Introduction
Outsourcing is an emerging business concept that most companies are adopting to maximize their profit under minimal marginal cost. The approach is a delegation strategy where a company hires another enterprise to manage a part or whole of its departmental services. The hired company is required to deliver delegated services I tandem with the core objectives of the parent company. In a business context, most firms advance their global market penetration through outsourcing parts of their services as a tentative approach to learning about the viability of an anticipated business strategy. The driving force for a company to outsource is reduction in operation cost as well as diversification of risk.
Company background
Aptmax logistics Ltd is a Multinational corporation (MNC) that was incorporated in the year 2005 with its headquarters in the US. The corporation started as a warehouse to other logistics companies until 2009 when the management resolved to venture wholly into the transportation industry. Since its establishment, the company has penetrated regionally as well as global markets not limited to African, Arab and Asian continents. With a staff capacity of 1500 direct and indirect employees, the corporation can deliver perishable goods and non-perishable goods to its customers across the globe.
Following the economic global financial crisis in 2008, the management decided that it would contract a company to undertake its information technology functions as well as warehousing and shipping functions. The idea was booted during a benchmarking session when the finance officer expressed a worrying trend in rising operation expense especially monitoring and tracking the logistics transport network. As a result, outsourcing technology was an alternative concept to safeguard the corporation’s profit margin.
Aptmax logistics has heavily invested in its service delivery practice due to the increased forces of competition in the market. Through its product market mix plan, the management has been able to navigate the company through the fierce market for it to be ranked the 9th most trusted logistics company. The attributes emanate from the corporation’s improved technologic network chain that ensures outbound logistics reach the customers within the stipulated period. The management conducted a feasibility study in UAE and China in preparation to diverge its globalization strategy.
This analysis will assist the management on the best market to venture with an emphasis on the influence of business outsourcing strategy in its information technology (IT), shipping and warehouse departments.
Comparing and Contrasting UAE and China
The United Arab Emirates (UAE) is an economic force to reckon especially due to its accommodative investment policies as well as great emphasis on technological infrastructure as the driving force to economic prosperity. Its foreign investment policies are favorable in that any foreign enterprise that wishes to establish a branch in the country is eligible for registration without necessarily having to obtain a local investor as a guarantor (Young, 2011). Additionally, foreign investors are considered by government’s initiative to provide financial incentives to local and foreign investors as an approach to tap the benefits that accrue with globalization. The UAE government concern for globalization benefits was strengthened in 2002 when the International and Investment Trade office was established to look into the business interest for local and foreign investors. Technologically, UAE commissioned the Abu Dhabi technology development Committee that was mandated to lead the country towards technological innovative concepts with intent to ease operation costs of companies (Young, 2011). For instance, the committee is attributed to the launch of solar project as an alternative source of energy, investment in fiber optic that has encouraged e-commerce and integrated management system for companies.
Both UAE and China enjoy a favorable political climate that exerts minimal bureaucratic mode of governance. The political climate is devoid of bickering and violence and thus appropriate for local and foreign investments. UAE government has enacted friendly policies that create a common ground for local and foreign investors. Foreign investors must register their businesses with the ministry of trade and obtain a permit to operate in the market. The Chinese government has an extensive foreign business policy that allows foreign investors to franchise their business and blend with local Chinese brands. In an economic perspective, China’s economy is higher as compared to the United Arab Emirates, and this has been due to its large citizen population that provides for high labor supply at low costs (Doing Business in China, 2012). Moreover; technology has been the driving force for china’s economy through production of cost-effective and efficient goods and services.
Technologically, China has been advocating transfer of technology concept that involves sharing technological initiatives for the mutual benefit of companies. The concept is viewed as an incentive to globalization in that it would strengthen the competitiveness for new and small enterprise business and enhance their managerial approach (Doing Business in China, 2012). The China Internet Network Information center is the brainchild behind the growth of technology in the country. The rapid growth of mobile technology is a favorable an incentive to Aptmax logistics whose intention to outsource in China will augur well with the invention of the mobile system for tracking goods on transit. Further, the fact that China has readily available raw materials will ease Aptmax burden to establish a technological supply chain network in US and instead rely on a cost -effective outsource from China. Consequently, China could be crowned the hub for e-commerce as compared to the emerging Dubai’s economic power.
