In most businesses, outsourcing is highly regarded as every organization’s ultimate goal is to achieve greater revenues. Outsourcing refers to using of contracts when a business organization is entering into a deal with another organization. Business people have decided to go regional or international depending on how viable the outsourcing could be promising. However, over the years, businesses are being discouraged to outsource to other countries since there are more risks associated with it as compared to outsourcing within the country (Gitman, L., & McDaniel, C., 2009). It involves the entails the existence of the third parties. For some reasons, outsourcing is seen to help most businesses as there is a combination of efforts and resources that are hard to achieve on an individual basis. Little cost is incurred by each business due to the element of cost sharing among the members. There is diversification of ideas that in the businesses that in return help them come out more strongly in terms of the services or goods offered to the public.
Outsourcing can act as a control measure because; the businesses in the contract must provide a check to avoid underutilization or over utilization of the resources. However, before businesses opt to outsource, there are several processes that must be followed to the letter to avoid conflict at a later date with the partners. Some contracts must be signed and preserved in a way that they can be available and produced in a court of law, in the case of any conflict. Therefore, the practitioners are advised to involve expert knowledge to give an advice on the benefits and the risks associated with outsourcing to/ the already existing businesses. The practitioners must be in a position to make sound decisions regarding the move to avoid affecting the public image or incurring huge losses that could have been avoided if there were no contractual agreements.
Recently, contract out has led to increased competition among businesses in the market. Many businesses have opted to subcontract to hedge competition against their competitors. It also helps the practitioners get the products or services to the consumers faster. They are able to work more efficiently and effectively in terms of processes and management. As a result, the consumers are able to achieve utility thereby; the businesses earning the customer loyalty that contributes to the increased profits. The practitioners are in a better position to act as liaison between the products or services and the producers. There is also transfer of skills to better productive areas as the combined efforts help the managers match the employee skills with the duty assigned hence; the increase in the productivity level.
Despite the businesses enjoying the above results, there are some risks associated with subcontracting to another country. The process can be faced with language barriers thus; added costs for training of the employees to learn a new language. Different business cultures may also limit the performance of the businesses, therefore, can act a discouragement to the practitioners due to the high possibility of the businesses being rejected in another country (Gitman, L., & McDaniel, C., 2009). The currencies used in the countries are different thus end up stretching the pockets of the practitioners since the currency in the country they ventured the businesses into might be higher than the currency in their own country. The wages availed to the employees might be different depending on the labor laws stipulated in the country. It affects the practitioners in a way that different countries many be having a higher wage bill as compared to the rest thereby; reducing the economic gains in the country.
The practitioners in the field need to know how well the compatibility is among the contractors. They must enter into contractual agreements in other countries only if there is compatibility in the business cultures. It is advisable to the practitioners to strategically position the businesses for easy access. The practitioners must ensure that their businesses have a good reputation in the home country before moving to another country. Communication is commonly known to be the reason behind the success of every business. Without communication, there can emerge hick-ups in the general management of the firms thus making it difficult in sharing of the ideas and resources. Corruption also comes in hand with failure of proper communication. The quality of goods or services is also affected.
Outsourcing to other countries can pose a great danger to the country. The members offer employment to citizens of the country they set up a business rather than offering it to the local people. It has a negative impact to the local citizens as they are rendered unemployed in their home country, and as a result they result into social crimes that pose a great danger to the businesses (Bragg, S., 2006). In the case of any conflict in the subcontracted country, there is destruction of property that leaves the members of the business suffering many losses that most of the times are irrecoverable. Outsourcing to other countries leads to unequal distribution of wealth as compared to the local outsourcing.
Many of the subcontractors to other countries might be outcasts in their own country because; they happen to be developers in the unfamiliar country rather than developing their own. They seem non-patriotic hence; face a lot of rejection from their fellow citizens. It can affect them psychologically leading to stress due to the pressure. The labor costs in the foreign countries are assumed to be higher than those available locally. The probability of the businesses collapsing in the foreign countries is high as opposed to those in the local country. It becomes difficult to predict the economic trends in the foreign country rendering the subcontractors ineffective and inefficient in their work (Greenhalgh, L., & Lowry, 2011). Local contract out enhances good ties among the members thus the peaceful existence in the country, therefore, working to the well-being of every citizen. It ensures cohesiveness among the people, as opposed to the cohesiveness achieved when the foreign country.
The government must take up an initiative to discourage outsourcing to other countries as this increases the country’s poverty levels due to the lack of employment. The citizens try to commit crimes as a way of making their ends meet. Education should be availed to the potential businesses that can opt to outsource to the other countries of the risks associated with it since; most of them venture into the activity without a clear picture of the adverse effects it can have on them (Power, M.,Desouza, K., & Bonifazi, C., 2006). Subcontracting in to other countries requires a lot of legal processes that must be followed to the letter. The cash used to formalize the business in a foreign country may be used by the members in more productive activities, in the local country. The processes involved in outsourcing, in the local country are not as complex as those in the foreign country thus help a lot in avoiding extra expenses to the members of the business.
References:
Gitman, L. J., & McDaniel, C. D. (2009). The future of business: The essentials. Mason, OH:
South-Western Cenage in Learning.
Bragg, S. M. (2006). Outsourcing: A Guide to Selecting the Correct Business Unit.
Negotiating the Contract Maintaining Control of the Process. Hoboken: John Wiley & Sons.
Greenhalgh, L., & Lowry, J. (2011). Minority Business Success: Refocusing on The American
Dream. Palo Alto: Stanford University Press.
Power, M. J., Desouza, K. C., & Bonifazi, C. (2006). The outsourcing handbook: How to
Implement a successful outsourcing process. London: Kogan Page.
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