Outsourcing on Companies based in other countries
Name of student
Companies and corporations are familiar with the term ‘outsourcing’ as it involves the transferring of employees, services and various assets that are a burden to a company to another one that is able to manage them especially in other countries. This is based on the fact that the company doing this is unable to control the resources at hand and it wishes to transfer them to another for profit so that it can concentrate on what it can manage or rather control best (Haugen et al, 2009).
Reasons for outsourcing
The major reason is for the firm outsourcing to be able to improve in their areas of core competency through mitigation of skills-shortage. When companies outsource to other companies in other countries we call this offshore outsourcing and this helps the company in question to flex its budget capabilities to an improved position as well as maintain proper control of the business specialties they are best at through offering the extra to other companies at a cost. Through this, any extra costs such as ambiguous taxes, costs as a result of energy, bureaucratic red-tape government-regulation costs that are mandatory as well as production costs that the company had been meeting are mitigated as they pay for what they need only and they do not have to incur extra costs of retraining staff so as to be able to perform the extra businesses that are already outsourced. It is a type of subcontracting other companies from other countries to handle some of the services or products once handle by the company since they have become a liability and in the process the company gains some profit. Expansion of local market and entry to new ones may be another ultimate drive towards outsourcing. On the same platform, companies are able to realize the re-engineering of their company through outsourcing as buffer capital is realized (Irving & Harrison, 1996).
Should the decision to outsource begin with analysis of relevant costs?
Costs are definitely the major reasons that have led to big corporations and companies to result to outsourcing especially to third party companies abroad as costs in their mother country have proven to be a burden and the ones offered in foreign countries are cheaper and affordable. Thus, employment in the mother country has declined tremendously while the economies of foreign countries get boosted. For any company to outsource they have to begin with scrutinizing and analyzing if the costs of production are the major causes of decline in profits. This should always be the fundamental platform in order for any company to decide whether they want to outsource any other reason can be handled locally. Others may argue that outsourcing is based on analyzing the source of market but that would not be very ideal since a company with a large market and a burden of costs will definitely realize very dismal profits while the one with mitigated costs will do even better with an average market. Profits are realized as a result of mitigation of all form of extra unnecessary costs (Haugen et al, 2009).
Outsourcing has become the major trend in the United States and many other countries and it is the high time that the government looks into various ways to ensure that the extra costs incurred by local companies are mitigated so that the local people can regain their employment and the local economy can thrive again. When it comes to the companies outsourcing, they should base their claims through extensive analysis on the costs that they face and they thin that are deterring them other than outsourcing on the basis of new-market entry alone as costs are the fundamental reasons why profits are not realized in most cases (Gelb Consulting Group, 1993).
Haugen, D. M., Musser, S., & Lovelace, K. (2009). Outsourcing. Detroit: Greenhaven Press.
Gelb Consulting Group. (1993). Outsourcing. Houston, TX: International Facility Management Association.
Irving, R., & Harrison, P. (1996). Outsourcing. Corby: Institute of Management