Domestic Employment vs Outsourcing
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Questions and Answers

Which scenario best exemplifies outsourcing, as opposed to other forms of business operation?

  • A tech company hires freelance programmers on a project basis.
  • A fashion brand establishes its own factory in a developing country to reduce labor costs.
  • A retail chain contracts a cleaning company to maintain its stores. (correct)
  • A car manufacturer sources its steel from a supplier in another country.

A multinational corporation (MNC) is considering outsourcing its human resources functions. What is a primary disadvantage the MNC should consider before making this decision?

  • Reduced operational costs due to economies of scale.
  • Potential loss of control over HR processes and data security. (correct)
  • Increased focus on core competencies of the business.
  • Access to specialized HR expertise and technology.

What is the primary difference between outsourcing and offshoring?

  • Outsourcing always involves moving business processes to a different country, while offshoring does not.
  • Outsourcing is a type of offshoring that specifically focuses on customer service activities.
  • There is no difference; the terms are interchangeable and refer to the same business practice.
  • Offshoring involves relocating business functions to a foreign country, while outsourcing contracts functions to an external provider, regardless of location. (correct)

An MNC based in the United States is deciding whether to outsource its customer support. Which factor would most strongly suggest that onshoring (outsourcing to a domestic company) is a better choice than offshoring?

<p>The importance of maintaining tight control over customer service quality and brand reputation. (A)</p> Signup and view all the answers

Starbucks' decision to outsource IT functions to Unisys in 2006 aimed to primarily achieve what strategic objective?

<p>Support and facilitate global expansion and operational efficiency. (A)</p> Signup and view all the answers

What key element defines domestic employment in the context of multinational corporations (MNCs)?

<p>Hiring individuals within the MNC's home country. (C)</p> Signup and view all the answers

In the context of outsourcing, what is the most likely reason a company would outsource its cleaning services?

<p>To focus on its core business activities and improve efficiency. (A)</p> Signup and view all the answers

A manufacturing company is considering outsourcing its logistics operations. Which of the following represents a potential risk associated with this decision?

<p>Potential disruptions to the supply chain due to the third-party provider's performance. (C)</p> Signup and view all the answers

A company decides to outsource its customer service operations. Which benefit is least likely to be realized directly?

<p>Greater control over the day-to-day operations of the customer service team. (A)</p> Signup and view all the answers

An organization is considering outsourcing its IT support. Which factor would be most important to consider when evaluating potential outsourcing providers?

<p>The provider's expertise and experience in IT support for similar organizations. (D)</p> Signup and view all the answers

Which scenario exemplifies how outsourcing can enhance a company's flexibility?

<p>A software company outsources its customer support to a provider that offers 24/7 service. (D)</p> Signup and view all the answers

A small business owner is hesitant to outsource accounting tasks due to concerns about data security. What is the most effective way to mitigate this risk?

<p>Implementing a robust security policy and ensuring the provider adheres to it. (A)</p> Signup and view all the answers

An organization outsources its payroll processing. Which of the following outcomes is least likely to be a direct result of this decision?

<p>Greater control over the payroll processing system and data. (B)</p> Signup and view all the answers

How can outsourcing global program management contribute to improved service delivery across multiple platforms?

<p>By leveraging the outsourcer's expertise to standardize security policies and operations. (C)</p> Signup and view all the answers

What is the primary reason companies outsource routine tasks like groundskeeping or cleaning?

<p>To free up internal resources and allow focus on core business functions. (A)</p> Signup and view all the answers

A company headquartered in the United States outsources software development to a company in India. How might time zone differences be leveraged as an advantage?

<p>By ensuring that work can be done around the clock, accelerating project timelines. (D)</p> Signup and view all the answers

Which activity exemplifies outsourcing rather than offshoring?

<p>A German automobile company contracting a Polish firm for call center services within Europe. (C)</p> Signup and view all the answers

What is a primary advantage of outsourcing for multinational corporations (MNCs)?

<p>Access to specialized skills or lower labor costs. (B)</p> Signup and view all the answers

How does offshoring potentially impact domestic employment in the company's home country?

<p>It may result in job displacement in certain sectors, particularly in manufacturing and customer support. (C)</p> Signup and view all the answers

What aspect of group work is highlighted as a valuable attribute in today's work environment?

