Offshoring (Essay Sample)

Offshoring
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Offshoring
Though not fully embraced, outsourcing and offshoring have proven very effective approaches for the various companies that wish to get global. This mainly happens through two major approaches; outsourced offshoring via vendors or partners or in-house offshoring. In the first case, all the processes of production, promotion, marketing, distribution and even sales is done by the partners in the regions. In this case, even the resources used are for the partner. In the second case, the offshoring company has to establish various global centers in all the areas of its operation.
The greatest advantage that comes with this approach is usually the reduction in the cost, which impacts its ability spread even further into more global markets. Mark you, with the reduced costs, the company would have the advantage of being able to invest in the other operational demands such as innovation and research (Ebiringa & Kule, 2014). For our case, out of the home country, the business will be organized in the form of offshoring in such a manner that it works in partnership with other already established organizations. In this context, all the processes of manufacturing and marketing will be done by the independent companies abroad.
To effectively have a grasp of the various locations, it is most appropriate to get into a partnership with people or organizations that are already established in such areas. This will involve the process of searching for the right partner. The partner should be such that they are well established in the market (Ikerionwu et al., 2014). As a business, there will have to be the period for doing in depth research on the right candidate to partner with.
Advantages of offshoring by use of independent companies
Cheap and readily available labor: Notably, in almost all the other countries apart from the United States, the cost of labor is relatively low. Through having purely independent subsidiaries, it will be possible for the company to harness the full potential of the local labor force. This will be much cheaper than having to get human resource to the locations from the home country, which comes with too much allowance implications in most cases.
Expansion with very limited overheads: through offshoring, it will be much effective in expanding teams without having to stretch the available facilities. As posited by Relph and Parker (2014), this will go a long way in ensuring that the company can have further expansion as there is minimum expenditure. One particular area that they note is the Research and Development sector which is a mandatory for venturing into any new market. Through this approach, the company shall have skipped this step as it will be dealing with a market that is already established and operational.
Good market competitiveness: maintenance of market competitiveness is much expensive in case the company is to have a centralized control and administration system as compared to having leveraging the already established companies in the offshore markets. Indeed, this is a number one step to making it in the global arena, whereby the company does not have to engage all its resources in the global business arena (Ebiringa & Kule, 2014). Besides, through using a partner that is already established in a market segment, the company will most likely have a very stable market share, thereby enabling its fast expansion rather than a case whereby it has to take time reaching out to the potential customers. This is especially done by having a prior research into the most potential partner before settling down.
Disadvantages
However, the move by the company to undertake its business operations in the foreign markets has a several challenges that the company may have to look into. Such risks must be checked into and the most appropriate measures taken to ensure they are properly mitigated. The very first risk is exposure of the company’s confidential data as a third party will be involved. The other challenge that often occurs in such partnerships is the inability of the company to beat deadlines as it does not have full control over the partner (Oldenski, 2014)). On the same context, the other challenge that occurs is the inability to practice quality control and ensure customer satisfaction.
Another challenge that usually comes with outsourcing is the hidden costs. Even though often recognized as the most efficient approach to carrying out business across borders, outsourcing is still very risky due to the possibility of hidden costs (Larsen, Manning & Pedersen, 2013). Such charges that were not contemplated usually come into play after the contract has already been signed and the business in operation (Schelhase, 2008).
At some point, the company may decide to have a central planning and control system, though it is not its choice in this case. However, a rough idea into the various constraints and advantages may be very helpful in carrying out a comparison with the approach settled on. This approach; though may be decided on by some companies, especially the large corporations and parastatal, it never works well for young and medium businesses (Oshri, Kotlarsky & Willcocks, 2009).
* Advantages
The very first advantage that may come with this approach to expanding into the global market is the ability of the company to have full control over the processes of production, marketing and the other managerial issues. This will go a long way in ensuring that the output is fully controlled, such that the product and the customer satisfaction ensured. This mainly stems from the synchronization that is done across all the branches located in various countries.
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