Outsourcing: reasons, advantages and disadvantages - Essay Example

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Strategic management deals with any large intended initiatives taken by the management of a company on behalf of the owners or stake holders which involve the utilization of resources in methods that enhance the company’s overall performance in the external environment…
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Outsourcing: reasons, advantages and disadvantages
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Download file to see previous pages In quite a few cases a balanced scorecard is utilised to assess the overall performance of a business enterprise in trying to meet its delineated objectives and goals. There has been growing support for strategies that originate from the stakeholders and for the use of balanced scorecards that include the needs of all stakeholders. Proper strategic management ensures that the business efforts and resources are optimised to meet the various goals and objectives.
The lack of strategic management in a business’ operations indicate that there will be wasted time, effort and resources and the stakeholder’s needs will not be met with as well. The overall effect will be inefficient business operations which would lead to decreasing revenues and it may also cause stakeholders to shift over to other businesses. The kinds of strategies being used depend largely on the business in question as well as on the external environment for the business. For example a global or transnational organisation would use a structured strategic management model while a SME (small and medium enterprise) would use an entrepreneurial approach to strategic management. (Johnson et al., 2008)
Victoria’s Power Industry and Outsourcing
Latrobe Valley produced over 90% of the energy needed for Victoria. The valley was dominated by the energy industry based on the coal reserves present nearby. In order to facilitate the growth of industry and to keep employment levels high, the Australian government invested in the power industry in Latrobe. Consequently the power industry in the Latrobe region was overstaffed to a large degree. Often one task was performed by a number of different employees because overstaffing was present. Moreover there was a conception that workers in the Latrobe power industry followed militant unionism actively. While unions were present in large part and most people were members of unions but it did not indicate that the unions were causing trouble. Some studies have even suggested that the workers in the Latrobe region displayed lower union activity (marginally) and the union activity was more centred on events outside the valley such as general worker problems in Australia. (Fairbrother & Testi, 2002) Given the militant image of the unions in Latrobe and the cry of inefficiency in operations spurred the government to take action. This was achieved by privatising the power plants in the Latrobe valley to multinational corporations. The advent of competitive business vendors meant that labour force trimming begun immediately. In an effort to optimise their business operations, the new companies went for outsourcing of tasks. This resulted in the removal of thousands of people from their jobs in the Latrobe region. The already high employment levels were replaced by high unemployment levels. The net effect was migration which further caused imbalances in the demographic composition of the region. (Fletcher, 2002) Strategic Thinking and the Growth of Outsourcing Outsourcing has certain advantages over conventional employment practices. In general, outsourcing enables businesses to meet their objectives better at reduced costs. This provides a lot of incentive for various businesses to outsource their operations. The various strategic reasons that encourage outsourcing are: Reduced Costs: Outsourcing enables employers to connect to cheaper labour markets such as those ...Download file to see next pagesRead More
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