New Travel Magizine Business

¶ … new travel Magizine Business

Executive summary for a new travel Magazine Business

In the context of a deepening economic crisis and as the third partner in the travel magazine business withdrew due to financial distress, the two remaining partners have decided to maintain full ownership of the business. Yet, this decision implies the necessity to seek other sources of capital. Since, at this stage, a bank loan is not a viable solution, a decision has been made in the development of internal strategies to reduce operational costs. A specific strategic course of action in this sense is constituted by the decision to outsource part of the organizational processes to more cost effective regions.

The outsourcing decision was made with the recognition of both advantages as well as the limitations of taking jobs outside the country. Yet, it was considered the most viable solution for the company at this particular period.

The Outsourced Processes

The travel magazine business incorporates various and complex operations, such as editing of the texts, revision of the texts, photography, website creation, website maintenance, accounting functions, managerial and administrative operations, marketing, designs, publishing, printing operations, distribution and so on. At this stage of the analysis, a question is being posed relative to the actual processes which would be outsourced and the processes which would be maintained within the United States headquarters.

The members of the academic field were traditionally observing and promoting the outsourcing of non-core business processes. It was generally assumed that the outsourced processes would be performed at sometimes poorer levels of quality, which would be acceptable in terms of non-core business processes. Yet, the core operations had to be performed at the highest quality standards, and they would be as such completed in house. Additionally, as the organization was no longer obliged to dedicate time and resources to non-core business operations, it could better focus on core processes. "Offshore outsourcing is strongly influenced by need for focusing on core activities. Outsourcing processes frees up management time and capital and enables best utilization of the two. Once the core processes are identified, the company should target to outsource peripheral / support business processes. Outsourcing these business processes will help management concentrate on core activities, thus enabling the company to strengthen its position in the market" (Patel, 2005, p.25).

Throughout the past recent years however, both academicians as well as practitioners began to focus on outsourcing core processes as well. Probably the most relevant example in this sense is offered by Nike Inc., a leading sports shoes and apparel manufacturer, who outsourced all of its manufacturing and otherwise operations to more cost effective regions. Within the United States, they only handle administrative and marketing operations. Additionally, the academicians also reveal that it can be beneficial to outsource core business processes. Claire Lise Benaud and Sever Bordeianu (1998) for instance argue that when a business process can be outsourced to generate organizational benefits, its feature of being a core or non-core business processes loses relevance. This leads the owners of the travel magazine business to the realization that the selection of the functions to be outsourced cannot be constructed on the core or non-core characteristic of the operations, but that a more thorough analysis has to be conducted.

The table below succinctly captures the essence of the analysis conducted to decide on the type of operations which would be maintained in house and those which would be outsourced.

Type of Operation

Reasons to Outsource

Reasons to maintain in house

Decision

1.

Managerial and Administrative

None relevant

Central operations which hold together the essence of the firm and which are conducted by the two owners

Maintain in house

2.

Accounting

None relevant

Increased necessity to maintain control over financial considerations

Maintain in house

3.

Design

None relevant

Represents the essence of the magazine and of the company and it cannot be performed by tertiary parties

Maintain in house

4.

Researching

Reduced costs, increased expertise, access to resources and intellectual capital across the globe

None relevant

Outsource

5.

Article Editing

Reduced costs, vast expertise, including locations outside the United States

None relevant

Outsource

6.

Article Revision

None relevant

In house revision would validate the quality of the piece

Maintain in house

7.

Photography

Reduced expenditures, first hand photographs from across the globe

None relevant

Outsource

8.

Printing

None relevant

Distribution would be performed within the United States and printing in another region would imply additional logistics costs

Maintain in house

9.

Publishing

None relevant

This type of operations would only have relevance within the U.S.

Maintain in house

10.

Marketing

None relevant

Only the in house marketing specialists know the company and its customers and will be able to create successful marketing campaigns

Maintain in house

11.

Website Creation

Reduced costs, experienced contractors, ease of telecommuting

None relevant

Outsource

12.

Website Maintenance

Reduced costs, experienced contractors, ease of telecommuting

None relevant

Outsource

13.

Distribution

None relevant

The magazine would be distributed within the United States and conducting the adjacent operations within another global region would not be efficient.

Maintain in house

Based on the analysis previously mentioned, it has come to the conclusion that five specific processes would be outsourced:

researching operations article editing operations photography operations website creation operations and website maintenance operations

3. Researching Operations

3.1. Preliminary performance targets

Despite the fact that this type of operations would be outsourced, it still needs to be completed at high quality standards. At an incipient level, the research operations would have to comply with the following specifications:

The sources of gathering information need to be reliable and trustworthy

The information researched and collected has to be true

The research process has to be though rather than superficial

The research process has to be inquisitive in the meaning that it should not be limited to collecting easily accessible information, but it should raise new questions.

