Management concepts and applications

Management Case Study

The process of globalization that characterizes today's economy has had both positive and negative implications for overall national economies, but also for international and local economic agents. Globalization has made it easier for certain companies to expand on international level, and for consumers to access certain products that were normally obtained in more difficult manners.

Globalization has also impacted competition. Nowadays, companies in all business sectors face a continuously stronger competition. Given the circumstances, small and large companies must find ways to become more competitive in order to at least insure survival on the market.

The most useful tool for creating competitive advantage consists in reducing prices. However, this objective cannot be achieved without developing and implementing strategies in this direction. One of the most important strategies for reducing prices relies on production outsourcing.

Cheap workforce that can be found in developing countries has determined international companies to seriously take this solution into consideration. The most preferred countries for outsourcing are China and India, competing with other destinations in Africa and Asia.

These regions are responsible for massive production of all types of products, from appliances to clothes and food. However, this solution also comes with negative aspects. Workers in these countries are often unskilled, and the quality of the goods produced here is often questionable.

1. Factors affecting the company's activity in India

As mentioned above, more and more companies apply outsourcing in their production process. Leethal Fashion Accessories makes no exception. India is the most targeted region for this activity (Hatch, 2006).

However, there are several factors that must be taken into consideration before and during the implementation of such a project in India. The company must identify and analyze the external environment factors that are most likely to influence the company's activity in India.

Understanding the company's external environment is the first step that must be taken in order to achieve the company's marketing objectives and general goals. The marketing environment is basically represented by opportunities and threats (Kotler, 1986).

In other words, the results of the company's efforts depend on the company's ability to exploit opportunities provided by the marketing environment and to avoid the threats that are also imminent within this environment.

As certain theorists agree upon, the company's external environment can be stable, unstable, or turbulent (Stoner, 1978). It can be observed that the environment currently provided by India is an unstable one, at least. Such an environment is usually characterized by frequent modifications that affect most of its components.

This type of environment is the most common one and it affects most companies in all sectors of activity. Developing a business in such an environment requires a prospective attitude, identifying the direction and degree of modifications that are likely to affect the environment in case, and increasing the company's ability to adapt to the changes that the environment will determine.

The external environment in which Leethal Fashion Accessories activates is consisted of the microenvironment and the macro environment. The microenvironment includes suppliers, workforce suppliers, clients, competition, and public organizations.

The company's macro environment is represented by the demographic, the economic, the technological, the cultural, the political, the institutional, and the natural environment.

The most important external environment fact ors that are most likely to affect the company's results in India are represented by language and communication barriers, religious and cultural differences, corruption affecting the government and the business environment, frequent delivery delays.

The language barrier is the first obstacle that companies addressing India as an outsourcing destination have to face in addressing this market. Workers in India speak very poor language, making it difficult for them to clearly understand what the company expects from them.

As a consequence, the company must make use of translators and interpreters, which add to total costs and require more time for reaching the company's objectives.

This leads to defective communication, which is further translated into increased costs. Furthermore, communication problems will add up and will generate more problems in the future, problems that the company must solve with increased efforts.

Religious and cultural differences also represent significant barriers that can create real obstacles for the company. The cultural environment consists of elements that refer to the system of values, customs, traditions, and beliefs that influence India's citizens.

The buying and consumption behavior that the company must take into consideration is based on these components. Even more, the elements of the cultural environment are sometimes decisive in determining market segments, and in identifying a certain consumer typology (Kotler, 1997).

These cultural differences are also responsible for determining the type of marketing campaign that would be mostly suitable for this region.

India is a country where religion plays a very important role. Many aspects of Indian citizens' everyday life is subordinated to religion or is influenced in some manner by religion. This fact must be taken into consideration and understood by Leethal Fashion Accessories.

Another aspect that raises obstacles for the company in India is represented by corruption, a phenomenon that significantly affects developing countries. Leethal Fashion Accessories must face the corruption that affects the Indian government and its institutions. This will lead to increased costs paid by the company for doing business in India.

2. Advantages of India as an outsourcing destination

India, and other targeted outsourcing destinations, represents the solution to the problems that Australian manufacturers face on national level.

The main reason for which Leethal Fashion Accessories and other Australian manufacturers have outsourced their production to India is represented by the high costs of the Australian workforce.

Also, the textiles and fashion industry in Australia has significantly declined over the past decades. This means there is little room for developing production on national level, production costs have significantly increased, leading to increased consumer prices, which are not competitive on local level.

Therefore, Australian companies are forced to find cheaper alternatives. This is where India interferes. The cheap workforce provided by India represents a viable solution for Australian manufacturers (Flatworld Solutions, 2009).

Given the country's and its citizens' economic and social situations, Indian workers are willing to work more than Australian workers would be (Shivapryia, 2009).

Another characteristic that determined Small Australian manufacturers to outsource their production process to India instead of other cheap outsourcing destinations is represented by the fact that India accepts smaller orders, and does not focus on massive production like China.

Also, workers in India are willing to do development and custom work, which cannot be achieved in other outsourcing destinations.

3. Control problems of outsourcing to India

Outsourcing production to India presents a series of disadvantages also. Leethal Fashion Accessories and other Australian manufacturers outsourcing their production to India have little control over the delivery dates that must be respected by Indian suppliers. This is mainly because of bad weather that Indian suppliers cannot control either (Overby, 2003).

Therefore, such delays can cause serious problems for the company, given their hard to predict nature. This obviously makes it very difficult for the company's managers to control the actual production process.

Also, there are fluctuations regarding the degree of quality and craftsmanship of the goods produced in India. These fluctuations cannot be anticipated, and therefore, they cannot be controlled by the company in order to be counteracted.

4. Types of control

The objectives of management control are representing by achieving the goals and objectives established by the company's managers (BusinessDictionary, 2010). There certain aspects that may be improved in the control area. Given the circumstances in which the production process takes place in India, Leethal Fashion Accessories managers must focus on implementing a feedforward control system (Waddell et al., 2004).

Based on previous experience, managers should be able to anticipate problems that might arise. These problems usually refer to delayed deliveries. As a consequence, the company should establish delivery terms in accordance with delays previously experienced, in order to better control the situation.

The situation that characterizes Leethal Fashion Accessories meets all the conditions required for implementing a control system based on feedback: the objectives of the control process are established by the company's managers, the output of the process is measurable, a predictive model of the process has been developed, actions can be taken in order to ensure that the objectives of the control process are attained (Linstead et al., 2004).

The company's activity in India is significantly affected by external environment factors, which can have a medium term or a long-term effect. Therefore, implementing a strategic control system is imposed.

Such a control system focuses exactly on monitoring environmental factors of high impact on the company's activity (Bartol et al., 2007). This way, the company can identify the factors that determine delivery delays and it can develop strategies designed in order to avoid or to counteract these issues.

However, strategic control does not suffice for reaching the company's objectives. Tactical control strategies must also be developed and implemented. After determining the objectives of the company and establishing the timetable for achieving these objectives, the results of the company's activity must be analyzed.

By monitoring these results, the company's managers can control and determine whether the company has achieved its objectives, and whether the company's efforts are justified.