Outsourcing in Business - Case Study Example

How Outsourcing Enable Entrepreneurs to be Flexible There are different reasons as to why different SMEs choose to use outsourcing. Outsourcing in business refers to the act of letting a third party handle certain processes in business organisation. The main reason as to why SMEs can decide to outsource is to avoid incurring some costs that might make the venture unprofitable. When used properly outsourcing can be cost cutting to SMEs. This is because most SMEs, usually lack the capability to carry out some processes without having to spend more. However, there are bigger organisations which have the speciality in those specific processes, thus enabling them to undertake the processes cheaply. In such cases, SMEs will always find it more affordable to let such processes be handled externally instead of them being handled within the business organisation at a higher cost. This paper aims at discussing the extent to which outsourcing enables entrepreneurs to be flexible. Outsourcing can be used by entrepreneurs in successfully handling various projects. In business management different projects usually require different resources. In any case a business organisation will decide to fully invest in a project independently, they will have to invest in all the resources that are needed for the project to be successful. However, things are different when a business organisation decides to use outsourcing. With outsourcing, they would not have to invest in all the processes that are involved in the project. They can find a third party to carry out some of the process that seems to be so costly that they can be able to reduce the general cost of the project. Therefore, it can be concluded that through outsourcing entrepreneurs can be able to undertake different types of project without having fears of whether or not they have the full capability of handling the project. If they choose to ignore outsourcing then they will have to stick to the projects that they are able to undertake independently. Outsourcing can also enable entrepreneurs to be flexible by reducing the risks involved in their undertaking. In business management the risks that require management include market, technologies, financial conditions, competition, government regulation, and many others. Through outsourcing business organisations are always able to relegate some of their functions to other business organisations with speciality is such areas (Corbett 101). When a business organisation delegates a certain function of their activities to another organisation, they also delegate the risks that are involved with the function delegated. One of the biggest hindrances of diversity in entrepreneurship is the risks involved. However, with outsourcing an entrepreneur can be able to be versatile because the risks are shared with the other business organisations that are involved in the various functions. Given that the companies that entrepreneurs approach for outsourcing have specialization they are in a better position to handle the risks and to make sure that they do not affect the process. For an entrepreneur outsourcing should not only be about reducing the cost of production, but also making the whole venture more competitive. One of the ways through which a business organisation can make good use of outsourcing is by relegating the areas that are not their strategic cores to other organisations so that they can be able to concentrate on their core processes. This will imply that they will be able to focus on their core processes. This will mean that the company’s staff will be able to have time to concentrate on perfect their most important task. This will bring flexibility in the non-core areas of the business organisation. They will be able to get the processes done by other organisations that have specialized in specific processes. This will only mean that there will be flexibility in terms of the non-core process, thus enabling the business organisation to bring the best possible end product or services to their consumers. As an entrepreneur, it is important for a person to make sure that all the processes are in line with the structure and goals of the organisation. However, it is always very hard to do so, especially in cases where one of the processes is only needed once in a while. If the business organisation is structured is such a way that it is able to accommodate the processes that only occurs once in a while then the production will be costly. However, a business organisation will also not be in a position to alter their structure, each time these processes are needed. Such alterations can prove to be highly costly to the business organisation. Fortunately for entrepreneurs outsourcing enable them to have such processes to be handled externally. This implies that they would not have to ignore these processes. Some of these processes are so important that their absence can be of huge effect to the end products. Outsourcing also enables them to operate without the worry of having to alter their structures to accommodate such processes. Customer satisfaction is something of high importance to a business organisation. When customers are satisfied with the goods or services that are availed by a company they will end up consuming more and more of the products or services that are produced by the company. In the absence of consumer’s satisfaction a company is likely to suffer low sales volumes. Entrepreneurs can avoid such scenarios by outsourcing some of the company’s processes. If they decide to do it all by themselves, then they risk realizing losses if in any case the end product is not satisfactory to the consumers. However, with outsourcing things can be different. A business might decide to outsource some of the determinant functions so that they can always change the outsourcing company in any case they receive a negative response from their consumers. If a business organisation had already invested in the technologies and the other resources that are needed for such functions, then alteration to fit consumer expectation would be an uphill task. Outsourcing can also be said to be a contributor to flexibility in entrepreneurship through making capital cost flexible. For a business organisation which undertakes all their functions by themselves, then capital cost is always fixed. It is fixed in that all the requirements that are needed in terms of technologies, human resource, and materials usually remain same. Things are rather different with outsourcing. Outsourcing gives a business organisation an opportunity to choose from various companies with the ability to undertake the processes required at a less cost. As a result of the variety a business organisation usually gains the bargaining power. They can bargain and choose from the existing offer that which matches their structure, culture, and goals. With that they will be able to get the best services at the best prices. The end result of such involvements in business is the complete satisfaction of consumers of the products or services that the company produces. In certain industries, there has always been a requirement of individuals with a certain level of skills and experience to take care of certain functions or activities. However, not all business organisations have the capability of employing all employees on a full time basis. However, employing such personnel might not be an issue to the business organisations that specialize in the areas in question. One of such areas is information technology. An SME might decide to let a third party take care of their information technology functions because investing in their own might be costly and unnecessary. Given that the companies in question have specialists in the field or function, then a company will be able to benefit from their expertise without having to part ways much of their financial resources. For instance, a business will have all their information technology functions taken care of without having to get into the complicated details of IT. Outsourcing also enhances flexibility by enabling entrepreneurs to effectively compete with the other players in the industry who are already established. It usually takes some time for a new business organisation to get to the level where they are able to compete with the already established players in the industry. However, with outsourcing things can be different. By letting specialized companies handle certain functions of a company, the end product or service will have the quality that can enhance competition with the already established companies. This will particularly be true if the companies entrusted with this function have the needed expertise and experience. Looking at the explanation given herein it is clearly evident that outsourcing can be of high benefit to SMEs. One common thing about SMEs is that they usually have limited resources as compared to the big ones. This implies that the limited resources have been properly managed if an SME has to compete with larger enterprises. Outsourcing enables SMEs to bring in some expertise and experience into their production without having to spend much. This means that SMEs can be able to be flexible and involve functions that they are not able to independently undertake in their production. Outsourcing is, therefore, of undeniable benefit to the management of SMEs. Work cited Corbett, Michael F. The Outsourcing Revolution: Why It Makes Sence and How to Do It Right. Chicago: Dearborn, 2004. Print. Read More