How multinational companies save millions with a global corporate strategy?

February 8, 2020

…BPO (Business Process Outsourcing) is the Key! Why is it better for Companies?…

In our first two Articles, we saw what is Global Outsourcing, how it works , which are the main process behind it and which are the most Outsourced Businesses.
Now we gonna see: 1) How Multinationals are saving millions through these operations, 2)Which are the Disadvantages compared to Advantages, 3)What is the Difference between Outsourcing and Offshoring 4) Which are the Companies leader on Outsourcing Market.

1)- How Global Strategy differentiates from traditional MNC strategies.

Fragmentation is not a new phenomenon; nor is outsourcing. The former is a precondition for the latter. Both trace us back to the beginning of industrial revolution but both have acquired an international dimension and complexity in the globalization era and now represent most important distinguishing features of contemporary globalization (Arndt & Kierzkowski, 2001). Intra-product specialization can only take place when various phases of a production process are physically separable, i.e. when the manufacture of a product or the delivery of a service is amenable to fragmentation. With the exponential technological advancement of the last 10 years, the various phases of production may now be spatially separated and undertaken at locations where costs are lowest (India , China Malaysia , Thailand ). Of course, this entails an increase in the costs of communication and coordination / administration of the various work areas within the Company, On the other hand, the gains inherent in intraproduct specialization and potential savings in learning costs should encourage the creation of firms focusing on component production. Large and small firms can now use the global economy as their production partner. MNCs face a much more competitive environment in the form of small and medium-sized companies who operate successfully in global production networks. Nowadays, thanks to the exponential development of technological processes, multinationals are increasingly outsourcing their business functions to the developing countries like India. U.S. businesses accounts for around 70 % share of the global market of offshoring and balance by European countries and Japan. India enjoys a major chunk of the global outsourcing industry. Philippines, China, Malaysia, Vietnam, Bangladesh, S. Africa, Ghana, Senegal, Kenya, Jamaica, Mauritius, Nicaragua, Barbados, Mexico, Brazil etc.

2)- Outsourcing: Advantages Vs Disadvantages

-Certainly, as we have previously observed, there are not only positive effects in translating some specific services to Third Party Companies with offices outside the National Borders; As we can see from the picture all the disadvantages are connected with a loss of control of the Company’s Board of Directors on the various departments below.

3)- Different between Outsourcing and Offshoring

-The term Offshoring indicates the relocation of some services or products from another country, and is often what news articles are really referring to when they discuss Outsourcing. While much offshoring involves outsourcing production to another company it can also refer to simply re-location certain aspects of a business to another country. The services and products are all still provided in the same country (from the same Company), but they are now in another country. For example, when a car manufacturer in the United States (eg TESLA) opens a factory in Thailand to produce certain parts, in this case Tesla is offshoring, since everything is still happening within the same company..When deciding between Offshoring or Outsourcing there are many factors that need to be considered, and the ‘right’ decision will vary from Company to Company. Ultimately there can be significant cost savings or specialization benefits from both offshoring and outsourcing, which is what drives many companies to choose these routes.