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What is outsourcing

Advantageous &Disadvantageous

Examples of Outsourcing

Types of Outsourcing

What is core competency

Core Products

Developing Core Competencies

Definition of Downsizing

Why do firms Downsize?

Advantageous & Disadvantageous

Examples of Downsizing

Contents

What is Outsourcing?

• Outsourcing is a strategic decision to give a task or activity to an independent contractor who determines how best to do the task or activity.

• The firm and the independent contractor become partners and may establish a long-term relationship.

• Examples of outsourced activities: IT, HR, Legal services, Manufacturing, R & D.

• Why Outsource?– Provide services that are scalable, secure, and efficient, while

improving overall service and reducing costs

Outsourcing Advantages:

• Increasing expertise

• Better quality people and knowledge

may be applied to an activity or task

by the outsourcing firm.

• Reduction in administrative costs may be possible when certain tasks are outsourced.

• Outsourcing certain activities and employees that do not fit with company culture may be used to preserve a strong culture or employee morale.

Outsourcing Disadvantages:

• Outsourcing may lead to loss of control of certain activities which may be a problem on time sensitive projects for example.

• Outsourcing an activity may result in loss of the opportunity to gain knowledge and information that may have general application to other key processes and activities.

Examples of Outsourcing

Call centers for Brazil in Angola

Legal and finance service in the Philippines

IBM providing travel and payroll for P&G

ADP processing payroll for thousands of firms

Blue Cross sending patients to India

Types of Outsourcing

Purchasing

Logistics

R&D

Finance/accounting

Service management

Human resources

Desirable Outsourcing Destinations

Outsourcing may not be appropriate when:

1. The task is a core activity critical to strategy or technology.

2. Task is highly interdependent with core activity due to technology or work design.

3. Task requires great deal of firm specific human capital or access to proprietary information.

4. Tasks where the employees work in close proximity to regular, core employees and are similar socially to them.

What is Core Copmetency?

Core competencies are the skills and processes that are used to develop a company's core products and services -- those products and services that give the business a competitive advantage over other businesses and are important for the long-term growth of the company.

Importance

Core competencies create value and cause a customer to chose your company's products over another. These competencies are most likely to be in core areas of the company.

Innovation

Innovative companies have a competitive edge in the marketplace.

Companies should never stop innovating. Small businesses have become successful against bigger competitors when they are nimble and relentlessly innovative.

Quality

Quality means reliability and performance. Japanese automakers gradually took over market leadership by making quality one of their core competencies. They deployed new concepts such as just-in-time manufacturing and total quality management to incorporate quality in all stages of design and manufacturing.

Identifying Competencies

Core competencies are generally not a single process but a combination of processes, technologies and skills. Core competency arises from the integration of different parts of the business, such as design with technological innovation.

Core Products

Core competencies are used to develop core products. These products may not be sold directly to consumers but are used in products that are sold to consumers.

Flexibility

A company's core competencies are not fixed. They change over time as a company adapts and changes to a changing business climate. Core competencies should enable a company to create new products and services.

Customer Service

Small businesses that provide exceptional customer service have a competitive edge in the market.

Other Competencies

Other core competencies that give organizations competitive advantages include strategic customer targeting and a superior Internet presence.

Developing Core Competencies

Core competencies do notalways develop on their own;putting a plan in place todevelop and leverage yourpersonal and organizationalcore competencies is the keyto fully realizing the benefitsof this concept.

DEFINITION OF

DOWNSIZEReducing the size of a company by

eliminating workers and/or divisions within

the company. It is sometimes referred to as

"trimming the fat".

When a company downsizes, it is

attempting to find ways to improve

efficiency and increase profitability.

Why Do Firms Downsize?

-Reduce costs.

-Reduce layers of management to increase decision

making speed and get closer to the customer.

-Generate positive reactions from shareholders in

order to valuation of stock price.

-Increase productivity.

STAGES OF DOWNSIZING

Stage 1; the decision to downsize

Stage 2; planning to downsizing program

Stage 3; making the announcement

Stage 4; implementing the downsizing program.

Downsizing has its set of advantages and

disadvantages for both the owner and

employees.

ADVANTAGES OF

DOWNSIZING

Advantage on Management

A single owner cannot manage a larger company

or be active in all decisions, tasks or projects.

Downsizing gives an owner more control of the

management team, of the individual projects and

creates more opportunities for the owner to

interact with employees at all levels

Labor Cost Saving

The primary motive for laying off employees is to

reduce company labor expenses.Cutting jobs is

therefore one of the quickest ways to significantly

lower costs.

Assets Sale

By downsizing an entire store, you don’t only

deduct employee costs, but you also have assets

that you can sell. For instance you can sell the

building, equipment, supply, furniture and

decor to raise funds as part of a sizable

downsize

DISADVANTAGES

OF DOWNSIZING

Public Image

A downsizing business may be viewed negatively

in the public. A business firing employees and

decreasing the amount of clients and production

may look like a failing business

Skill and Knowledge Loss

Eliminated employees retain knowledge that is

often lost during downsizing. many critical

skillsets and business information will still be

forfeited when employees leave the company.

Employee Stress

Employee positions are eliminated during a downsizing, but

the quantity of work generally remains consistent.

Remaining employees are saddled with additional

responsibilities and requirements that can impact the

amount of work they are expected to perform. Initially,

employees may be more productive since they still have a

job, but the stress due to workload increases quickly and can

erode the initial productivity boost.

EXAMPLES OF

DOWNSIZING

HSBC HoldingsHSBC Holdings, an international banking and financial services concern, laid off 5,000 people in 2011 and has plans to lay off 25,000 more. HSBC Holdings has already shut down its operations in Russia and Poland, the site notes, and closed 195 branches, many in New York.

General Motors

General Motors and rivals Ford and Chrysler comprise the "Big Three" American automakers. The sweeping layoffs GM and other automakers implemented in response to a drop in sales were a devastating blow to their workers and to local economies. The Street.com website cites various sources that calculate a GM layoff of between 75,000 and 100,000 workers in a 11 year period between 2008 and 2010, depending on whether closed car dealerships were taken into account.

Toyota

Toyota even though manufacturing 7000 car in a year,period of

2001 crisis no personal was layed off.

-How did Toyota lay off no personal?

The answer is saving and recruitment. It didn't employ new

employees. In some particular days production process worked,

the rest of week manufacturing process was not active.

According to management department of Toyota, employees

were most important value of factory. Today workers of Toyota

proud working in this company and they are working to get the

corporation to top of sector