Outsourcing in an International Firm

Paper Summary:

In this article, the writer looks at the advantages and disadvantages of outsourcing in international business, concentrating on General Motors. The writer maintains that the most often-mentioned advantage is the ability to significantly drive down wage and production costs, yet there are also process costs that can also be significantly reduced. The writer points out that a major disadvantage of outsourcing is the culture clash that happens between manufacturers and those doing the outsourcing, with one or the other rejecting each other's culture. The writer concludes that General Motors had no choice but to embark on private industries' largest ever outsourcing initiative, as their market share in core markets is dwindling quickly as the onslaught of the more fuel-efficient and affordable sport utility vehicles are penetrating their core markets.

Outline:
Introduction
Advantages of Outsourcing
Disadvantages of Outsourcing
Conclusion

From the Paper:

"A second major reason General Motors wanted to outsource IT was to accomplish higher levels of customer service performance globally from this specific organization. The dual benefits of greater responsiveness and cost reductions in addition to stabilizing what for many companies is a high turn-over operation with attrition of 60% or more makes outsourcing service and support an imperative. The fact that outsourcing companies also keep trainers on staff in the event new employees need to be trained due to attrition also appeals to many manufacturing and services companies including GM."
"A third major reason that manufacturers outsource in general and GM specifically was to obtain needed IT expert-level skills more economically in global locations other than the U.S. This is especially true in the context of the Sarbanes-Oxley compliance efforts GM plans to pursue in the context of their global outsourcing effort. This also is the case with lean manufacturing concepts for industrial manufacturers who are interested in getting significantly lower per unit production costs, and realizing economies of scale in procuring parts and components in India and China where costs for these key components are significantly lower than in the US."

Sample of Sources Used:

• Carrillo, Desronvil, Niven. Laura Carrillo, Kathia Desronvil, Colleen Niven. Offshore Outsourcing: Is It A Viable Approach for All Projects? AMR Research, Boston, MA. June 30, 2002
• Hoover, Nicholas. GM's massive Outsourcing Deal Up And Running". Information Week Magazine. September 11, 2006. Available from Informationweek.com at location: http://www.informationweek.com/news/showArticle.jhtml?articleID=192701131 . Accessed 17 November 2006.
• Sarbanes-Oxley Act (2002) - U.S. Senators Sarbanes and Oxley. Passed in 2002 by both U.S. House of Representatives and U.S. Senate. http://www.aicpa.org/info/sarbanes_oxley_summary.htm Text viewed on the Internet on 17 November, 2006.

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