Globalization and Outsourcing: Business Trends and Strategies

Introduction

Business operations hold the objective of maximizing profits on each and every transaction undertaken. To achieve this, economies of scale are sought and decisions on how best to maximize them are preferred (Brooks, Weatherston, and Wilkinson). The increasing realization and embrace of efficiency has driven a trend toward outsourcing those services that companies find inefficient to undertake internally, allowing them to concentrate on activities in which they are efficient and that do not bear excessive cost. Shenkar defines outsourcing as the act of transferring part of a business activity to an outside vendor, arguing that such actions are a measure to cut costs and improve operational efficiency (Shenkar).

International business involves business activities that cross borders. Being an aspect of globalization, it does not exclude small companies, nor does it occur only when a company establishes an operational base abroad (Ozimet). A company can also attain a global perspective through outsourcing — for example, by establishing a call center in India. The key consideration for assessing globalization is to evaluate the integration and connectivity between different parts of the world. Shenkar notes that a defining feature of international business is that firms operate in highly uncertain environments (Knight and Cavusgil). The rules and regulations in such environments are highly volatile, at times contradictory, and marked by persistent uncertainty. Decision-making in the global market is therefore based on dynamism, unlike in domestic markets.

Link Between Globalization and Outsourcing

As the practice of outsourcing has grown, so too has globalization, which has expanded considerably over the past few decades. Globalization manifests in the form of trade relations (Dash). This gives local companies the impetus to concentrate on products that offer a cost-effective advantage. The spread of globalization is fueled by technological efficiencies, which are themselves driven by the need to specialize and exploit efficiency. Companies embrace globalization to access cheaper raw materials and, as in the case of Foxconn — Apple's manufacturing partner in China — cheaper labor. This arrangement is also recognized as a form of outsourcing. The outsourcing model enables corporations such as Apple to move operations to lower-cost regions; in turn, these corporations are expected to provide the host community with improved living standards, proper working conditions, and contributions to community development.

It is evident from the discussion above that drawing a clear line between where globalization begins and where outsourcing starts is difficult. Clearly, the two go hand in hand, complementing each other in terms of the goals they seek. Both are said to be measures of exploiting existing and emerging advantages in a bid to generate greater profits. Core to the existence of each is the opportunity to increase efficiency at a lower cost.

Conclusion

The trends in the world today concerning globalization and outsourcing are all geared toward optimizing the potential of companies. This movement is accelerated by rapid changes in technology that demand organizational commitment for sustainability. The adoption of outsourcing is driven by globalization and the need to remain operationally efficient. Globalization leads to product standardization, which in turn facilitates the transfer of technology. It is necessary that operations in this form of market be further supervised through appropriate regulations and regulatory bodies.