Discuss The Advantages And Disadvantages Of Outsourcing

Outsourcing, according to the dictionary definition, is ‘the contracting or subcontracting of noncore activities to free up cash, personnel, time, and facilities for activities in which a company holds competitive advantage. Companies having strengths in other areas may contract out […] aspects of their businesses to concentrate on what they do best and thus reduce average unit cost’. (Businessdictionary.com) In other words, it is just a strategy of transferring particular business functions or tasks to outside suppliers instead of completing them internally. In today’s business world, this practice is widely used by considerable number of companies, especially those operating on the global level – outsourcing enables firms to focus on their main long-term goals by relieving them from marginal activities that are being entrusted to external organization. Still, outsourcing is not purely riskless and there is always a certain degree of hazard that the company

(Stimpson P., Smith A., 2011, p. 135) What is more, firms might use low-cost workforce and with the help of the newest telecommunications move operation or data centers to low-cost areas. Outsourcing can also eliminate or significantly reduce operating and overhead costs like factories, buildings and its maintenance, taxes, insurance, security or utilities. Additionally, businesses outside the U.S. and some other European countries are often subject to smaller number of various regulations concerning labor conditions, use and disposal of materials, right-to-work laws and other areas of manufacturing that raise the cost of producing goods in more developed and regulated countries. (Smallbusiness.com) At the same time, in particular cases using an outside vendors may result in higher costs that the company expects, which might be considered as a