Analysis of the cultural dimension in UAE and China using Hofstede’s cultural model
Cultural diversity is noted as one of the greatest impediment to globalization culture. The challenge is evident among employees when personal beliefs of one community corrode with the practices of another society. According to Hofstede’s cultural dimension theory, interaction of the different culture is the basis of enhancing communication among members with varied belief and practices. The model facilitates a healthy business culture through accommodating cultural diversity during business negotiations and communications (Hofstede, 2001). The power distance index (PDI) is slightly higher in China than In UAE. Chinese mode of authority is driven by authoritative bureaucracy that creates little room for intervention. Despite their slow shift towards endorsing democracy, the achievements are far from reach. However, UAE power index still ranks above average and could be defined as high.
Moreover, China has a high index of long-term orientation score that is vividly portrayed by its long-term technological innovations in their quest to attain economic superiority. In UAE, long-term orientation index could be termed as moderate as proved by its quest to adopt other nations technological concepts to attain enabling economic environment. Both countries record a high masculinity index since men are more culturally empowered to take leadership roles in political, social and economical aspects.
China’s cultural index on Uncertainty Avoidance is higher than in United Arab Emirates (UAE). Its high regulation laws on foreign investment and transfer of technology concept portrays the society’s cautious approach to protecting its indigenous practices and resources. On the other hand, United Arab Emirates’ rules on foreign investment are less restrictive and thus have attracted an economic boom driven by modern technological concepts and foreign investors.
Therefore, Hofstede’s culture dimension theory is an influential concept in business culture since it facilitates effective communication, contractual negotiations and management practices. (Hofstede, 2001).
Evaluate the suitability of each of the countries for regional and global integration
The globalization aspect is every business strives to expand its market niche across the globe. The concept is an economic diversification of risks whereby a business enterprise may gain in one economic environment and lose in the other. As a result, chances will be minimal for business liquidation attributed from economic pressure. China’s investment in technology innovations, as well as its gradual shift from bureaucratic to democratic political environment, has challenged the dominance of United States economic superiority in the world. Further, it has diversified its investment projects in the African continent thus creating an opportunity for market diversification. The economic advantage is appropriate for Aptmax logistics to outsource its information technology shipping and warehousing department with intent to tap on the technology transfer initiative, availability of raw materials and low cost of production. In addition, the high population in china creates preference for labor-intensive capital that is affordable and cost-effective.
In United Arab Emirates, the business culture is favorable for Aptmax management to consider investment. Lenient investment policies and calm political environment are appropriate for business transactions. Moreover, the country’s record of the high number of tourists is an economic advantage to logistics business since many tourists would prefer to accompany their visits with some personal belongings. Advanced technology in UAE is a boost to logistics especially in the adoption of E-commerce. Additionally, technology innovations would boost the company in its quest for adopting E-logistics platform that enables coded monitoring and tracking of transit goods.
Recommend the suitable country for the international business strategy, with a justified response.
The most suitable country for Aptmax logistics Ltd to outsource its business activities is China, and this is because China has a low labor-intensive capital that accounts for low cost in service delivery. The high Long-term orientation score portrayed by Chinese community is a conviction to a continued innovative culture in the technology industry. Similarly, the globalization strategy for China to diversify its investments to developing continents such as Africa is an economic advantage for Aptmax Logistics Ltd since it creates a chain of diversifying its logistics services in Africa.
References
Young, E. (2011). Doing business in United Arab Emirates Country profile. Retrieved from Ernst and Young website: http://emergingmarkets.ey.com/wp-content/uploads/downloads/2012/05/Doing-Business-in-UAE-2011.pdf
Hofstede, G. H. (2001). Culture's consequences: Comparing values, behaviors, institutions and organizations across nations. Sage.
Doing Business in China:2012 Country Commercial Guide for U.S. Companies. (2012). US Commercial Service.
