As per strategic management principles, many companies and organizations decide to outsource some of their services because various reasons. PRCM management outsourced almost all the aspects of mine design such that they can reduce and control operational costs. When some aspects are outsourced, the company offering the services will incur the costs of all the operating machines and labor used. It is cheaper for many organizations to outsource than to acquire all the tools needed, and employ qualified personnel to work on the elements. PRCM management would incur more costs as compared to outsourcing. The management would need to generate electricity supply ventilation, which is very expensive to the company. Constructing the mine, environmental safety process, and extracting coal requires expensive tools that will be used in all these operations. In addition, the company will employ qualified professionals to operate in these processes and even financial management, which is more expensive to the company. It is better for the organization to outsource as they acquire funds and prepare for it to install its machines and employ professionals in the future (Rothaermel, 2013, p. 77).
The company will have time to focus and improve on its expansion strategy. Since the company will have to delegate all the aspects of mine design to the outside firm, it will have time to concentrate on other activities. For example, the company will concentrate advertising the company's products to cover larger market leading to increase in sales and automatically the profit will increase. Since the company will have reduced the operational costs, it will concentrate on designing a plan on how it can expand such it can stand on its in future without having to outsource some aspects. Through outsourcing, the company will access excellent capabilities because the firm providing the services is specialized in the aspects given and has qualified professionals. As a result, the company will produce quality products, which will be recognized by customers and investors that the company is upcoming and operating well. PRCM Company does not have enough internal resources to install and operate the mine design. The company decided to use the available resources in outsourcing the services from an outside entity as it strategies to acquire the resources in the future. Since the company, offering the outsourced aspects will have its machines and resources, the available internal resources will be used in other activities inside the company (Stead & Stead, 2013, p. 93).
The approach of strategic management employed by PRCM management has some problems to the company. Outsourcing aspects will lead loss of managerial control. After outsourcing the aspects, PRCM will not have any managerial control on the aspects outsourced because the company outsourcing will be in charge of all managerial activities concerning the aspects. The employees of the company in management positions of the aspects outsourced will not have any experience since they are not exposed to any experience of the aspects outsourced. In most cases, the aspect of outsourcing is accompanied by hidden costs, which are not realized by the company when signing contract. The signed contract covers the agreed terms and conditions. If any additional requirement arises in the process of offering the services, the company will incur extra charges.
Outsourcing will pose a threat to confidentiality and security in the company. For example, if there is any information about medical records, payroll, and any other confidential information given to the outsourcing company confidentiality of the company may be compromised. The company data should be taken into account, and if the outsourcing company accesses the data, the contract should be signed where the outsourcing company will compensate in case it happens. Another problem is the quality of the services provided by the outsourcing company. The outsourcing company will be motivated by the profit. Since the contract fixes the prices, he outsourcing company will only increase the profit by reducing expenses. In addition, PRCM Company will not have chances to make any changes in the business environment because the contract is explicit. In the case of any changes to be made, the company will incur extra charges. Outsourcing will create bad publicity in both the company and the outside environment. It is because the outsourcing company will bring its staff, and it will not employ any member of the community. In addition, when some parts of the business services are outsourced, the remaining staff will lose morale since their job opportunities might be offered to an outsourcing company in the future.
The disaster was caused by poor decision-making by the management. Since the management is at top leadership positions in the company, they make final decisions. In most cases, the management relies on the previous experiences and successes achieved by the company. For example, when the company made more sales in a given month in the previous year, the management will recommend the production of products in large quantities during the same period in subsequent years (Lopez-Nicolas & Merono-Cerdan, 2011, p. 505). If the demand of the product drops, it leads to greater losses. In the case of PRCM, the managers might have used outsourcing in the previous years it became successful. Since it was successful in the previous years, they applied the same strategy in the subsequent year.
In most cases, leaders in management positions do not trust themselves that they can lead a successful project. Instead, they appoint someone or a firm to do it on behalf leading to outsourcing. PRCM management might have doubted themselves that they could not deliver by managing the mine design and operation: they decided to offer the aspects to outsourcing company. Leaders who do not trust themselves that they can lead or manage in a company make rush decisions. Such leaders do not take their time to consider the consequences of abrupt or wrong decisions that they make. As a leader with success in the past should not doubt in him/herself but he/she invest in professional development, improve his/her skills, and even test the level of competition with other leaders. The leader should be ready to participate in an activity recommended by the top management as he/she gathers wisdom and continuously mature in the process of managing or leading.
Many leaders do not see any opportunity in their leadership positions. Some leaders when requested to supervise or even manage a given activity do not see an opportunity that activity. They do not see anything that they can achieve or benefit from in the activity. The same applies to the leaders or managers of PRCM (Hitt & Hoskisson, 2012, p. 163). They opt for an outsourcing firm because they did not see any opportunity from the mine design and operation. Leaders who see the opportunity and have circular vision are proficient in managing change and anticipating crisis before circumstances fall on their hands. When a visionary leader sees an opportunity, it allows him/her to anticipate the results achieved after every decision he/she makes. Mismanagement of resources is another reason that drives leaders to make poor decisions. From the mismanagement, the leader will make poor decisions because they want to conceal the dubious deals they have done in the company. It is possible that the management of PRCM misused funds, which were made for the mine design and operation. Eventually, they found themselves making poor decisions leading to the decisions to outsource the aspects of mine design and operation.
In most cases, the decision-making process lies between the management and the employees. Employees should be incorporated in the contribution of ideas leading to quality decision-making in the company. Sometimes the managers are greedy to the extent that they make decisions without involving the employees such they can have chances of misusing funds. In the case of PRCM, even ventilation system was not an aspect that it could be outsourced because the management could acquire the systems and power it themselves. They decided to outsource ventilation system by making decisions without involving the employees such that they could save more funds for themselves. If the managers could have involved the employees in decision making to outsource the ventilation system, it would have been rejected, and more funds saved to be used in other activities. Another influence that the funds the managers relied on was the diversion of funds that could have been used for acquiring ventilation system for their personal activities. However, they decided to outsource it without incorporating the employee in the decision-making such they can hide the misuse of funds (Balaban & Beli?, 2010, p. 33).
The major failure that the managers made in their decision-making process was to outsource an activity that could be obtained and installed in the company without incurring the unnecessary expenses. It is a failure because the managers decided to make decisions without consulting the employees on whether the ventilation system can be outsourced or acquired and installed by the employees. Another failure is consultation and coordination with professionals and advisors before making the decisions. If…