Question

Critically discus this statement with facts: “ outsourcing is a double edged sword with positive and negative effects in developing and developed countries , respectively . (Please argue and support )

Answer 1

Outsourcing is assigning certain tasks to be carried out by the third party. For instance, the manufacturing of Levis Jeans is carried out by a third party, Arvind Mills and Levis focuses only on Branding and marketing of the products.

Outsourcing has its own positive and negative effects :

Positive effects

• Achieving economies of Scale : Third party can club the orders received from various parties and thus achieves economies of scale due to large scale production.
• Companies can focus on core competence : By outsourcing the non-value added activities, companies can focus on their core activities.
• Third party carry out the tasks properly : Third party which has got expertise in the tasks can carry out in a better way compared to the company with less expertise carrying out the tasks.
• Design collaboration : Design collaboration can be achieved when the third party is involved in carrying out certain tasks.

Negative Effects

• Increased Risk : There is a higher level of risk as the third party is involved.
• Loss of control : Manager will lose the control and cannot command the third party.
• Disclosing the secret confidential information : Certain secret, confidential information of design is leaked to the third party.
• Quality Problem : The third party might not carry out the tasks with highest level of quality standards as the company does.
• Additional Cost : Some hidden cost is also there which becomes apparent later after signing the contract.