Globalisation and advent of technology has put immense competitiveness on businesses. In order to extend their core competencies and become more competitive in their businesses, more and more companies are outsourcing some of their non-core functions (Chadee, 2009). Globally it is an emerging trend to diversify major business functionality to a low cost destination that allows cost savings to a significant amount. There are positive as well as negative aspects associated with outsourcing of business functions that are discussed in the study by taking example from Australian automotive industry (Haveckin, 2012).
Background of the Study
Australian automotive companies are primarily importing components and parts from China at low costs. Though there are several challenges in regards to quality of such products and components imported companies are devising strategies such that those challenges can easily be succumbed to. Companies are incurring high costs in reagrds to training and developing staffs and employees present offshore. Often their investments are rendered useless due to staff incapacity and labor related challenges. The most prominent challenge in outsourcing to a developing economy is cultural challenge.
The project scope offered analyses factors that lead to outsourcing along with its several advantages and disadvantages. Analysing the concept related to outsourcing might appear to be vague and inconsistent to present hence the study has adopted concept related to a specific industry within Australia, which is the automotive industry (Fisher, 2008). The project scope is theoretical in nature hence has limited application in practical aspects. Further, the project has adopted secondary data analysis hence it includes limitations as well as scope of such secondary data. Primary data has been excluded in totality from the project. Quantitative technique analysis has also been excluded from the scope of discussion of the current project. However, the project scope can be extended to provide more relevant insights into the topic (Holcomb, 2007).
Business scopes of outsourcing are immense and have tremendous potential to provide parent company with profits (Penter, 2009). Various developed countries have adapted the process of business outsourcing that can render effectiveness of their core business processes and reduce overall costs. Reduction in costs of non-core business functionalities as HR, finance and so on can have tremendous impact on the profitability of businesses and allow it to be competitive. For the scope of the current study, a literature review has been incorporated, these literary sources have been effective in providing central theoretical and conceptual framework to the development of the study. A. Banerjee (2009) article, International Service Outsourcing: Using offshore analytics to identify determinants of value-added outsourcing. In the Strategic Outsourcing: An International Journal, pages 68 to 79 identifies the key values or benefits provided by outsouricng of business functions (Banerjee, 2009).
K. Broedner (2009) article, Productivity effects of outsourcing: new evidence on the strategic importance of vertical integration decisions. In the International Journal of Operations & Production Management, pages 127 to 150 provides useful insights into the topic (Broedner, 2009). This journal provides relevant insights into the prospects associated with outsourcing. Apart from large corporations outsourcing their business functions, small and medium scale enterprises can also undertake outsourcing for gaining technical expertise, as gaining knowledge and skills in IT or ERP often indulges a high amount of costs(Javalgi, 2009). With outsourcing of such business fucntionality they are able to save on costs as well as expertise. SMEs automotive companies in Australia often outsource manufacturing of small parts and then makes final assembling in their warehouse, which not only saves costs but also expertises. D. Brown (2007), The Black Books of Ooutsourcing: How To Manage The Changes, Challenges, and Opportunites. Published by John Wiley & Sons (Brown, 2007). Outsourcing however requires tremendous amounts of changes to be made in the parent company. As multiple Australian automotive plants have already shut down due to outsourcing. Federal government in Australia have opened market, hence automobile companies are rather importing parts and assembling them prior to marketing them. M. S. Lacity (2011), Business process outsourcing studies: a critical review and research directions. In the Journal of information technology, volume 26(4), pages 221 to 258 provides a crtical view on the topic (Lacity, 2011). This article provides a critical perspective in the research direction as the negative aspects have been analysed by very few. It becomes critical to analyse the losses to job and loss of employee morale from outsourcing of such jobs.
