ECONOMIC ANALYSIS

Economic Analysis

Economic Analysis

Introduction

The involvement of management accounting in strategic decision and coordination activities remains a controversial issue in literature. Therefore, the objective of the present study is to explore the significance of management accounting, by analyzing the degree of input in the context of a typical strategic decision: the offshoring of services. For several years now, a new trend towards the outsourcing of complex services, such as software development or product design to low-wage countries, has emerged. multinational bank call centre aim to realize significant cost savings by either outsourcing service development to suppliers in countries such as India and Russia or by engaging in joint ventures and acting as local service providers. Both, the distance combined with the economic and legal differences that are relevant to international activities as well as the monitoring of ongoing offshoring constitute a substantial challenge.

Offshoring is generally conducted by using one or more of four possible business models: direct offshore outsourcing, third-party offshore outsourcing, joint-venture offshore outsourcing and wholly owned subsidiaries (Khan and Fitzgerald, 2004). Knowledge-intensive R&D activities tend to be transferred to captive offshore centers, rather than outsourced to external providers (Bardhan, 2006). A number of risks and obstacles that affect offshoring strategies have been identified in literature. Among these are poor service quality and communication infrastructure, loss of control, cultural differences, high-employee turnover at vendor firms, the staffing of projects with inexperienced employees by the vendor, as well as country risk, legal, and privacy issues (Rao, 2004; Beulen et al., 2005; Carmel and Nicholson, 2005; Lewin and Peeters, 2006; Metters, 2008). High-cultural distance and language barriers are drivers of invisible costs, which occur when services are offshored (Stringfellow et al., 2008).

Philippine BPO Industry

BPO has been one of the fastest growing sectors in the Philippines in the past seven years. By 2010, revenues are projected to reach US$12.2 billion, showing a five-year compounded annual growth rate (CAGR) of 38% (SGV Industry Bulletin-BPO Edition). The bulk of this amount will be accounted for by the call centres. In the global arena, the Philippines consistently ranks among the top five BPO locations. The country continues to be an attractive location for offshore voice BPO (call centre) services due to its supply of English-speaking professionals, low labour costs and availability of a good telecommunications infrastructure.

Customer Care (Call Centres)

The relatively high cost of personnel and worker inefficiency, which accounts for the majority of call centre operating expenses, influences outsourcing in the call centre industry. The call centre landscape in India, the Philippines and other locations is growing in response to the demands made by organisations in developed economies to off-shore their calls to low labour cost service suppliers.

Even with such an impressive performance, the Philippine market share of the global pie was only 3% in 2005. India, the country's closest competitor, had a market share of approximately 8% in 2005. There is definitely much room for growth as the US and British markets remain largely untapped. Asia Pacific has only drawn on approximately 11% of ...