Questions on Seen Case Study
Question one:
Discuss how the changing technological environment present threats and opportunities to the outsourcing of production from any single country of your choice.
In the present day business environment outsourcing has served as one of the most popular tools for management in almost every organization. Many companies both private and public continue to increase their business operations through outsourcing some of their services to outside vendors. There is an increasing debate among company managers regarding what to outsource and what to produce internally (Eliot, 1998). The high rate of change in technology is posing a lot of threats to managers in various companies making them take the outsourcing option. According to IBM (2008), managers and Information Technology (IT) executives have now for years been fighting with the ongoing business complexity and infrastructure cost. Companies take a decision to outsource their services and products in order to deal with the above problems, with the aim of reducing cost and improving IT performances. Presently almost every company is aiming at achieving global business models, as managers’ move towards the technologically advanced ways of doing business with the changing outsourcing processes.
Taking for instance a country like Asia there has been a great change in outsourcing dynamics and location of businesses. The main aim of adopting outsourcing decisions among Asian companies is cost reduction. Companies set perfect production and marketing strategies aimed at increasing their sustainability in the present business environment. The future marketing analysis indicates that most companies should adopt changes that would assist them venture into the future business world. Asia is a home of many manufacturing and service provision companies with outlets in almost every country globally (Dasher, 2008). Presently companies who outsource their services in Asia are experiencing a lot of problems related to cost and production. Most countries have cancelled outsourcing their services in Asia due to the emergence of hidden costs, problems associated with quality control, and a lot of delays. All these contribute to delayed supply chain that results into poor production, and eventually lack of customer satisfaction.
The fast development of IT associated with internet has allowed many business corporations adapt innovative strategies in order to survive the present competitive business environment. Companies come up with strategic management strategies through making various decisions regarding the type of operations to undertake to achieve their corporate missions and goals. The environment composes of threats and opportunities, which corporations expect to face while deciding their production and marketing strategies. The effort of an organization to manage these threats and opportunities depend its internal capabilities. Asia’s global business objective is to achieve the potential for growth in large markets. The country aims at achieving this through outsourcing various corporation services in order to improve and develop itself.
In order to safeguard their products, Asian organizations have adopted the intellectual property by patenting their products and services. The increase worldwide economic downtown has affected many organizations in Asia since it has a positive effect on approaching global outsourcing. According to the report by Boston Consulting Group (BCG), countries fond of outsourcing always receive a tremendous increase in their economic turnover by a huge percentage. The group claimed that IT practices aid in achieving proper marketing strategies through creation of a competitive advantage and excellent business performance (2012).
Outsourcing involves the supply of different organization resources from external sources through contracting other companies or corporations. Changing technology has posed a great threat when it comes to outsourcing. In the modern business times, also referred to as the society of knowledge and intellectual value, a lot of attention is given to all activities that affect a nation’s economy. Asia has become the world’s top region in growing of asset management markets. The report from International Investment Funds association shows that Asia’s mutual fund pool increased by 9.5 percent from January to July 2003.the growth was achieved through various outsourcing activities carried out within Asia. In order to maintain a safe keeping of assets and trade settlement, Asia financial institutions have adapted new modes of outsourcing applying the current IT through data transfer. Technology forms the basis of all transactions taking place in all business sectors. Developed countries have an advantage of winning the competitive market since they easily adopt the upcoming technology, thus avoiding a lot of business threats (Asian Investor 2004).
The changing technology also poses many threats when it comes to the issue of outsourcing. Outsourcing affects almost every industry especially when the managers have poor knowledge on planning the production and marketing strategies. Technology has introduced network based systems that are automatically operated, and many organizations have adopted these systems. Using the above systems has posed a lot of risks especially concerning data security. Outsourcing makes companies share information with the external bodies allowing them to access information regarding their operations, which poses a very big threat to the outsourcing company. IT makes operations in an organization simple through simplifying various operations related to conveying information, storing data, and receiving data and information. On the centrally, technology presents a lot of risks to the organization that can lead to extreme loses. When an organization outsources to another external company data exchange takes place, which can lead to introduction of viruses to the company’s computer systems. On the other hand, network systems pose a threat to data theft in an organization when they connect to the outside world increasing the accessibility of hackers to the systems (Elky 2006). Many Asian companies have suffered these threats, making it a national disaster.
Question two:
Many organizations managers adopt the new technology due to the global advancement in technology. Since current global business transactions are been carried out via the internet, organizations have no other alternative than to adopt the new technology. In addition, the changes in technology have forced the managers to adopt them in the management systems. The IT management systems help the manager to keep an effective track of the organization ranging from employee management to organization process management. The advancement in IT has further subjected managers to diverse cultural settings. This is associated with the fact that, the rapid changes in levels of technology have induced perfect competition among organizations in a global setting (Cesyniene 2008: 2). In addition to this, changes in technology have led to managers starting to think globally, undertaking various decentralization measures for their organizations, adopting the accompanied change with the technology level, and carrying out an effective competition plan for their products. Need for improved performance and competition among the various organizations has led to adoption of changes in technology.
Global economic crisis has created a volatile environment in the business sector through slowing down outsourcing processes. Most companies have ended up lowering their expenses in the IT sector, and reducing or exit the marketing operations from external bodies due to the decreasing resources. On the other hand, the global uncertainties force forces most organizations into looking for skilled labor locally to avoid the hustle of dealing with outside contractors. The most contributing factor to the increasing global economic crisis is the lack of long-term business visibility by some organizations, which prevents them from undertaking long and more strategic outsourcing initiatives. All these problems are caused by lack of understanding of globalization and changes in technology (Forester Research Report 2008).
