Question

Advantages of outsourcing

Indicate whether each scenario in the following table is an example of outsourcing.

Scenario	Outsourcing	Not Outsourcing
A French pharmaceutical company closes its own accounts payable department and hires a Swiss accounting firm to take care of this aspect of its business.
The Skype office in the United States contracts an independently operated call center in India to handle telephone customer service.
Apple decides to internally manufacture displays for iPhone products rather than working with Japanese and South Korean companies.

Which of the following are advantages of outsourcing? Check all that apply.

Increases degree of control

Creates opportunity for new exports

Increases technical know-how for future innovation

Answer 1

Ans) Outsourcing is when one company hires other company or individual to do a/some part of their task(s). Advantage of outsourcing are÷

• Loss is divided.
• Work is divided and hence it becomes more efficient to focus on more important tasks.
• Investment is reduced as other firm bears building and other costs.
• Greater competitive advantage.
• Increased reach.
• Knowledge sharing.
• Stimulate entrepreneurship, export and employment from where outsourcing is done.

Cons÷

• Loss of control over outsourced task.
• Difficulty in management

1) It is outsourcing as instead of doing work by themselves, french company hires swiss company.

2) It is also outsourcing as customer handling is given to other firm in India by Skype.

3) It is not outsourcing as apple has decided to manufacture displays internally, rather than giving it to some other firm.

Ans 2) The advantage of outsourcing include, opportunity for new exports and increases technical know how for future innovation. Whereas it decreases (not increases) degree of control. [Explanation given in first para].