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Outsourcing: Theory, Literature and Effects - Essay Example

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Outsourcing: Theory, literature, and effects Outsourcing “refers to the practice of a firm entrusting to an external entity the performance of an activity that was performed erstwhile in-house” (Varadarajan 2009, p. 1165). Varadarajan elaborated that “although off-shoring and offshore outsourcing to suppliers have dominated much of the recent discussion and debate on outsourcing in scholarly journals and the business press, the nature and scope of outsourcing that does not transcend national boundaries, and outsourcing to entities other than to suppliers is quite substantial.” In other words, outsourcing may or may not refer to offshoring or offshore outsourcing; further, inshore outs…
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Outsourcing: Theory, Literature and Effects

Varadarajan 2009, p. 1165-1166). Varadarajan pointed out that other phrases used by firms also imply outsourcing: “externalization of low value added value chain activities in firms, the hallowing of corporations, the transformation of firms into virtual enterprises, and terms such contracting and sub-contracting, also imply outsourcing” (p. 1166). Although one part of the Varadarajan material suggests that outsourcing is a transitional phase, one part recognizes that in some cases, outsourcing is “the only viable” route for the firm (p. 1166). ...
uppliers, (3) downstream vertical outsourcing to a firm’s intermediate and end use customers, (4) horizontal outsourcing to a firm’s direct competitors, peripheral competitors and potential competitors, and (5) horizontal outsourcing to a firm’s strategic alliance partners” (1166). Varadarajan’s main point is that outsourcing is basically tapping goods and/or services external to the firm and that outsourcing can come offshore but not from a subsidiary, from a good or services supplying third parties with which the firm currently do not have a relationship (but not from a head or higher ranking offices of a company), from consumer linking third parties, even from competitors, and from strategic partners (1166-1169). Varadarajan’s model appears sophisticated but the sophistication basically arises from a complicated restatement of essentially simple ideas. Nevertheless, his views on outsourcing is probably unique and a solid contribution to the literature. What is also emphasised in Varadarajan’s ideas on outsourcing is that saving on costs is not the only driver for outsourcing and this point is also one of Varadarajan’s key points on why there is a need to think “expansively” on outsourcing (2009, p. 1169). For instance, quality and not only cost is a major consideration for a firm to outsource a particular product or service (Varadarajan 2009, p. 1169). Perhaps, a key concept that can cover both costs and quality in the decision to outsource is the need to make one’s products or services competitive. In sum, Varadarajan essentially pointed out that decision to outsource can arise from the need to make one’s product or service become costs and quality competitive, access better one’s target customers, acquire access to knowledge and ... Read More
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This paper begins by defining outsourcing and then describing the different forms of outsourcing. Next it outlines why organizations opt to outsource and how they select what to or not to outsource. The paper then dwells on the advantages and disadvantages of outsourcing from two perspectives: from the point of view of a company and from the point of view of the country.
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