. (2010). Outsourcing. Farmington Hills, MI: Greenhaven Press.