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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
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