OUTSOURCING

Case Study : Outsourcing

Case Study : Outsourcing

Introduction

Ever since the economic recession in the past decade in the U.S and the rest of the world, the easiest option for small businesses to manufacture goods has been to outsource to China where costs are comparatively lower and easier to manage. Outsourcing Is also given the name of “relational contracts”, and according to Santos and Simonetti, “(they) give parties both long-term stability and flexibility as they can be adapted to respond to a changing environment”. However, this is an option that has slowly started to become more taxing rather than easy on the small businesses, and slowly the trends are changing back to goods being manufactured in the US itself. In this paper I will analyze this changing trend and evaluate whether it provides more opportunities or challenges for the businesses starting up in US, or whether they should stick to the outsource method.

Discussion

It is a fact that ever since the last few decades, the term “Made in America” is rapidly losing its value, as about 80 percent of products sold in America now are being manufactured in third world countries where the labour cost is much lower, or being given the technical know-how and treatment by Chinese companies that are much better equipped for manufacturing goods. Outsourcing is a relatively new trend that has been making a serious impact on and throughout major American companies. If a household is rummaged for everyday appliances, there is a good chance the majority of these would be made in China, which is testament to the fact that Chinese companies have made their impact felt. In the case study provided, the small business Sleek-Audio has evaluated the opportunities and cost of remaining with the outsource operation in China, and has decided against it. According to the case study, the problems they faced with outsourcing their product was that the manufactured goods were of low quality. They also encountered shipment delays, communication barriers, travel and other costs. All of these are problems that may be faced by any company that decides to outsource its product, may it be in China or any other place. There are challenges that will be faced no matter what, since there is a huge distance between the two protagonists as well as several barriers, communication being only one of them(Drezner, 2004). While it is true that the economic boom in China that has recently been felt worldwide is in correlation with the outsourcing movement of the US, the recession in America also plays a part in this. Many Americans have started to ask the question of whether or not outsourcing is a good option now, since it means there is a huge gap in employment figures in the US as a result of it. While it may be true on certain levels that American companies, regardless of whether they are small businesses or big companies, are fuelling China's financial system by outsourcing jobs that would be applied for by Americans if it weren't ...