<p>Leveraging each member's strengths to enhance overall team performance. (B)</p> Signup and view all the answers

A smartphone company outsources the design and assembly of its phones to a firm in another country, but retains control over the technical components. What does this scenario exemplify?

<p>Partial outsourcing (C)</p> Signup and view all the answers

Ford's decision to outsource its back-office operations to India is primarily driven by which consideration?

<p>High demand for vehicles and increasing production costs in the U.S. (B)</p> Signup and view all the answers

Samsung's decision to invest $500 million in its Austin semiconductor plant indicates a strategic move towards?

<p>Strengthening domestic production capabilities. (C)</p> Signup and view all the answers

What is a key characteristic of a 'back-office' job in the context of outsourcing?

<p>Supporting the company's main operations without direct client contact. (A)</p> Signup and view all the answers

A company in the UK outsources its customer service operations to a company in Malaysia. What benefit does the UK company gain by leveraging the time zone difference?

<p>Access to a workforce with potentially lower labor costs. (B)</p> Signup and view all the answers

What is a primary challenge associated with outsourcing that companies must proactively manage?

<p>Ensuring seamless communication and avoiding misunderstandings with the outsourced provider. (C)</p> Signup and view all the answers

Company X is considering outsourcing its payroll function to a third-party provider. What data security risk should Company X be most concerned about?

<p>The outsourced provider might not have adequate measures to protect sensitive employee data, leading to potential breaches. (D)</p> Signup and view all the answers

What fundamentally differentiates offshoring from outsourcing?

<p>Offshoring always involves a physical transfer of assets, while outsourcing does not. (B)</p> Signup and view all the answers

A US-based company outsources its IT support to a firm in India. Which of the following represents a potential cultural challenge they might encounter?

<p>Differences in communication styles and work habits that require accommodation and understanding. (C)</p> Signup and view all the answers

A major advantage of outsourcing is often cited as reduced operational costs. However, what indirect cost should companies most carefully consider when evaluating this potential benefit?

<p>The expenses associated with contract negotiation and legal oversight. (B)</p> Signup and view all the answers

How might longer opening hours, achieved through outsourcing, benefit customers?

<p>Extended availability of services to accommodate different schedules and time zones. (C)</p> Signup and view all the answers

Which of the following is the most significant difference between outsourcing and offshoring regarding business operations?

<p>Outsourcing involves contracting specific tasks to an external entity, while offshoring entails relocating entire business functions to another country. (C)</p> Signup and view all the answers

Flashcards

Domestic Employment

MNCs employing people in their home country.

Outsourcing

MNCs paying another company to handle specific business functions.

Outsourcing Examples

Non-core activities are often outsourced, where the company brings in outside firms to handle tasks such as cleaning.

Outsourcing as Strategy

A business strategy where certain functions are contracted out to third-party service providers.

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Starbucks Outsourcing

IT Functions, Data center services, Equipment procurement, Configuration and Maintenance

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Data Center Services

Services for maintaining computers, data and networks.

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Enterprise Security Management

The ongoing efforts for controlling configuration, deployment, and monitoring of resources.

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Help Desk

Service that helps users with technical problems.

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Business Continuity & Recovery Consulting

Services that help businesses plan and execute strategies to maintain operations during disruptions and recover effectively afterward.

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Global Program Management (Security)

Planning and execution of security measures across different platforms and security tools.

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Outsourcing: Improved Efficiency

Improving effectiveness and speed by using external resources for specific tasks.

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Outsourcing: Cost Savings

Reducing costs by using external resources, especially for labor and operations

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Outsourcing: Increased Flexibility

The ability to quickly adapt to changes in demand through outsourcing.

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Outsourcing: Time Zone Differences

Taking advantage of different time zones through outsourcing to maintain productivity around-the-clock.

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Extended Business Hours via Outsourcing

Having an external agency manage the business for extended durations.

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Communication Barriers

Delays in project completion due to communication gaps between the company and the outsourced provider.

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Outsourcing Security Risks

Potential exposure of sensitive company data to external parties, leading to security breaches.

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Data Protection Act

The Act provides a legal framework for protecting personal data.

