International business and the trend of outsourcing
Outsourcing is the new trend in the global market also can be called as job work. A new word in the market creating a drastic change in working style or management of the companies is Outsourcing. It means that a company gives a contract to another company to work for them to provide services. There are different types of outsourcing such as Technology Service outsourcing, Business Process Outsourcing, Offshore Research and Development and Knowledge Process Outsourcing.
Offshore outsourcing also lead to globalisation as in outsourcing a company uses different resources of countries leading to innovation and sharing of technology, workforce and information leading it to make the economy of the country strong. As stated by Czinkota (2005),” the increase in the frequency and duration of linkages between countries leading to similarities in activities of individuals, practices of companies, and policies of governments”.
It also helps in maintaining the relationships between the nations and also leads to the generation of the employment making the workers more productive and increasing the standard of living.
There is a negative side of offshore outsourcing as too much sharing of technology between the countries makes it obsolete in nature. Competition between the rivals can create the cultural differences between the countries. The economy of the domestic country becomes weak as their will be less development compared to the other country from where the companies get their work outsourced.
Offshore outsourcing has led to a new era in the working style of western companies. Western companies like IBM is a U.S. based company. Globalisation also has affected the working style of IT sectors. According to the hyper globalists, we live in the world without any boundaries where there are no restrictions on the political or cultural rules, free flow of services, research and development of the nations.
IBM has a good experience in outsourcing services. As listed in the BPO rankings of 2008-09 in India, IBM-“DAKSH” comes on 3rd position among the top 15 BPO companies exporter. IBM does outsourcing because they do not want to carry out IT or application related services on their own. Many call centres are operating in India because of many advantages such as low labour cost. IBM is a big organisation having many different activities to carry out. Outsourcing helps the organisation to concentrate on their core activities using all the efficient resources available. It also generates employment which in return makes the economy of the country strong by increasing the per capital- income. By outsourcing their activities the risk involvement also decreases or shared by the other companies.
On the other hand, there are some disadvantages also as communication is one of the greatest problems ever faced. English is an international language but not the national language. Understanding and the fluency in common language is important. This problem always arises at inbound and outbound services as the language differs. Because of the offshore it may lead to an improper control over the activities. Their outsourcing is done in different nations and core activities are carried out in different nations, due to the reason there is some lacking in the control. By outsourcing activities to different nations their can also be a threat to security and there can be a lack in confidentiality as information can be shared or leaked from the organisation.
Emerging market companies
As explained in the report of Delphi study, many of the companies are moving their operations to the low labour costs but highly skilled labour countries. Due to globalisation, the market is becoming more complex and competitive. To survive in the market a company has to manage between its buyers and suppliers. By studying different examples of the manufacturing companies are setting up their units in emerging market. As listed by Vardy,(2007) Reliance, Ranbaxy, Hyundai Motor, Infosys, Lenovo, Samsung are some examples of emerging market companies. Many brands like Levi’s, GAP, Nike etc. has their manufacturing units in emerging markets like India and china. These companies mainly deal in clothing industry. As explained by David Mayle,(2006) High Tech Computer Corporation (HTC) is a Taiwan based company deals in electronics media. It manufactures mainly laptops and mobiles. HTC does offshore research and development as it has a merger with Microsoft (U.S.) for their hardware development. Benefits from these countries mainly access to highly skilled labour, professional expertise, diversification in different countries, saving capital expenditure, generating employment and increment in revenue.
Environmental and cultural benefits can also be consumed by the companies. Companies also look for the Foreign Direct Investment (FDI) in the emerging market which leads to growth in infrastructure, making the economy strong and making a relationship across boundaries.
Drawback can be cultural differences are still there. Language is the main problem because in Taiwan they speak Taiwanese (a form of Chinese) and in U.S. their language is English. They have different form of organisational pattern according to which they work. As explained by Dicken (2011), sceptics mean that there are certain limitations to cross the boundaries of other nations. There are boundaries that nations do take care of. Every country has its own protocols or rules and regulations that are followed by them. Home country becomes weak as they lack behind the opportunities. Information sharing in the long run becomes a negative aspect as it can be replicated.
Workforce of the western countries
The workforce of the western companies has benefited a lot as the world has become a global village. As presented by Englund et.al.(2010), the modern outlook of the workforce has changed as the countries are becoming globally connected by various means one of them is offshore outsourcing. The framework of the workforce has changed as now women are also adding up in the labour force of the western countries. Ideas that are limited to a geographical workforce have now been generated as the women are creating an influential position in the western countries.
As understood by the graph above women workforce is now dominating or increasing compared to male employment.
As argued by Gereffi (2005), globalisation has set a new trend in the outsourcing of jobs in U.S.. From 1960’s to 2000’s there has been a radical transform in the jobs like from basic factory jobs (shoes, clothes, electronics etc.) to advanced business services (software, designs, brands ).
Western workforce has always been very sincere because they show dedication towards their work. Their working style is very different and the timing of their office hours creating a low cost of production. American style management is world renowned. Their management skills are much diversified and expertise. Western workforce is culturally very vibrant and flexible as they include labour from all over the world such as India, china, Japan, Tokyo, Africa.
But at times there are some clashes between the workforce due to different thinking and attitude towards the work. Discriminations are also done between the white and black and men and women. As explained by Murphy (2011), the labour force of western countries like U.S. is decreasing drastically because of lack of job security. They are very self centred and always carry a feeling of individuality.
Workforce of emerging market countries
The Social Investment Forum (2011), SIRAN highlighted different emerging market countries such as Brazil, China, India, Indonesia, Israel, South Korea, Malaysia, Mexico, and South Africa. Workforce plays a very important role in the development of the emerging market countries.
As explained by Whitfield M. And Vanhorssen N. (2008), India is the first stop for outsourcing IT related services such as computer programming and internet related services as India produces the finest engineers every year. They have a wider knowledge and follow an English based system. Their command over English is very good. The emerging market countries have a great pool of available talent. This helps in companies to utilise it efficiently which leads to the growth of the economy. Secondly, due to large customer base the companies utilises the work force in different domains hence leading to the innovations in different segments of the market. The young and vibrant workforce in these countries provides a great zeal of enthusiasm and productivity which simultaneously makes it profitable. The different management style in emerging countries helps to create a niche in product management relating to offshore outsourcing.
There are some disadvantages relating to the workforce of emerging countries related to outsourcing such as there is a big cultural difference and hence MNC’s has to adjust to the cultural difference in a big way. Communication issues also come into picture as they have different regional languages. In china this is the major issue. Difference in wages and time zone also creates a barrier when working with workforces in the emerging countries. Accountability and corruption also creates a big gap in the management of workforce in the emerging countries.
In the end it can be said that because of off shoring and outsourcing the world has become a global village. It has helped the countries to utilise it potential in making a mark for itself. It has helped to create different ideas with respect to cost efficiency. Other offshore and emerging market transform, the input continued existences are learning how to meet the face and find ways to exploit on the developing business landscape. As discussed above there are different parameters involved in this. Also with it comes a set of disadvantages as well but nevertheless it has helped the whole world come on the same platform which was not there before.
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