This case study examines the outsourcing strategy of Leethal Fashion Accessories, an Australian fashion accessories manufacturer that relocated part of its production to India. The paper analyzes the key external environment factors affecting the company's activity in India, including language barriers, cultural and religious differences, and corruption. It then outlines the primary advantages India offers as an outsourcing destination — particularly its low-cost, flexible workforce and willingness to accept small orders. The paper also identifies control challenges such as delivery delays and quality fluctuations, and concludes by recommending a layered management control system combining feedforward, feedback, strategic, tactical, and operational controls to mitigate these risks.
The process of globalization that characterizes today's economy has had both positive and negative implications for overall national economies, as well as for international and local economic agents. Globalization has made it easier for certain companies to expand at the international level and for consumers to access products that were previously obtained only with greater difficulty.
Globalization has also intensified competition. Nowadays, companies in all business sectors face continuously stronger competitive pressure. Given these circumstances, both small and large companies must find ways to become more competitive in order to at least ensure their survival in the market.
The most useful tool for creating competitive advantage is reducing prices. However, this objective cannot be achieved without developing and implementing focused strategies. One of the most important strategies for reducing prices relies on production outsourcing.
The cheap workforce available in developing countries has led international companies to seriously consider this solution. The most preferred countries for outsourcing are China and India, competing with other destinations in Africa and Asia. These regions are responsible for the massive production of all types of goods, from appliances to clothing and food. However, this solution also carries negative aspects: workers in these countries are often unskilled, and the quality of goods produced there is frequently questionable.
As noted above, more and more companies incorporate outsourcing into their production process. Leethal Fashion Accessories is 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 most likely to influence its activity there.
Understanding the company's external environment is the first step toward achieving its marketing objectives and general goals. The marketing environment is essentially represented by opportunities and threats (Kotler, 1986). In other words, the results of the company's efforts depend on its ability to exploit opportunities provided by the marketing environment and to avoid the threats that are also present within it.
As certain theorists have argued, a company's external environment can be stable, unstable, or turbulent (Stoner, 1978). The environment currently present in India can be characterized as unstable at a minimum. Such an environment is typically marked by frequent changes that affect most of its components. This type of environment is the most common and affects companies across all sectors of activity. Developing a business in such an environment requires a prospective attitude: identifying the direction and degree of likely changes, and increasing the company's capacity to adapt to the shifts that environment will produce.
The external environment in which Leethal Fashion Accessories operates consists of the microenvironment and the macro environment. The microenvironment includes suppliers, workforce suppliers, clients, competitors, and public organizations. The macro environment is represented by demographic, economic, technological, cultural, political, institutional, and natural factors.
The most significant external environment factors likely to affect the company's results in India are language and communication barriers, religious and cultural differences, corruption affecting the government and business environment, and frequent delivery delays.
The language barrier is the first obstacle that companies addressing India as an outsourcing destination must face. Workers in India often have limited proficiency in English, making it difficult for them to clearly understand what the company expects of them. As a consequence, the company must employ translators and interpreters, which adds to total costs and requires more time to reach objectives. This leads to defective communication, which in turn generates increased costs. Furthermore, communication problems accumulate and create additional complications that the company must resolve with greater effort.
Religious and cultural differences also represent significant barriers. The cultural environment of India consists of a system of values, customs, traditions, and beliefs that influence its citizens' behavior. The buying and consumption behavior that the company must consider is grounded in these components. Moreover, elements of the cultural environment can be decisive in defining market segments and identifying consumer typologies (Kotler, 1997). These cultural differences also determine the type of marketing campaign most suitable for the region.
India is a country where religion plays a very important role. Many aspects of Indian citizens' everyday lives are subordinated to or influenced by religion. This reality must be understood and taken into consideration by Leethal Fashion Accessories.
Another obstacle for the company in India is corruption, a phenomenon that significantly affects developing countries. Leethal Fashion Accessories must navigate corruption affecting the Indian government and its institutions, which leads to increased costs for doing business in the country.
India, along with other targeted outsourcing destinations, represents a solution to the problems that Australian manufacturers face domestically. The primary reason Leethal Fashion Accessories and other Australian manufacturers have outsourced their production to India is the high cost of the Australian workforce.
Additionally, the textiles and fashion industry in Australia has declined significantly over recent decades. This means there is limited room for developing production at the national level; production costs have risen substantially, leading to higher consumer prices that are not competitive locally. Australian companies are therefore compelled to seek cheaper alternatives, and this is where India becomes relevant. The cheap workforce available in India represents a viable solution for Australian manufacturers (Flatworld Solutions, 2009).
"Delivery delays and quality fluctuations challenge managers"
"Feedforward, strategic, tactical, and operational control systems"
"Control systems offset outsourcing risks in India"
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