Outsourcing
Outsourcing
Outsourcing
Set of flashcards Details
| Flashcards | 16 |
|---|---|
| Language | English |
| Category | Micro-Economics |
| Level | University |
| Created / Updated | 15.05.2016 / 07.08.2019 |
| Weblink |
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Outsourcing
Definiton
- Engaging with another company to take over part of workflow
- Another country (offshoring)
- Entails a transfer of the ownership of an activity
Offshoring
Definiton
- Moving activities, processes, business functions overseas
- within the same company (captive offshoring)
Onshoring vs Offshoring
Nearsourcing
Offshoring to markets with close proximity to the home market
Onshoring
Bringing the activity back onto home-country soil
Insourcing
Bringing the activity back in-house (in the same company!)
Business Process Outsourcing
Outsourcing/offshoring of ‘processes’ such as procurement, HR, accounting (and more), together with the IT that supports it
Information Technology Outsourcing & Application Outsourcing
Management of communications activities, infrastructure and software development, maintenance and support
Production Outsourcing
- Companies can outsource whole or part of the production process to other firms
- Efficiency, cost reduction, being closer to new markets, reduce trade barriers
Motives for Outsourcing
Motives for Offshoring
Small Firms vs. Large companies
- Small firms
- Have a stronger preference for offshoring competence exploring activities
- Large firms
- Large firms prefer to relocate their competence exploiting activities
Risks of Outsourcing
- Loss of Know-How
- Opportunistic behavior of partner
- Transaction costs = higher total cost
- Transfer of core competences
Offshoring and Productivity
- Positive and significant effect of offshoring on productivity
- BUT: limited to the case of international outsourcing
- Offshoring towards developing countries has a positive effect on productivity
- Offshoring activity in developed countries has no significant effect on a firm’s productivity
Hidden cost of offshoring and Advantages
Hidden cost
- Managing increasingly globally dispersed operations
- Hard measurable costs of relocating business tasks abroad
Advantages
- Low labour costs
- Increased speed to market
- Access to qualified talents
Advantages of Outsourcing
- Efficiency
- cost reduction
- being closer to new markets
- reduce trade barriers
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