Another prominent article that provides relevant study in the field is G. D.-K. Beverakis (2009) article, Taking information systems business process outsourcing offshore: The conflict of competition and risk. In the Journal of Global Information Management, volume 17(1), page 32 provides key insights into the several risks involved in outsouricng of business functions (Beverakis, 2009). This article is critical as it effectively hihlights the possible risks not only the positive imapcts from outsourcing. AS outsourcing is often done to a ofshore country, it becomes critical to evaluate the effectiveness of such outsouricng activities against the plausible risks that they poses. While there are certainly benefits, some key risks associated with outsourcing is loss of brand value to the parent business. Closure of the offshore company, hence loss of investment. Low skilled employees and staffs who lack proper education as well as training to match up to parent company profile. C. P. Lin (2007) article, Issues and recommendations in evaluating and managing the benefits of public sector IS/IT outsourcing. In Information Technology & People, volume 20(2), pages 161 to 183 discusses the various issues and benefits in managing outsourcing (Lin, 2007). This article highlights the key issues and recommendations that corporations can include in order to overcoem relevant challenges in regards to outsourcing. C.Sheehan (2009) article, Outsourcing HRM activities in Australian organisations. In the Asia Pacific Journal of Human Resources, volume 47(2), pages 236 to 253 provides insights into the prospects of outsourcing HRM activities in Australia (Sheehan, 2009). A large number of Australian companies including automobile companies are outsourcing their HR functions offshore. Such offshoring of business fucntions in HR are allowing them to develop technical expertises and conduct appraisal, performance analysis in an easy method.
J. J. Wang (2012) doctoral dissertation, Examination of outsourcing of components and finished products from Australia to companies in China: inter-firm business problems, solutions and business success factors (Doctoral dissertation, Victoria University) (Wang, 2012). China, India, Philipines offer tremendous amount of labour force that can highly benefit any type of industry however, they challenge in these cases is the cultural challenge that needs to be overcome. For any business fucntion to be smoothly communicated and translated is requring tremendous capability from the business investments. Such investments are often burdening the parent company and leaving the entire endevour as cost inefefctive. Hence, stakleholders of the company prior to evaluating the positives associated with outsourcing needs to consider the potential downfallls that can arise and implement appropriate control measures. Certain companies have already icnroproated certain Key Perforamnce Measures (KPI) for evalutaing and allocating tasks to business processes. Businesses needs to look at outsourcing as their strategic alliance rather than treating them as costs effctive units only. Hence, approach towards such units needs to be similar to that of an extended business unti such that effectiveness in a susrtenable manner can easi;y be established. This can redner the entire business effective and efficnet in all form creating a sustenable future for the same.
Research Design and Methodology
One of the most essential aspects of any field of study is the Research methodology. In this part of the research, research methodology’s comprehensive sketch has been adopted by the scholar in order to complete the study successfully while meeting all the objectives and obtaining answers to the research issues recognized (Bradley, 2007). The study at first explains the diverse aspects of research methodology and then provides a clarification for selecting various methods to complete this study.
A research philosophy ascertains the overall structure of the study by describing the underpinning aspects. Ontology, epistemology, axiology and rhetoric research philosophy are the four research philosophies that can be used by the scholar. Here rhetoric research philosophy has been used (Gallagher, 2009). The Rhetoric research philosophy is used in studies with the main aim being the in-depth inspection of all the problems and exploration of all other related aspects for the elucidation of the results so as to form judgments.
The decision made by the researcher related to the adoption of the inductive approach is a part of research approach. In this approach, at first, the observations are pursued and then studied. It is because of this that the results are derived and theories are therefore formulated (Creswell J. W., 2017).
The research design is regarded as one of the most essential components of research methodology. It aids in determining the efficiency and functionality of the methodology and thereby establishes an operational research process. There are four types of research design which a scholar can choose from: explanatory, descriptive, predictive and exploratory (Creswell J. , 2013). A scholar adopted the exploratory research design wherein there was a shortage of information and hence it had to be researched from varied sources in order to form concrete solutions.
There are a number of tools that a researcher can adapt to gather information to support their research design. For this project, Quantitative secondary data has been utilized. Tools like observations, focus groups, questionnaires and interviews can be adopted (Cline, 2011). Out of these tools, a researcher can use any tool as per their requirement. However, for qualitative secondary data, data is collected from newspapers, magazines and periodicals.
Methods of Data Collection
Either primary or secondary means can be used to gather data. The qualitative secondary data includes the data that has been published already. This is the data that has been found put by some other researcher and can be utilized (Corbin, 2008). Sources like books, journals, magazines, newspapers, periodicals and the internet are great sources. These are rich sources of information and can assist people in perceiving as to how they are to view varied subject matters.
The only thing that limits this study is the sample’s size. The size that has been used is very small as compared to that of the population (Hirschheim, 2009). Therefore, the sample cannot be considered as an ideal representation of the entire population. As the study has been undertaken in Australian automotive sector, where company’s belong to different areas, it makes it complex to ensure the universal application of the findings.
