Outsourcing

Question 1

What is outsourcing

Answer 1

transferring activities to a third party outside the business

Question 2

Give examples within the 4 departments

Answer 2

• finance = payrolls
• HR = Training
• Marketing = Social Media Management
• Operations = component production

Question 3

1 advantage of outsourcing

Answer 3

• using a specialist = ^ quality especially if it is not a core competency of the business
  • Lower costs = labour/ overheads = lower price = higher demand = higher sales
  • no need for capital investment = ^ cashflow

Question 4

Another advantage of outsourcing

Answer 4

• business can focus on their core competencies

Question 5

One con of outsourcing

Answer 5

• lose control of the process = quality issues = not willing to improve/ innovate the product
• ethical issues may impact business reputation = market cap

Question 6

Another disadvantage of outsourcing

Answer 6

• leads to over reliance on external provider = porters 5 forces = greater supplier power = ^ supplier power = long term ^ price & costs