question of discussion

Nike’s Outsourcing Decision

Nike, a company that specializes in clothing and shoes, is an example of a real-life outsourcing choice (Leavy, 2004). The Nike corporation took this decision due to a number of reasons that made profitably producing their merchandise in the United States impractical. Nike cited high manufacturing costs and a need for productivity as primary reasons for outsourcing production. This was also shown by a poll, which revealed that the current price of Nike sneakers would increase by $100 if they were manufactured in the United States. Further, based on high competition in the shoe industry, there was a need for increased efficiency and a focus on core areas. The outsourcing of production allowed for Nike organization to reallocate much needed resources in the improvement of their products and invention of new products to capture a wider market.

Disadvantages of Outsourcing for Nike

Despite the outsourcing model working for the Nike firm, there are several disadvantages that accrued from its decision. The most notable is the public backlash from consumers set against the outsourcing model. This is due to the loss of jobs that is a direct result of such a move. Further, although outsourcing provides room for an organization to focus their energies in other areas, there lies the disadvantage of losing control of the process. The danger here lies in the fact that the parent company cannot monitor the process and a change in quality or design is possible, making the collaboration a disaster in waiting. This is supported by outsourcing companies driven by making a profit with little regard to quality. Further, the shift in timelines has proved to be a challenge since it’s quite difficult to synchronize schedules resulting in customers not getting products at a reliable timeline.

Advantages of Outsourcing for International Businesses

Any international business is faced with the dilemma on which components to manufacture in-house and which to outsource to independent suppliers. Outsourcing is a good idea and there lies evidence from successful firms that apply this model (Schniederjans, Schniederjans and Schniederjans, 2015). One key advantage that a business benefits from outsourcing is the firm gets more experts. This is crucial as a firm gets the best skill of experts that specialize with the product or service and thereby improves its output. Further, an organization is able to focus on what matters as by outsourcing its processes, there lies only the improving of core processes. Another advantage that lies in outsourcing is the firm gets to reduce its costs on recruitment and experience shorter overheads. Outsourcing further is crucial for getting things done fast as external agencies pursue efficiency and quality time management. Outsourcing also allows for the sharing of risk among partner companies and thereby an organization benefits from the specialist enhanced ability to tackle or mitigate potential risks. Outsourcing also saves on technology and infrastructure for an organization as the partner that has taken the business process is responsible for their own development of infrastructure.

The Future of Outsourcing

Outsourcing as a model for international companies had initially faced high public backlash and is still a matter of contention. However, the adaption of the model by most companies has shown that there lies great benefit to outsourcing irrespective of the disadvantages involved. The future for every organization that looks to increase its profits and substantially grow its market coverage is only in outsourcing model.

References

Leavy, B. (2004). Outsourcing strategies: opportunities and risks. Strategy & Leadership, 32(6), 20-25.

Schniederjans, M. J., Schniederjans, A. M., & Schniederjans, D. G. (2015). Outsourcing and insourcing in an international context. London: Routledge.