Outsourcing goes hand in hand with the changing technology because organizations that adopt the issue of outsourcing have to make use of IT. Nike Inc, an international company has faced the effect of global economic crises as it longs to achieve successful growth in the footwear industry. According to Sioridze (2011), Nike Inc makes use of three cooperative strategies in achieving its successful growth. These are internal development, mergers and acquisition, and cooperation.
Nike is one of the most competitive companies in the world with business outlets all over the world. The company’s management team has been on the fore front to maintain its leadership position through responding to customers and competitors demands effectively. One of the Nike competitors Reebok has tried as hard as sponsoring a number of sporting events, but all these have not made it win the sport wear industry. With the rising cases of global economic crisis, Nike Inc has found it hard to outsource its services to other companies like Adidas and Reebok. When Nike introduces a new technology, its competitors always make an imitation and sell it into the market at a lower price. This has made the management at Nike device a new strategy of using external manufacturers to produce some of their products bearing the Nike logo.
Economic crisis have contributed into lack of new investors into the foot wear industry. In order to achieve the set goals and objectives companies should compete under all circumstances through offering reasonable prices, conducting efficient production processes, and making high quality products. The high economic turn over experienced in most countries worldwide has lead into lesser customers aiming for highly priced products, but purchasing products with low prices to serve them just for a while. Nike has two options when it comes to performing its business transactions. The first option is to own and operating the factories, while the second option is looking for ways to outsource its operations. When the company outsources its operations within US, there is an advantage of easy monitoring the contracted firms, and acquiring skilled labor. On the other hand, the company can outsource in the developing countries which poses a high threat due to high cost of production. Nike uses subcontractors globally in its outsourcing strategy. Global economic crises experienced in some countries, especially those experiencing wars have slowed down Nike operations by lowering its productivity. For example, Nike subcontractors in Iraq always record low production due to the unstable nature of the country resulting from frequent war crisis experienced there (Kleindorfe 2006).
Nike initially experienced production slowdown while operating in the United States, but later on expanded into other areas and there is no evidence of the future outcomes. There has been a tremendous decrease in United States global sales due to high rate of falling prices and reduction of the labor market. This has made Nike to sort other alternatives of outsourcing its services in other countries around the world. In China, the company experienced a low returns due to the decreasing growth of the manufacturing sector in the country. The retail sales and fixed asset investments have continued losing their value due to poor growth. Eventually, Nike recorded a slow growth in China that affected other factories located in various regions (Locke n.d).
Question 3:
With reference to the Euro Zone, explain how the contemporary financial crisis might affect the future development of global outsourcing.
European member states use Euro as their common currency thus forming an economic and monetary union called Euro zone. The currency is made up of these countries; Australia, Finland, France, Greece, Ireland, Italy, Estonia, and many others. Currently the European policy makers are worried of the financial crisis hitting Italy and Spain. Most industries like outsorcing in different locations where they can maximize their incomes and at the same time operate at a lower cost. Outsourcing among Euro zone countries has seen many organizations, especially those from United States experience a lot of financial crisis due to unstable nature of Euro currency. There was a hit on the US economy as members of Euro Zone suffered financial crisis affecting companies that had entered into contract with these members. On the other hand, those companies that had settled in US experienced increased growth rate since the US economy developed following many investors who settled in the region (Cable & Debthan, 2012).
Following the Euro Zone incidence, the financial crisis affecting various countries in the European committees are likely to experience a lot of problems when it comes to outsourcing their services. Most corporations experience declining market value because of financial crisis, which leads to lack of operating capital. Outsourcing enables an organization contract another organization in some of the operations. When a country experiences financial crisis the cost of operation becomes high and eventually, companies find it hard to outsource. Those companies that provide outsourcing services consume a lot of capital since in order to carefully manage their expenses. On the other hand, the presence of tight economies and a need for an organization to reduce the cost of operations forces them to increase use the outsourcing option. Since many companies are unable to predict the future of their business operations they enter into short outsourcing contracts, but expect high returns from the contractors (Manmohan 2010).
The Business Process Outsourcing industry experiences a lot of difficulties in times of financial crisis as members look for alternatives in the global market. The most affected sector during these periods is the pricing of services. Most companies opt to close down some of their operations rather than outsource then to external bodies since by doing so, they incur almost double the cost of production. A research to analyze the effect of financial crisis on the business process outsourcing indicated that most countries, especially from Europe prefer outsourcing their businesses in USA and other developed areas. In Europe, there has been a continuous decrease in the Euro currency in the international market making countries charge more tax in order to generate the needed revenues. Financial crisis has a direct effect on the business outsourcing due to high demand for the companies to sustain their profit margins (Global Research Institute 2009).
According to the increasing completion in all business organizations most companies will opt for outsourcing in order to increase their competitive advantage. In doing so managers need a good understanding of different countries they wish to settle. In the current business environment, managers are keenly observing the effects of Environmental factors on investment sector. Global business matters have assists in identification of the sub-prime financial crisis and that; issues on governance have affected risk management in different business sectors. A successful investment is correlated to one’s ability of understanding and evaluating the factors influencing market valuation in a given company. Analysts have the capability to discern financial metrics of factors that contribute to corporate value and offer reliable interpretation of the complex accounting data. Presence of economic uncertainties results into poor market valuations, which has made many business leaders make an option of merging their organizations (Manmohan 2010).
On the other hand, the increasing rate of technology has allowed many companies adopt the advanced methods of operating their businesses. Companies target outsourcing firms who have access to more technology because they usually charge less, but offer quality services. Many large organizations are suffering from financial crisis experienced in some countries resulting into their closure. In future, the issue of financial crisis should be addressed keenly since it has the capability of affecting most companies globally.
Reference list
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