Question

Corporate Strategies on Outsourcing Research What are the implications for companies seeking lower cost employees but they want the same results? What kinds of challenges can arise and how should the cost vs. efficacy balance out in the medical research companies? Is paying higher costs within USA the answer? How can medical costs be reigned in if we cannot reduce costs by shipping work overseas? Review these and other questions that arise about outsourcing work. No answer is easy and companies must balance their costs along with results expected, including managing customer expectations. Find additional cases that talk about these issues and explain.

Answer 1

Implications for Companies seeking lower cost employees with same results are that:

1) quality of work could be compromised in outsourcing but it could be improved by technical development and training.

2) there is a trade off between bearing training and technical development costs for workers of the country to which the work is outsourced and bearing higher costs within the host country instead.

Outsourcing work has its costs and benefits.

Benefits for the host country would be:

1) lower costs

2) focus on core areas and improve efficiency in those.

3) tap a great pool of well educated workers at lower costs.

4) helps in economies of scale by focusing on core areas and outsourcing non-core areas. this in-turn helps in reducing costs

5) allows companies to use resources not internally accessible, by expansion into new geographies.

For medical research companies in the USA, outsourcing some parts of R&D to Asia and other developing countries could help them in saving time and money by outsourcing non-core areas and focusing on core areas. This could help them tap great pool of well educated scientists and researchers from Asia at lower costs. Also, outsourcing could help companies take advantage of economies of scale by expanding to new geographical areas. Also, USA companies could develop and test compounds faster by working with Indian partners.

Paying higher costs within USA might not be the optimal answer because by outsourcing non-core areas of the business companies can obtain such services at lower costs from their outsourcing partners and by focusing on core areas they can improve efficiency. A firm's outsourcing decision is also based on, the level of firm's vertical integration.