Today, the outsourcing strategy is often implemented to create a competitive advantage over rivals. Businesses now look to achieve sustainable competitive advantages in each step of their supply chain. Outsourcing in emerging countries has become the solution in getting this sustainable competitive advantage as these locations are well-endowed in natural resources and human skills. The reasons of outsourcing are multiple, such as sharing risks or producing efficiently by specialists which the company does not have itself. In the long-term, outsourcing allows companies to be focused on their core-activities. Nowadays, scarce are business functions insulated from outsourcing; finance, call centres, Research and Development (R&D) operations are easily outsourced abroad. However, the Information Technology (ITO) and Business Services Outsourcing (BPO) are the main outsourcing areas as their worldwide performance exceeded US $55 billion in 2008 and grew by 15 to 20% annually since 2004. Outsourcing in emerging markets has become a source of competitive advantage at various levels of the supply chain.
[...] Thus, communication with a labour union is difficult and in some cases may lead to a strike (Elmuti, D. et al, 1998). Moreover, outsourcing can strongly damage the corporate image as it is often associated with exploitation of low-wage workers such as Nike has been experiencing (Elmuti, D. et al, 1998). Technically, outsourcing suppliers are potential competitors because they have access to companies' strategic information and process (Mohr, J., et al 2006). For example, Motorola had contracted with Taiwan's BenQ to produce handsets and the latter has launched its own brand of handsets in China by using the Motorola's techniques (Engardio, P. [...]
[...] In the case of emerging markets, companies consider economic drivers – ie. emergence of high technology in developing Asia - and demographic drivers – ie. access to high-skilled human capita (Dixit, A. et al, 2009). Basically, favorable access to these cheap resources is often synonym of competitive advantage and encourages companies to outsource to these places. Fifthly, outsourcing in favourable locations can enable companies to be more competitive as the company has access to a market with a great potential. [...]
[...] Today companies are likely to look for competitive advantage in quality to assert their differentiation position. This particular competitive advantage is gained by access to large skill pool available in developing countries. In of Chinese students got an engineering degree while compared to of American students (Click, R. L. and Duening, T. N., 2004). Higher education provides students from developing countries with strong technical and business knowledge that MNCs are constantly looking for students are graduated every year in Cairo (Egypt) of them speak fluently English and even 1,000 are able to speak Lithuanian (Willcocks, L. [...]
[...] Finally, outsourcing is sometimes synonymous with hidden costs related to exchange rate risks or even lack of business knowledge in developing markets (Kotabe, M., and Murray, J. Y., 2004). To conclude, companies are constantly looking to reduce their costs, increasing their productivity and profitability and enhancing the quality of their products and outsourcing seems to be an intelligent strategy to gain competitive advantage. Moreover, it allows companies to reduce their fixed investment because they have easy access to cheap facilities abroad that lower their break even point (Kotabe, M. and Murry, J. 2004). [...]
[...] et al ,2009).Outsourcing in emerging markets has become a source of competitive advantage at various levels of the supply chain. Porter (1998) defined competitive advantage through five forces and the combination of these determines the attractiveness and the profitability of an industry (fig.1). One of these forces is ‘barrier to entry' as the efforts that a company should make to increase its market shares while limiting the entry of competitors on the market. Outsourcing in emerging markets allows companies access to low-wage workers. [...]
APA Style reference
For your bibliographyOnline reading
with our online readerContent validated
by our reading committee