3.2. The type of contract

The research operations represent a particular type of process as they lack the numeric and clearly established characteristics. In other words, it is extremely difficult to estimate how long a research project would last or what costs it would incur. When researching travel topics, the researcher would gather information from both primary as well as secondary sources. Trips to touristy locations -- the primary sources -- would incur costs; trips to the libraries (traditional or online) to identify the history of a certain location would also incur costs. But the amount of these costs is not easily foreseeable. This means that the contract would be a cost reimbursable one. It is however necessary to cap the research expenses to a maximum accepted limit.

3.3. Vendor evaluation criteria

In the selection of the foreign entrepreneur to provide the research operations, the travel magazine business would consider the following criteria:

Previous expertise with researching operations

Previous expertise with outsourcing operations

The extent of the cost efficiency (better put, the prices offered by the provider)

Previous works and successes of the organization, retrieved from discussion with the company, as well as its past customers.

3.4. Number of vendors

This specific issue would traditionally be handled once for all operations and it would state that the outsourced operations would either be handled by a single foreign contractor, or by several individual contractors. Yet, since the current situation reveals a combination of these two elements, it is necessary to individually address it. In this case, the researching operations would be conducted by one vendor, the one which would also handles the article editing operations.

3.5. Timeline for the contracting process

The research project is an ongoing business operation and it is as such impossible to create a timeline unless more specific constraints are offered. Assuming that the magazine would be published once a month, the research operations would occupy an estimated two weeks out of this period.

4. Article Editing Operations

4.1. Preliminary performance targets

The article editing operations are expected to meet the following preliminary performance requirements:

reliability of the information presented in the articles the quoting of all sources used and the complete lack of plagiarism the ability of the article to not only reveal true and reliable information, but also information interesting to the customer the complete lack of grammatical or otherwise editing mistakes in the piece the article has to represent a combination of useful information and captivating details

4.2. The type of contract

The editing of the articles would be offered based on a unit contract, in which each piece of writing is paid based on the number of pages it contains. This price per page of article would be fixed. The terminology for this type of contract is that of firm fixed price contract. "In this type of contract, the fee is fixed for the products or services. No incentives are given while cost overruns are borne by the seller. Seller is at the highest risk here. Scope of work has to be very clearly defined for such type of contracts" (PMP Study).

4.3. Vendor evaluation criteria

The vendor selected for the article editing operations would have to comply with the following criteria:

Increased cost efficiency

Previous expertise with travel articles editing

High quality of the written articles and commitment to high quality

4.4. Number of vendors

The article editing operations would be offered by the same vendor offering the research operations.

4.5. Timeline for the contracting process

In a context in which the magazine is published once a month, the editing of the articles would be expected to be completed within a week, normally the third week of the month, after the two weeks of research are completed.

5. Photography Operations

5.1. Preliminary performance targets

The foreign contractor in charge of photography operations is to ensure that the following performance targets are met:

The photographs are clear and reveal the touristy destination

The photographs are relevant to the article presented

The luminosity of the photographs is adequate

The interference of the photographer is minimal. It is as such accepted that the photographer addressed luminosity or clarity issues, but he cannot insert new elements in a picture.

5.2. The type of contract

For purposes of efficiency, the photography operations would be conducted simultaneously with the processes of research. Some of the costs incurred by the photography operations are predictable -- such as costs with the usage of the camera -- but most of them are not predictable and depend on the costs incurred by the photographer, such as trips to the respective travel destinations. This means that the basis of the photography operations would be set against cost reimbursable contracts.

5.3. Vendor evaluation criteria

The criteria based on which the photography services vendor would be selected refer to the following:

Cost efficiencies offered by the vendor

The vendor's previous expertise with photography for travel promotion purposes

The vendor's previous expertise with contracting services

The high quality of the photographs and the commitment of the vendor to maintaining and even enhancing the quality

5.4. Number of vendors

The photography operations would be offered by the same vendor who offers the research and article editing services. In the situation in which this vendor is not specialized in photography, a compromise solution would be sought.

5.5. Timeline for the contracting process

As it has been previously mentioned, the vendor would take the photographs during the two weeks of the research operations. Throughout the third week of the month, the photographer would arrange and edit the pictures and would prepare them for insertion in the articles and for publishing.

6. Website Creation Operations

6.1. Preliminary performance targets

The performance targets initially identified include:

The website represents the operations of the company as these are indented

The website represents an effective means of communication between the company and its customers / prospective customers

The website promotes the company's products and services

The interface is user friendly, the functionalities of the websites are complex

The website is both appealing as well as it is informative

6.2. The type of contract

The creation of the website commences at clearly established demand and offer specifications. The travel company states what they want the website to include, how it should look, what functionalities it should have and so on. The it company presents the conditions of realizing the customers' demand and a price is set. This particular contract would be constructed on fixed costs.

6.3. Vendor evaluation criteria

The foreign company creating the website has to meet the following requirements:

Offer the company a significant cost efficiency

Possess extensive expertise with website development

Possess expertise with outsourcing contracts

Be high capable from a technologic standpoint

Be responsible and trustworthy

Be committed to the high quality of the services offered and determined to enhancing them

6.4. Number of vendors

The website creation services would be offered by a second vendor, specialized in this particular type of products and services.