Adding Value through Offshoring Flashcards
offshoring
involves shifting jobs to another country, but it may not involve transferring jobs to another organisation.
A company may simply decide to move its local customer services operation to one of its own subsidiaries abroad. That is offshoring, but it is not outsourcing
outsourcing (and its relation to offshoring)
Outsourcing need not necessarily result in job losses in a particular territory or country.
A job can simply be handed over to another organization of the same nationality and geographical location where it can be carried out more efficiently
what are some reasons offshoring became a thing
- The Internet
- ICT: Voice of over IP
- Social acceptance of telepresence
- Cost cutting pressures
- Collaboration applications
- Cloud computing
- Digitization?
- Education?
- Technical supports
- Call centers
- Source of professional expertise?
Merits of offshoring
- Labor cost savings
- Access to talent and qualified personnel
- Greater organizational flexibility
- Growth Strategy
what can offshoring cause?
CLUSTERS
- Emergence of clusters specialized in offshoring activities
- Different regions gained recognition for different types of expertise
What are some main offshoring destinations/clusters?
Main destinations: India, China, and the Philippines
- Bangalore: Call centers
- Latin America: IT-Associated clusters
- Mumbai: Investment banks
- Dubai and the UAE: Infrastructures, low taxes
- Cape Town: Qualified workforce and insurance services
- Morocco: Customer service
- France and Spain: Multilingual workforce
- Vietnam: Math graduates who are also multilingual
Benefits of offshoring clusters
- Firm-level productivity increases
- Industry-level productivity increases
Risks of offshoring clusters (7)
- First limited number of places => Demand > Supply
- Unstable currencies
- Unstable wages
- Intense competition for employees
- Regulatory limits
- Inflation in these target regions
- High turnover of labor
What are the 5 criteria for choice making process with regards to offshoring?
- Calculate costs of services
- Forecast availability of skilled labor
- Estimate local market potential
- Evaluate quality of infrastructure
- Assess country’s risk profile, political and business environment
What are the three global strategies?
- Adaptation
- Aggregation
- Arbitrage
Offshoring falls under which international strategy? Why?
Arbitrage
- Offshoring exploits differences between countries
- Most offshoring processes are associated with Arbitrage.
- The decision to go for offshoring must take into account the company’s comparative advantage.
What are the 6 steps to formulate a strategy that includes offshoring?
- Think big picture, not item by item
- Decide what you want to outsource (as in offshoring) and how
- Examine destinations carefully
- Adapt to the new reality
- Develop Local talent
- Govern your offshored business
describe Think big picture, not item by item
Fit between offshoring as operating strategy and overall global strategy
describe “what you want to outsource (as in offshoring) and how”
- Focus on what process you want to outsource
- Identify interdependencies – How interdependent is customer service and re-sell in case of home internet?
- Identify the most outsourceable
describe “examine destinations carefully”
- Labor costs
- Talent availability
- Market potential
- Infrastructure quality
- Acceptable risks
- Environmental factors
