The emergence of the manufacturing industry brought about development within the aged process of outsourcing. Offshore outsourcing is a recent endeavor which emerged in the 1960s within diverse multinational companies (MNCs) and global subcontracting. The realization of globalization advantages brought about renewed evolution to the process of outsourcing within the past two decades. As the time unfolds, outsourcing is now taking the perspective of being a dimension of the globalization process. Commensurately, this process has now become a new strategy for multinational companies, a strategy inferred to as their global goal (Islam & Shepherd, 1997). To capitalize on the advantages of outsourcing, companies are required to focus on global strategies and abandon their traditional policies. Besides, they need to understand the cohesiveness of outsourcing and globalization. Ultimately, outsourcing leads to economic impacts within world trade structures and as such leaves decisive alterations on the progress of companies and their overall profitability. This paper evaluates the potential advantages of outsourcing within a hypothetical multinational corporation. Through careful analysis of culture and regional integration within prospect countries, this paper ends up recommending a country for consideration, while at the same time justifying its response.
By definition, the term outsourcing refers to the development of supply sources, which are located offshore from the main factory, plant, or office, and that have been tasked with the job of producing the final services or products. Therefore, in relation to this definition, outsourcing pertains to a constant input supply and/or the availability of products that are semi-finished and need further processing in order to come up with the final service or product. This definition categorically leads to an implication that value is typically added to outsourced provisions within the production or assembly process, underscoring the need for outsourcing in successful multinational companies. In the event that a supply source is located abroad, large corporations face the realities of offshore or international outsourcing. However, when property rights are placed into account, and when the ownership of the supply source is by the firm’s subsidiary, economists on occasion label this international in-sourcing (Andreff, 2017). Presently, virtually all large corporations that have a multinational hold are outsourcing almost all of their services and product development. Among these services, and ones that will be looked at in this paper include entire departments, such as Information Technology (IT), warehousing, customer relations, and shipping among others.
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This paper’s hypothetical corporation is a multinational parcel delivery company that has been in business for the past fifty years. This company offers package delivery to numerous destinations all over the world. As a leader in North America when it comes to the less-than-truckload industry and a worldwide leader in operations that entail supply chain management, this company continues to offer diverse services globally. Primarily, the company operates in North America with its headquarters based in Atlanta, Georgia. Its employee base stands at 408,000 and every day the company serves close to 1.5 million customers who have shipped products and 7.9 million consignees or receivers located in over 220 territories and countries globally. At a particular year, the company delivers close to 16.9 million pieces every single day, which amounts to packages that soar over 4.3 billion. These statistics indicate the company’s command and stature in the package delivery and supply chain business. Although this is the case, the company is suffering from its logistical and technological pride. Therefore, in a bid to augment its value to customers by providing solutions and tailor made improvements, this company is on a pathway to realize its potential through the process of outsourcing. Aside from offering services such as supply chain and package delivery, the company also offers financial products as part of its diversification process.
The advent of globalization brought with itself valuable, cross-cultural comprehension exceeding regional and global differences. The term itself refers to the interaction of economies among various regions and nationalities. As such, globalization offers an important avenue for multinational companies to expand their boundaries and thereby realize their goals and objectives. Particularly, concerning this multinational company, globalization plays a significant role. Since the corporation is a parcel delivery company, its role in international business supersedes its national strides and progress. Consequently, globalization plays a central role in enabling prompt success for this company. Over time, the advantages of globalization have been studied extensively. In retrospect, globalization opens up the borders of nations, increasing its awareness of the different cultures, races, and religions of people. Furthermore, it sensitizes companies of the need for manipulating such variations, leading to the maximization of business opportunities among corporations. Through this advantage, the aforementioned company is able to harness the power of other ethical, cultural, and ethnic paradigms to harness the potential to reach their business objectives and goals. Another advantage that works in favor of this company is the advantage of free movement. This is a significant improvement since people are able to travel freely; subsequently, offering more room for continuous and exponential expansion.
