OFFSHORE OUTSOURCING
Before explaining the actual benefits and drawbacks of offshore outsourcing for various things, I would like to make clear few conditions like off-shoring, outsourcing and offshore outsourcing. Off-shoring means taking the task or process to some other country, while on the other side, outsourcing means taking help of various other company to do some area of the work or process. Below is the definition of just offshore outsourcing.
According to Needle (2010), "where a company not only locates a task in another country but deals this activity to another firm, it is referred to as just offshore outsourcing. " Offshore outsourcing not only really helps to reduce cost overheads but also helps in various other aspects which we will be seeing quickly.
WESTERN COMPANIES
As per me the traditional western companies are the companies that are developed, progress and are known world-wide. Apple, IBM, Nike, Airbus are several examples of western companies. The advantages of just offshore outsourcing for traditional western companies are the following:
Lower cost of labour: When the merchandise is being manufactured in some place were the labour cost is cheaper than the country of companies existence, it really help company to save money by using cheap labour and even more labour can be employed.
High performance: When labour is cheaper it'll straight help company in performance by using or my making labour work in a variety of shifts and work can be done 24x7 and that will give the organization high performance.
Proper use of the time zone: Companies can make proper use of your energy zone difference. For example as cited in Needle (2010), many USA companies use the service of Indian software technical engineers when their personal computers are not being utilized.
The drawbacks of just offshore outsourcing for traditional western companies are as follows:
Quality of service or product: When the product is produced by some other company in some other place it is probably not necessary that they might supply the same kind of service to your product or the quality of product might not be exactly like the main one you expect the quality to be.
Communication difference: When two different companies of two different origins works on the product, which might come up a challenge were communicating to each other is an issue and that create a communication difference.
Threat to security: When outsourcing services such as taxation and payroll, the service agency will be able to see company's important data and this might create threat to security of data.
I wish to mention few of types of Nike and Airbus. Quality Web Solution (2010), Nike as most of us known is well renowned sneaker making giant from USA, but it no longer manufactures parts of the shoes they need, they may have just outsourced the work to some just offshore companies, but the single of the shoe is still designed in USA. Another case I'd like to give is that of Airbus. Clark and Smith (2010), as we realize that Airbus established fact company in aeroplane making but even Airbus doesn't make all the parts required in aeroplane, they have outsourced the designing and processing of engine found in aeroplane to Rolls Royce and even though problem was detected in its engine motor Airbus requested settlement from Rolls Royce.
Emerging Market Companies
When it involves define emerging market companies, as per me the growing market companies are the companies that are not well renowned but developed and have the energy and potential to contend with the companies of the world. Zara, Lenovo are several examples of emerging market companies. The features of just offshore outsourcing for emerging market companies are the following:
Global opponents: Because the company is emerging company and its own competition has been the globe with european companies, it automatically creates a worldwide competition. Because you have opponents that are making same product as that of you. This not only creates competition for the business but also boost the morale of the company.
More Buyers: THE BUSINESS will be in their state to get good traders to invest in their business. As the business is growing one and shows sign of good competition and make proper use of product they are working, more and more investor wish to spend their money into the company.
Diversification of business: As the rising company get proper attention by the buyer and investor, they might create a level where they would try to diversify their business in a variety of other areas.
The negatives of offshore outsourcing for emerging market companies are as follows:
Government regulations: THE BUSINESS might face a challenge with the rules and rules of the government that might come up in some instances.
Product launching: The merchandise is to be made keeping in mind the country where the product is usually to be launched else it will make a problem that the product doesn't get proper attention by the consumer of the country were the merchandise is launched.
Quality of labour: The labour must be high skilled and proper training must get else the grade of the merchandise will come up and that will influence the product as well as the company.
I wish to mention couple of example of emerging market companies, one of animation done in Bollywood videos and another of Zara. Before when a movie in Hollywood was made and any animation work needed to be done, the task was outsourced to India. However now the truth have modified a whole lot, now whenever a movie is manufactured in Bollywood and any aesthetic impact or some animation work is to done in that, the task is outsourced for some companies in USA. Second circumstance I'd like to mention is that of Zara. Kelly and Clark (2008), Zara as we know is Spanish centered fashion chain dealer. Zara's most of the products are created in Bangladesh. Zara not being very renowned still give its competitors like Tommy Highflier and Difference a good fight on the market, and it recently overtook GAP to be one of the top advertising fashion brands nowadays.
Workforce for western countries
For me, the labor force of western countries means the employee employed by the companies in the american countries. The condition in utilizing the workforce in traditional western countries, the salary are on resolved basic and that make the companies to invest more on staff salary which affect the income of the company. The benefits of the labor force of european countries are the following:
Adapt soon to technology: If sometimes there exists change in technology, the workforce of european companies can adjust to change in technology sooner when compared to workforce of emerging countries.
The cons of the labor force of western countries are the following:
Fixed Salary: The salary paid to workforce of american countries is set. The salary have to be paid on hour basis with basic hour rate chose by the united states. So when it comes to employ a labor force in traditional western countries the salary that had a need to pay is much greater than that of workforce of emerging countries.
Here we will again take an example of Airbus. Harrison (2007), we come to know that Airbus will outsource its work and try to cut short the number of workers. By doing so it will help company to reduce 32% of its overheads. The example shows us that even hiring western workforce can increase the expenditure of the company as the payment for these people is fixed and these cost the business a bit higher than expected.
Workforce of appearing market countries
For me, the workforce of rising market countries means the employee employed by the companies in the emerging market countries. The issue in utilizing the labor force in these market countries is that whenever there may be change in technology the employees have to be trained and it could decelerate the creation process.
The good thing about the workforce of appearing market countries is as follows:
Contract basis salary: The salaries paid in emerging market countries are on contract basis and that means more the worker work more he/she provides the payment. But indirectly additionally it is increasing the creation of the business which contributes to more revenue for the business.
The downside of the workforce of emerging market countries is really as follows:
Not adaptable to improve in technology: The workforce in these market countries are not much informed and if there is change in technology the company need to trained the labor force and that decelerate the creation process. Because of changes in technology, the business need to observe that the workforce is given proper training with faster rate so that the creation process doesn't get influenced. Working out cost also influences the profits of the business.
Let take a good example of Tesco. Jobber and Fahy (2009), the clothing we get in Tesco with Tesco's own-label are created in Bangladesh. And we realize that Bangladesh is one of the rising workforce countries. So when the work is outsourced to them it can help Tesco in making more income as the total amount required to do same job in UK is a lot more when compared to that in Bangladesh. And even earnings to be paid in UK are set while that in Bangladesh is contract basis.
Finally I would like to summarize that offshore outsourcing has advantages for european and emerging companies and its workforce, but on the other hand of it, it also have few disadvantages that may create problem at some stage.
