ExTech

27th November, 2012

ExT

Outsourcing to the Philippines Proposal

Student IDs: 620032029. 610000042. 600017465. 600022626. 600026857.

Table of Contents
Introduction Financial Benets Language Workforce Characteristics Organisational Structure Time Business Relationships & Etiquette Recommendation Bibliography Appendices 2 3 4 5 6 7 8 10 11 13

Introduction
ExTechs management board have researched the possibility of outsourcing ExTechs manufacturing of computer hardware. Recommending the Philippines as the potential outsourcing location, this report will outline the nancial benets of outsourcing to the Philippines. More importantly, the report summarises the cultural considerations that have been taken when choosing the Philippines as the ideal outsourcing location for ExTech.

Financial Benefits
Selecting the Philippines as an outsourcing location would be nancially advantageous for ExTech. Outsourcing to the Philippines could open new sales markets for ExTech which could contribute greatly to its growth. At the same time, outsourcing will signicantly reduce manufacturing costs by lowering overheads. Labour is considerably cheaper with the Filipino minimum wage at 6.19 per days work (Government Digital Service, 2012); whilst land is almost seven times cheaper in Manila (the capital) (SourcingLine, 2012) than London (BNP Paribas, 2012). Overall, outsourcing will lower ExTechs production costs, therefore resulting in higher prot margins.

Language
There is no language barrier between the UK and the Philippines when conducting cross border communication and business transactions because English is the accepted business language (Kwintessential, 2012).

Workforce Characteristics
The Filipino attitude toward education is that it is the main tool through which social and economic progression is achieved. The high level of literacy, being over 90% for both adult men and women (UNESCO, 2012), and a keen attitude toward furthering education provides a large selection of skilled labour for ExTech. Notably, Filipino women aspire to work in higher organisational positions, whereas a larger proportion of men work in manufacturing sectors (The World Bank Group, 2010). Importantly, the largest sector of Filipino manufacturing is of technological products (The World Bank Group, 2012) meaning there is an established skilled labour force to produce ExTechs computer hardware.

Organisational Structure
Due to the hierarchical organisational structure present in the Philippines, managers need to take into consideration the importance given to titles (Kwintessential, 2012). Downward communication is common practice (Kwintessential, 2012) and employees work within their position boundaries, rarely questioning management decisions. Thus, communication between the two countries will be made easier by the high power distance (Kwintessential, 2012) of the Philippines (Appendix A), with ExTech needing only to deal with a small number of Filipino managers. Filipino employees expect hard work to be recognised meaning UK managers should ensure praise is given. Moreover, conrmation of good work will encourage the Filipino team to drive focus on ExTechs long-term strategic aims.

Time
The Philippines and the UK have very similar business hours making it easy for UK managers to operate in either country. Punctuality is considered very important (Kwintessential, 2012) and setting deadlines well in advance will allow both the UK and Filipino employees to manage time expectations. The Philippines use a synchronous approach to time (Luthans & Doh, 2012), meaning they are able to undertake multiple activities at once which is benecial when producing a technological product. UK managers will need to set deadlines to allow for some leeway as the synchronous approach considers deadlines exible.

Business Relationships & Etiquette

Our UK outsourcing managers should not change unexpectedly since Filipinos thrive on interpersonal relationships and conduct business with people, not corporations. These managers should be trained to consider body language when communicating. We are dealing with a very high context culture, which is benecial in the long run since negotiations will run smoother (MSU, 2012). This provides opportunities for future expansion and growth for ExTech. However, this means that our management should include individuals willing to build personal relationships and adapt to another culture.

Business Relationships & Etiquette

The individualism index (Appendix B) is not as high in the Philippines as in the UK (MSU, 2012). Their attitude revolves around a collective culture that places importance on larger societal goals (MSU, 2012). This ideology is an asset for ExTech because it will provide us with employees that are loyal and will conform to management expectations.

Recommendation
The Philippines offers a lot of nancial benets, mainly lower labour and land costs ultimately lowering our cost of production signicantly. With no language barrier and an educated workforce, adapting to the culture would be relatively easy. As long as we are aware of the top down management structure and the high power distance and can adapt our management style to match, outsourcing should be a seamless process. If we adapt to the synchronous approach to time that Filipino managers take and adhere to their business etiquette, our endeavours to outsource our manufacturing should be successful.

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Bibliography
BNP Paribas.(2012).UK Total Ofce Occupancy Costs January 2012. Available:http://www.realestate.bnpparibas.co.uk/upload/docs/application/pdf/ 2012-01/jan_2012_occupancy_costs_map.pdf. Last accessed 14th October 2012.

Government Digital Service. (2012). National Minimum Wage Rates. Available: https://www.gov.uk/national-minimum-wage-rates. Last accessed 14th October 2012.

Kwintessential. (2012). Intercultural Management - Philippines. Available: http:// www.kwintessential.co.uk/intercultural/management/philippines.html. Last accessed 11th October 2012.

Kwintessential. (2012). Philippines-Language, Culture, Customs and Etiquette. Available: http://www.kwintessential.co.uk/resources/global-etiquette/philippinescountry-prole.html. Last accessed 11th October 2012.

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Bibliography
Luthans, F. & Doh, J. (2012) International Management : Culture, Strategy and Behavior,(8th ed.), Boston: McGraw-Hill

Michigan State University. (2012). Philippines: Culture. Available: http:// globaledge.msu.edu/Countries/Philippines. Last accessed 16th October 2012.

SourcingLine. (2012). Global Services & Outsourcing Locations: Philippines. Available: http://www.sourcingline.com/outsourcing-location/philippines. Last accessed 14th October 2012.

The World Bank Group. (2012). Philippines | Data. Available: http:// data.worldbank.org/country/philippines#cp_wdi. Last accessed 14th October 2012.

UNESCO Institute for Statistics. (2012). UIS statistics in brief. Available: http://stats.uis.unesco.org/unesco/TableViewer/document.aspx? ReportId=121&IF_Language=eng&BR_Country=6080&BR_Region=40515. Last accessed 14th October 2012.

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Appendices
Appendix A
Philippines

Power Distance

United Kingdom
0 10 20 30 40 50 60 70 80 90 100

(KWINTESSENTIAL, 2012)

Appendix B
Philippines

Individualism

United Kingdom
0 10 20 30 40 50 60 70 80 90 100

(KWINTESSENTIAL, 2012)

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(KWINTESSENTIAL, 2012)