In order for companies to expand, they need appealing business environments that will not hurt their fiscal state in addition to providing them with room for steady profitability. As such, there is normally favoritism among different regions within the world. This paper looks at important countries that are conducive for outsourcing Information and Communication Technology (ICT) services, shipping services and warehousing. While numerous developed countries are calling for a decentralization of industry, other countries, especially the developing or emerging ones are taking up the task of fulfilling their industrial needs. As such, countries such as China, South Korea, Thailand, Vietnam and many others are emerging as top outsourcing destinations for companies looking to further their reach. For companies to consider their outsourcing partners adequately, they need to be quite objective regarding actualizing their and potential goals. Consequently, various factors are of essence. These factors include; economic systems, cultural ideologies, political systems, legal and regulatory environments, advancements in technology, e-Business capabilities, ethics and social responsibility among others. More pressing is the fact that each business portfolio has its own policies and agendas. Therefore, as per this company, the factors mentioned above are of absolute influence. Overall, the outsourcing nation is of paramount significance for the advancement of company agenda and the expansion of company portfolio
Considering the nature of this company, two countries come close to actualizing its business potential through the process of outsourcing. These countries are India and China. American and other companies in developed nations have longed outsourced industrial support from these two countries. India has long been a sustainable country, which boasts of impeccable work ethics, and the ability to get things done. Being the world’s twentieth largest economic system in terms of purchasing power parity, India boasts of having reliable industrial parks that are able to assure quality and overall timely delivery of products and other services. In spite of having a diverse and impactful culture, India poses a cultural ideology that exudes patience and overall politeness, which is indispensable particularly in transacting smooth business. As a country, India is perfectly able to provide outsourcing services such as technological applications, and warehousing. Moreover, in all outsourcing strategies, political consideration is important. The political, legal and regulatory environments are quite conducive for supporting business. Being a country that has experienced relative political peace for quite a number of centuries, India radiates an atmosphere conducive for the parcel and supply chain businesses. Technologically, the country is advanced, subsequently, supporting e-business capabilities. Overall, India is strategic and allows prime social and ethical responsibilities. On a downscale, the country’s poverty index presents issues to do with security and safety of employees. While this may not be urgent in micro-enterprises, in large multinational companies, the urgency is apparent as the occurrence of safety incidences leads to increased fiscal challenges.
China, on the other hand, is also a powerhouse of outsourcing and supports various strategic business actualizations. The socialist market economy of China remains to be the second largest in the world. As such, China continues to be strategic in enabling outsourcing provisions for various companies. Moreover, in terms of purchasing power parity, China leads as the world’s largest economy. While enjoying this economic status, China has seen an influx of foreign companies. For this reason, it remains to be a solid outsourcing country. While the country has quite a conservative and diverse cultural ideology, it also prides itself in having exemplary advances in technology. Just recently, China launched a quantum satellite in space, solidifying them as the first in the race to conquer space. This development alone shows the enormous strides China has made in technology. Another strength of China is its social and ethical responsibility, which reduces social ills such as corruption. While the country has a plus on its tech frontiers, its regulatory, legal and political systems remain questionable in business, which brings an atmosphere of doubt among business endeavors.
Outsourcing brings its own challenges of cultural integration. Culture, as defined by Professor Geer Hofstede, refers to the combined mind programming that distinguishes members of one particular category or group from another (Hofstede, 2011). Being the person who has conducted the most all-inclusive studies concerning how much workplaces are influenced by culture, Hofstede, defines six dimensions of national culture that constantly affect work ethics and ultimately, translates to the overall success of companies. The first cultural dimension is that of the Power Distance Index (PDI). This particular PDI dimension expresses the degree in which underprivileged societal members accept that power is distributed unequally. In the case of India, a high power distance leads to the acceptance of hierarchical orders, leading everybody to understand their place. This, in turn, fosters slow business environments, unlike China, which demands power equalization and thus seeks for power and justification, leading to sublime business environments, that is enabled by a rising economy and affluent class. Other cultural dimensions such as China’s collectivism stemming from a socialist political environment facilitates teamwork, leading to more productivity. In terms of masculinity versus femininity, both countries exude equal perceptions. The uncertainty avoidance index shows the ability of citizens to handle ambiguity and uncertainty. While this index remains low, the company mentioned above thrives. Here, China emerges as successful, especially in recent years. While long-term orientation versus short-term normative orientation may not cause direct influence on outsourcing probabilities, the indulgence versus restraint cultural dimension causes direct impact on outsourcing plans (Hofstede, 2011).
After making most considerations for the process of outsourcing various services and products in companies, the consideration of both regional and global integration is of the essence. In terms of global integration, China is well placed as an influential partner, which has its reach in varied business endeavors. On a global scale, China has contributed to worldwide Gross Domestic Product (GDP) by close to 20 percent as of 2015. This economic success clearly shows its global integration success as a nation. On the other hand, India’s integration is also pronounced although its domination on the global markets cannot outshine China.
Ultimately, for consideration of international business within the company mentioned above, China stands as a formidable force. Not only is the country an emerging superpower, but it is also a haven for business ability and flexibility. Moreover, its display of collectivism, indulgence compared to restraint, and its relatively low uncertainty avoidance index makes China conducive for outsourcing.
References
Andreff, W. (2017). Outsourcing In The New Strategy Of Multinational Companies: Foreign Investment, International Subcontracting And Production Relocation. Papeles De Europa , 18 , 5-34.
Hofstede, G. (2011). Dimensionalizing Cultures: The Hofstede Model in Context. Online Readings In Psychology And Culture , 2 (1). http://dx.doi.org/10.9707/2307-0919.1014
Islam, I., & Shepherd, W. (1997). Current issues in international business . Cheltenham: Edward Elgar.