Analysis of above methodologies and journal review provides a path for undertaking the study. Outsourcing can prove to be a major advantage for the industry especially automotive ones. While there are several advantages, corporations needs to strive to overcome the challenges that faces individuals. Corporations while outsourcing needs to evaluate the negatives first and then take actions to reduce such potential threats to the company and industry in totality. Negatives of outsourcing might create a low brand name for the Company and employees might end up losing trusts in the Company. Corporations needs to outsource those functions which are outside the purview of employee scope and practices, but not at cost of losing an employee’s job. The quality issue is another prominent factor that needs to be considered while outsourcing, while there might be positive factors to overcome the same. At various instances outsourced companies might treat the parent’s company’s work as secondary due to large amounts of projects that it processes. In such cases corporations needs to wait prior to getting service at the company. Hence, company cannot outsource key corporate functions that involves catering to customers. Though there are several pros and cons associated with the entire scope of outsourcing, companies seem to evaluate and understand the positive aspects only. It is primary goal for any corporation to overcome challenges for establishing their core competencies. Such endeavours made needs to ascertain the several challenges and then adopt appropriate actions for the same.
Banerjee, A. &. 2009. International Service Outsourcing: Using offshore analytics to identify determinants of value-added outsourcing. . Strategic Outsourcing: An International Journal, 68-79.
Beverakis, G. D.-K. 2009. Taking information systems business process outsourcing offshore: The conflict of competition and risk. Journal of Global Information Management, 17(1), 32.
Bradley, E. C. 2007. Qualitative data analysis for health services research: developing taxonomy, themes, and theory. Health services research, 42(4), 1758-1772.
Broedner, P. K. 2009. Productivity effects of outsourcing: new evidence on the strategic importance of vertical integration decisions. International Journal of Operations & Production Management, 127-150.
Brown, D. &. 2007. THE BLACK BOOKS OF OUTSOURCING: HOW TO MANAGE THE CHANGES, CHALLENGES, AND OPPORTUNITIES. John Wiley & Sons.
Chadee, D. &. 2009. International outsourcing of information technology services: review and future directions. . International Marketing Review, 411-438.
Cline, R. R. 2011. Data collection methods. . Introduction to the Pharmacy Business Administration Series.
Corbin, J. &. 2008. Basics of qualitative research: Techniques and procedures for developing grounded theory.
Creswell, J. 2013. Research design: Qualitative, quantitative, and mixed methods approaches. Sage publications.
Creswell, J. W. 2017. Qualitative inquiry and research design: Choosing among five approaches. Sage publications.
Fisher, J. H. 2008. Understanding the outsourcing learning curve: A longitudinal analysis of a large Australian company. Information Systems Frontiers, 165-178.
Gallagher, M. 2009. Data collection and analysis. Researching with children and young people: Research design, methods and analysis, 65-127.
Haveckin, B. 2012. Information technology outsourcing by large Australian organisations (Doctoral dissertation, Victoria University).
Hirschheim, R. a. 2009. Outsourcing in a global economy: Traditional information technology outsourcing, offshore outsourcing, and business process outsourcing. Information systems outsourcing, 3-21.
Holcomb, T. a. 2007. Toward a model of strategic outsourcing. Journal of operations management, 25(2), 464-481.
Javalgi, R. R. 2009. Outsourcing to emerging markets: Theoretical perspectives and policy implications. Journal of International Management, 156-168.
Lacity, M. S. 2011. Business process outsourcing studies: a critical review and research directions. . Journal of information technology, 26(4), 221-258.
Lin, C. P. 2007. Issues and recommendations in evaluating and managing the benefits of public sector IS/IT outsourcing. . Information Technology & People, 20(2), 161-183.
Penter, K. &. 2009. Offshore Business Process Outsourcing to India: Two Australian SME Case Studies. In Information Systems Outsourcing. Springer Berlin Heidelberg., 549-561.
Sheehan, C. 2009. Outsourcing HRM activities in Australian organisations. . Asia Pacific Journal of Human Resources, 47(2), 236-253.
Wang, J. J. (2012). Examination of outsourcing of components and finished products from Australia to companies in China: inter-firm business problems, solutions and business success factors (Doctoral dissertation, Victoria University).