Outsourcing

• What is outsourcing?

  Contracting a business process to an external provider
• In which departments can outsourcing occur?

  Finance, HR, Marketing, Operations
• What is a common outsourcing task in the marketing department?

  Social media management
• Why might a business outsource component production?

  To reduce costs and improve efficiency
• What is a key advantage of using specialists through outsourcing?

  Higher quality than non-core competencies
• How can outsourcing lead to lower costs?

  By avoiding full-time employee expenses
• What financial benefit can outsourcing provide regarding machinery?

  It avoids capital investment in machinery
• How do economies of scale benefit outsourcing?

  They lower average costs through mass production
• What is a core competency?

  A business's primary strength or expertise
• What is a major disadvantage of outsourcing?

  Loss of control over the outsourced process
• What risk is associated with trusting an external provider?

  They may only do the bare minimum required
• How can outsourcing affect a company's reputation?

  Through the ethics of the external provider
• What is a potential consequence of over-reliance on an external provider?

  Increased supplier power over the business
• How might an external provider increase their prices?

  By knowing the business relies on them
• What are the advantages of outsourcing?

  • Access to specialists for higher quality
  • Potentially lower costs on labor and overheads
  • Avoidance of capital investment in machinery
  • Focus on core competencies
• What are the disadvantages of outsourcing?

  • Loss of control over processes
  • Risk of external provider doing the bare minimum
  • Ethical issues affecting reputation
  • Over-reliance on external providers