- Distinguish between offshoring and outsourcing. Explain at least one example of each.
Sources to be cited:
3 (please, provide digital sources used) Kindly attach the pdfs consulted together with the finished work
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Please answer the following: Use the PDF files attached as 1 of the sources the reference is below:
- Distinguish between offshoring and outsourcing. Explain at least one example of each.
Use the PDF files attached as 1 of the sources the reference is below:
References
Lucas, R. W. (2019). Customer Service: Skills for Success (7th ed., pp. ). New York, NY: McGraw-Hill Education.
Offshoring and Outsourcing are terms that are used in business often. These terms are sometimes misunderstood, although they are very different and have different business strategies. Outsourcing occurs when a company or organization decides to contract work to third parties. On the other hand, offshoring refers to a situation where work is done in a different country, mainly to leverage the cost advantages. Offshoring and Outsourcing are used primarily to bring more profits to companies and organizations. This essay will explore the differences between offshoring and Outsourcing, as well as give examples of each.
One significant difference between offshoring and Outsourcing is the risks and criticism involved in these two strategies. In offshoring, there are criticisms since it transfers jobs to other countries. In this case, the organization will have to hire employees from the country they are partnering with. However, the organization can choose to transfer some of their employees, but not all. Although this is the case, most of the companies and organizations that decide to offshore their business do so to cut down production costs. Also, in offshoring, the risks involved include language differences, geopolitical risks, and poor communication (Hamp-Lyons & Lockwood, 2009). On the other hand, the dangers of Outsourcing have some misaligned client interest. Also, Outsourcing creates an increased reliance on third parties, which might lead to the business’s losses and failure. In Outsourcing, there is no criticism in terms of transferring jobs to other countries (Contractor et al., 2010). However, geopolitical and poor communication can also affect Outsourcing negatively. Before deciding which strategy to invest in, the company or organization needs to evaluate these risks and criticisms and choose one with fewer risks, hence fewer losses.
The other significant difference comes in terms of benefits. These two strategies have several benefits. Offshoring takes advantage of relatively lower prices from the skilled labor force in another country (Contractor et al., 2010). Some countries can provide cheap labor; hence it becomes easy to reduce the costs. This leads to more profits, and the business gets a better chance of advancing in the offshored country. In Outsourcing, companies take advantage of specialized skills and experiences (‘The World of Customer Service.’ (n.d.). Also, an organization can decide to outsource if the costs of labor and production will reduce. This means that products and services will continue being produced but at lower prices. Although the two strategies have different benefits, the company’s goals and visions will determine if they will do offshoring or Outsourcing.
Lack of required expertise leads to outsourcing. If the organization feels that the company does not have enough experience and skills to handle something, they will outsource it to a more experienced entity. The outsourced functions are done by non-employees (Contractor et al., 2010). On the other hand, the business functions that have been offshored are done by the organization’s employees. So the employees are the same, only that the work is being done from another country. This is done mostly if the company wants to expand its business in another country. Before an organization settles on offshoring, it must be ready to recruit new employees who will work in the other region (Contractor et al., 2010). Sometimes the company might decide to transfer some of its current employees who have enough experience, and they are given the management jobs in the country where they are posted. The new employees should be adequately trained when it comes to offshoring. One must consider that there are cultural and communication barriers that might affect the training process. However, if it is done correctly, then the business operations will end up running smoothly.
An example of offshoring is when a manufacturing company decides to offshore its first stages of production. This happens if the production cost will be cheaper in another country, meaning that the raw materials and labor are relatively inexpensive and readily available. The finished product is then kept in its own country, where marketing and sales are carried out. Another example is when a company imports the inputs and the raw materials from countries with cheaper markets. IBM is one of the companies that have benefitted from offshoring (Contractor et al., 2010). IBM made a 10-year contract with the National Bank of Canada. IBM Canada is the head of bank information maintenance. An excellent example of Outsourcing is when Alibaba outsourced website development due to localization concerns (Contractor et al., 2010). The company outsourced some developers from the United States of America. They wanted a website that would appeal to a variety of audiences, both at home and worldwide. Another example of Outsourcing is when Slack outsourced app and website design. This shows that different companies have been benefiting from both Outsourcing and offshoring
As seen, offshoring and Outsourcing are different, but they bring tremendous benefits to the business. They both have their own goals and objectives, and they offer different values to the organizations. Companies need to assess all the viable advantages and disadvantages to come up with a better decision. Also, companies need to explore better options out there, as long as growth and profits are guaranteed.
References
Contractor, F. J., Kumar, V., Kundu, S. K., & Pedersen, T. (2010). Reconceptualizing the firm in a world of Outsourcing and Offshoring: The organizational and geographical relocation of high-value company functions. Journal of Management Studies, 47(8), 1417-1433. https://doi.org/10.1111/j.1467-6486.2010.00945.x
Hamp-Lyons, L., & Lockwood, J. (2009). The Workplace, the Society and the Wider World: The Offshoring and Outsourcing Industry. Annual Review of Applied Linguistics, 29, 145-167. https://doi.org/10.1017/s0267190509090126
‘The World of Customer Service.’ (n.d.). Chapter 1, 28-78.
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