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Outsourcing (Reminder)

Assigning or delegating services to another company or agency.

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Offshoring

Establishing physical infrastructure in a different region or country.

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Physical Asset Transfer

Outsourcing doesn't need this, offshoring does

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Cultural Accommodation

To adapt to the social norms of the outsourced company.

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Outsource

Transferring a portion of your work to another company, either locally or overseas.

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Back-office job

Tasks not involving direct client interaction.

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Ford Motor Company

An American automobile manufacturing company that outsources and offshores.

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Samsung Electronics

A South Korean manufacturer of consumer electronics and smart appliances.

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Samsung in the Philippines

Samsung Electronics using the Philippines for Australian customer support.

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Outsourcing Advantages/Disadvantages

Evaluating outsourcing's pluses and minuses for multinational corporations.

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Complement Strengths

Collaborating effectively by leveraging individual strengths within a team.

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Study Notes

  • Issue 1: Domestic Employment vs Outsourcing

Domestic Employment

  • Employing people in the home country

Outsourcing

  • Multinational corporations pay another company, a third-party service provider, with expertise to handle certain business functions
  • Involves non-core activities
  • Examples include outsourcing cleaning to an outside cleaning firm or the customer support to a call centre
  • First discovered as a strategy in the 1980s
  • Became a key component of business development in the 1990s

Starbucks Outsourcing Example

  • In 2006, Starbucks outsourced to Unisys in its retail stores, regional support centres, and manufacturing facilities for global growth
  • Unisys will take responsibility for service and help desk services
  • Unisys also became responsible for data centre services, including network and server monitoring and support
  • Equipment procurement, configuration and maintenance were responsibility of Unisys
  • Business continuity and recovery consulting services fell to Unisys
  • Unisys was made responsible for global programme management to plan and implement service delivery
  • Furthermore, enterprise security management fell to Unisys

Advantages of Outsourcing

  • Improves efficiency and productivity because another entity performs smaller tasks better than the firm itself, freeing them to concentrate on core aspects
  • The core functions of a university are to teach and do research, leaving support staff to assist in these functions
  • Saves costs by cutting labour and operational costs for the business like overhead, equipment, and technology
  • The external agency pays for its own cost of operations
  • It may also lead to faster turnaround times and increased competitiveness within an industry
  • If an MNC creates a department for the business process, then there is a need to hire the right talent, train the staff, and invest in the infrastructure
  • Increases flexibility in terms of time zone differences
  • By adjusting work shifts, it is possible to have the business managed for 1t hours by an external agency
  • Longer opening hours benefit customers

Disadvantages of Outsourcing

  • Signing contracts with other companies may take time and extra effort from a firm's legal team
  • A lack of communication or miscommunication between the company and the outsourced provider may occur, delaying project completion
  • MNC and outsourced provider needs time to accommodate certain cultural and social practices
  • Security threats occur if another party has access to a company's confidential information and suffers a data breach
  • There is a danger of security breaches despite things like the Data Protection Act, information technology, networking protocols, and safety measures

Outsourcing vs Offshoring

  • In outsourcing, there is no physical transfer of assets
  • There is only the assignment or delegation of services to another party or agency that could be located in another region/country.
  • Offshoring business processes involves setting up physical infrastructure in another region or country, leveraging cheaper power and people

Outsourcing vs Offshoring examples

  • Ford Motor Company outsources back-office software development, IT services, and customer support to India
  • Their offshoring of manufacturing went to China and Mexico because of high demand for its vehicles and increasing production costs in the US
  • Samsung Electronics outsources the design and assembly of smartphones to Wingtech and Huaqin from China, but determines the technical components
  • Samsung offshores its manufacturing to countries like the USA, investing $500 million in its Austin semiconductor plant in Texas in 2005
  • Samsung has a new manufacturing plant for smartphones in India.
  • Samsung offshores it customer support for Australian mobile users to the Phillippines

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Related Documents

PBW3163: Multinational Corporations and Global Communication - Domestic Employment vs Outsourcing

Description

Explanation of domestic employment where people are employed in their home country and outsourcing, where companies pay another company, a third-party service provider, to handle certain business functions e.g. Starbucks and Unisys.

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