How Can Outsourcing to Emerging Markets Be Used to Gain Competitive Advantage? - publié le 14/04/2010

Résumé du document

Today, the outsourcing strategy is often implemented to create a competitive advantage over rivals. Businesses now look to achieve sustainable competitive advantages in each step of their supply chain. Outsourcing in emerging countries has become the solution in getting this sustainable competitive advantage as these locations are well-endowed in natural resources and human skills. The reasons of outsourcing are multiple, such as sharing risks or producing efficiently by specialists which the company does not have itself. In the long-term, outsourcing allows companies to be focused on their core-activities. Nowadays, scarce are business functions insulated from outsourcing; finance, call centres, Research and Development (R&D) operations are easily outsourced abroad. However, the Information Technology (ITO) and Business Services Outsourcing (BPO) are the main outsourcing areas as their worldwide performance exceeded US $55 billion in 2008 and grew by 15 to 20% annually since 2004. Outsourcing in emerging markets has become a source of competitive advantage at various levels of the supply chain.

Extraits

[...] (2009) ‘Outsourcing to emerging markets: theoretical perspectives and policy implications', Journal of International Management, Vol Issue June, pp 156-168 Domberger, S. (1998) The contracting organisation: a strategic guide to outsourcing, Oxford University Press: Oxford Downing, R., Stack, M. (2005) ‘Another look at offshoring: which jobs are at risk and why?', Business Horizons, Vol.48, pp 513-523 Drezner, D. W. (2004) outsourcing bogeyman', Foreign Affairs, June, (online), available at: http://www.danieldrezner.com/policy/outsourcing.htm date accessed: 11/01/2010 Elmuti, D., Kathawala, Y., Monippallil, M. (1998) 'Outsourcing to gain a competitive advantage', Industrial Management, Vol Issue May-June, pp 20-24 Engardio, P., Einhorn, B. [...]

[...] Downing and Stack (2005) defines outsourcing as the process of contracting with an outside company to perform a non-core function of the company. Outsourcing is become a global phenomenon launched by the US firm, General Electrics in the late 1970's. This trend has been accentuated through the reduction of international barriers to trade and the WTO agreements for the foreign investments liberalisation (Downing, R. and Stack, M., 2005). Today, this strategy is often implemented to create a competitive advantage over rivals (Kotabe, M. and Murray, J.Y., 2004). [...]

[...] Today companies are likely to look for competitive advantage in quality to assert their differentiation position. This particular competitive advantage is gained by access to large skill pool available in developing countries. In of Chinese students got an engineering degree while compared to of American students (Click, R. L. and Duening, T. N., 2004). Higher education provides students from developing countries with strong technical and business knowledge that MNCs are constantly looking for students are graduated every year in Cairo (Egypt) of them speak fluently English and even 1,000 are able to speak Lithuanian (Willcocks, L. [...]

[...] Additionally, outsourcing in emerging markets remains risky in spite of governmental efforts to reduce corruption and intellectual property risks. Again, their growing economies are often subjected to macroeconomic instability like inflation and currency fluctuation; that may affect the competitiveness of MNCs (Kotlarsky, J. and Oshri, I., 2008). In other words, outsourcing in developing countries offers price, quality and innovation competitive advantages through the access to big potential markets but safeguards need to be negotiated to avoid pitfalls. Referencing Ahmed, Z. [...]

[...] Porter (1998) also stated that competitive advantages can be achieved through costs independent of scale. First, favourable host government policies such as tax breaks or incentives for foreign investors encourage companies to outsource in emerging countries (Kotlarsky, J. et al, 2009). Since 2006, China has launched a national programme and 10 Plan to encourage foreign businesses to outsource their software production in the country. Secondly, businesses can gain a competitive advantage through the learning curve and experience of the supplier. [...]