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Is outsourcing a wise corporate strategy?

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user2618867 | (Level 3) eNoter

Posted February 5, 2013 at 4:17 AM via web

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Is outsourcing a wise corporate strategy?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted February 5, 2013 at 4:38 AM (Answer #1)

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There is no one answer to this that is always correct. Outsourcing can be a good strategy for a business, but in the past decade or so it has been pursued by many companies when they really should have chosen other strategies.  So, outsourcing is sometimes a good strategy and sometimes a bad one.

It can be a good idea to outsource if you truly understand what your firm’s core business is.  If you have a true understanding of this, you will know which processes can be outsourced.  You can outsource those aspects of production that are not part of your firm’s core competence and which your firm is not doing as well as it could.  This makes your firm more streamlined and efficient.

The problem is that many firms have chosen to outsource simply as a way to cut costs.  They have not realized that the processes they were outsourcing were actually vital to their core business.  They also underestimated the problems that could arise when certain parts of the production process were out of their control (because of having been outsourced to other companies).

This shows us that there is no way to say that outsourcing is a categorically good or bad strategy.

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