Question

What are the benefits of outsourcing as short-range strategic solution for market expansion including an economic benefit

Answer 1

Q. What are the benefits of outsourcing as short-range strategic solution for market expansion including an economic benefit

Outsourcing is a process of sub-letting part or whole of a production process or services delivery through contracts to other agencies. It is usually seen as an effective tool in the services sector and also production areas. Outsourcing by organisations is mainly done in absence of adequate or efficient systems in place for a particular operation or when the out sourcing is more cost effective then in-house production or services delivery. Outsourcing is also often referred to as offshoring or works that are out sourced to foreign destinations. However outsourcing is seen mostly as a short range strategic solution. Strategic alliances and partnerships to pursue certain goals but as independent organisations is the current most common form of outsourcing relations. Strategic partnerships concentrate on long term partnership goals but based on short range strategic needs and also increased innovation and association of the detailed business process that is segregated to suit the capabilities of the organizations. Strategic outsourcing and vested outsourcing tries to create conditions in the business where both the partners involved in outsourcing and in sourcing are given a positive payoff from the transaction.

The benefits of outsourcing are as follows;

• Reduction in costs from the specialization of labor and capital along with international exchange of comparative benefits
• Greater emphasis on particular business process rather than on all whereby the specialization again increases the scope of more distribution of work
• Outsourcing opens up opportunities of involving quality and capabilities from around the world
• Greater specialization in business would mean proper utilization of scarce resources and also proper distribution of labor and capital accordingly in sectors that require more(or less) resources due to outsourcing (or in sourcing)
• Greater specialization and distribution of works would tend to increase efficiency in economic terms also in terms of production technologies and innovation.

Finally from the above discussion it is understandable that outsourcing for the delegating country would mean scope of expanding the production based on the capabilities of the outsourcing partner with advantage to produce the certain output. And for the country receiving out sourcing contracts would obviously means an increase in business and also market for its product or capability. And in case the relationship is across national borders than the process of out and in sourcing would expand the market beyond national boundaries and to a great extent.