Running head: WEEK THREE ASSIGNMENT

Week Three Assignment

Antdrone R. Randolph
BUS 644 Operations Management
Ashford University
Instructor Arthur Baldonado
Monday October13, 2014

WEEK THREE ASSIGNMENT

Outsourcing is defined as the strategic use of outside resources to perform activities

traditionally handled by internal staff and resources. Outsourcing is an organizational strategy by
which the organization contracts out major functions to specialized and cost efficient service
providers, who become valued business partners. Some companies even transfer some of their
own employees to these outsourcing company (Vonderembse & White, 2013). In todays global
economy, outsourcing is the single most significant way in which companies are able to cut cost
with a focus on increasing the bottom line, or profit margin of the company. This report will give
a thorough examination of outsourcing and the reasons behind it. First this report will analyze the
trade-offs between inputs for productivity improvements, and the pros and cons of global
sourcing versus producing in the U.S. Next, this report will give an example of one of these
outsourced products or services. Finally, a low-labor-cost country will be recommended based on
inputs, trade-offs, and going global advantages.
Even though outsourcing is increasingly becoming the fashion in which many global
corporations do business, there are a few trade-offs, or sacrifices these corporations must make in
order to improve productivity. One of the main trade-offs are the jobs of the domestic employees
that are terminated which serves as a sacrifice for sending their jobs to other countries with low
labor cost. Another organizational trade-off for outsourcing is the loss of employee integrity, and
consistency in regard to the organizations strategic goals, and mission. Most of the outsourced
jobs go to employees in other countries that are rarely aware of the reasoning behind producing
the good or service. This sacrifice could really be seen as one of the disadvantages to
outsourcing.
Just like any other decision that is made in regards to an organization, outsourcing has its
advantages and disadvantages. A couple of the main advantages to outsourcing are the

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abundance of costs, and time saved by engaging in this practice. Tasks are usually outsourced to
venders that specialize in their field. The equipment and technical expertise held by these
vendors are usually very job specific and are better than what is already possessed by the
organization. In this way, the tasks are being completed faster and with increased quality.
Organizations also save on operational and recruitment cost by outsourcing. Outsourcing eludes
the need to hire individuals in-house; hence recruitment and operational costs can be minimized
to a great extent (Corbett, 2011). Along with advantages to outsourcing, there are also
disadvantages to the practice.
Although outsourcing definitely helps companies to save costs, at times there are hidden
costs that are involved with work contracts that are signed beyond domestic borders. Another
disadvantage to outsourcing is the risk of exposing confidential information involved when
working with a third-party vendor. Also, as mentioned before, most outside vendors are lending
there expertise to multiple companies, meaning that there usually is a lack of complete focus on a
particular companys tasks, and goals. Lastly, an organizations public reputation and image
could potentially be damaged by outsourcing to countries that have very loose labor laws and
engage in unethical labor practices. These sweatshops are manufacturing facilities that lack
sufficient safety guidelines, and cleanliness. The employees are paid close to nothing per hour,
while working very long hours. Nike is one such company that has seen both the good and bad
sides of outsourcing.
Nike is the leading athletic shoe maker in the world. One of the core competencies of the
company is the use of a low cost manufacturing strategy that allows them to produce very
aggressive advertisement campaigns, complete with celebrity athletes, and global marketing
appeal. Back in 2005, Nike was the first company in the shoe and athletic apparel industry to

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disclose a list all of their manufacturing factories across the globe. Currently Nike utilizes
countries such as China, Vietnam, Thailand, and Indonesia as the manufacturers of close to all of
their products. According to Nike they are committed to supply chain transparency and continue
to update our publicly available list to encourage and support transparency and collaboration
around issues affecting our suppliers (Gordon, 2011). This commitment comes after many
accusations of misconduct, and unethical labor practices in the various production facilities used
to produce their shoes. Nike spend millions on rebuilding their tarnished public image after these
accusations.
When investing and outsourcing to other countries abroad, a few factors must come into
play when deciding on a particular country. A lot of costs are involved when investing in other
countries. A country must ensure that the country possesses a sufficient workforce that has a
good amount of education in order to produce the good or service. Some of the locals of this
country must be able to converse in the language of the organization, and the safety and security
of the working environment must be up to date. Local laws and regulations must be followed on
a consistent and reliable basis in order for the organization to avoid great amounts of corruption
(Woffinden, 2010). One of these such countries that possesses most of these qualities is
Madagascar. This country boast the cheapest labor prices at $0.18/per hour.

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References
Corbett, M. F. (2011). The outsourcing revolution [electronic resource]: why it makes sense and
how to do it right / Michael F. Corbett. Chicago, IL: Dearborn Trade Pub., c2010.
Gordon, N. (2011). Strategic violations: the outsourcing of human rights abuses. The Humanist,
(5). 10.
Vonderembse, M. & White, G. (2013). Operations management. San Diego, CA: Bridgepoint
Education, Inc.
Woffinden, M. (2010) Surfing the Next Wave of Outsourcing: The Ethics of Sending Domestic
Legal Work to Foreign Countries Under New York City Opinion 2006-3. Brigham
Young University Law Review, 2007483.