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Business Off shoring and Outsourcing Essay

Introduction

The goal of a business is to maximize profit in a competitive market and demonstrate a leader in the particular industry. The changing economy has provided a limited concept to securing the once procedure to keep the workforce in place or sustaining manufacturing products in house. Although, the consequence for senior management of companies deciding to implement off shoring or outsourcing measures; the cost of loss jobs and wages becomes a significant problem. The business management team usually weighs out the pros and cons and continues to the initiative to reduce operation costs (Collis, 2003).

The changing aspects to sustain the winning strategy that business are committed to reaching their board of directors and investors expectations for advancement in the industry. The measures used by senior management of companies choose off shoring and outsourcing to address the difficulties for balancing the operations and associated costs. Therefore, the usage of off shoring is implemented in an attempt to refrain from losing the leader status in a particular industry or going out of business. The usage of outsourcing is implemented in the pursuit for managing the internal business processes for a cheaper cost of labor, in an effort to savings to the corporation.

The review will identify and present an integral vantage point to primary objectives of two different companies and two approaches in stimulating their bottom line for a formidable financial outcome. The focus on two forces from Thomas Friedman book “The World is Flat (2008),” assisted in the analysis of identifying the perspectives of the goals of the company’s business strategy for success. The two companies in review is SunTrust and Mattel that currently has continue to utilized outsourcing and off shoring activities – that contributes to the sentiments of jobless individuals and consumers for the aftermath consequences.

The Mattel Company’s Objective to off Shoring Manufacturing Toys

The Mattel Company is one of the world’s largest toy companies that manufacture widely known children from Barbie doll to hot wheels. The company was initially founded in 1945 by Harold Matson and Elliot Handler that transformed the perception of preferred brand identity toy and how a toy was manufactured. The primary creation of Mattel initially manufacturer picture frames and dollhouse accessories and later on shifted entirely too exceptional toys as an increase of consumer interests of the product in 1959.

The success of Barbie brought Mattel Company an advantage point to extend out other business divisions such as Fisher-Price and Tyco. The additional divisions created a world of the largest and most outstanding toy makers for decades. The extreme of demand for the toy products in the subsequent years encouraged more staff workers to address the orders and sustain the leaders in the industry. The senior management team at Mattel Corporation in the late 1980s begun to look into off shoring activities to subsidies the operation costs. The difficulty for Mattel is the balancing act that comes into play when implementing off shoring initiatives in another country that has culture differences and regulations adaptation.

The culture differences and regulations adaptation in China presented a serious consequence in business operations in the United States and in other markets. The objectives of the Mattel Company for utilizing the off shoring initiative that keeps the quality as beginning output with determined overall costs, however, the quality became the main issue in the last past years. The Mattel recently in 2007voluntairy issued a massive recall of its imports due to confirmed reports that found lead and dangerous parts. The massive recall resulted in a sharp decline in sales and the Mattel brand identity as well as brand equity.

The senior management team at Mattel Incorporated fully understood the backlash from activist, parents, and competitors that garner the company have profit hunger only initiative. The Mattel Company formulated an approach to handling the concerns by new measures for enforcing the off shoring manufacturing in China, on Mattel Incorporated behalf, to implement better ways to eliminating the challenges imposed on the brand identity as well as brand equity. The brand identity received a significant negative effect on the overall operations of the Mattel Company initiatives.

According to Harbhajan and Varinder literary review book titled article on “Outsourcing and off shoring in the 21st Socio-Economic Perspective (2006)” presents an interesting concept to the certain aspects of difficulty to pursuing such options. The manageability expressed in authors Harbhajan and Varinder outlook into the matter is the overwhelming of declining company’s brand identity and its equity. The decline creates a lesser investment in consumers, largely in the corresponding country i.e., U.S.A., to reject the previous or current products.

The key points that Harbhajan and Varinder outlined is the focus of the company to ensure an alignment to sustaining the demographic market. The consumer based at Mattel, for instance, outlines the core foundation for staying in business and to refrain from severe declining in the market share.

The analysis from authors Harbhajan and Varinder literary review illustrated that a company’s demographic market should propose a corrective communication model investing into a successful branding marketing plan initiative. The previous year’s studied of companies balancing their brand identity in adapting off shoring implementation presented findings indicating certain key relationships to consumer’s loyalty.

The initiative for companies, according to Harbhajan and Varinder, to solidify a consumer base b a strong market showing of brand identity the demographic must be identified and infuse new trends in product development that enhances the brand style of the company. Studies show the influence of tapping into the demographic matrix of the company creates the influence on their perspective preference for products that are identified to refocus the connection to using off shoring.

The consumers will demonstrate a negative outlook to the company communication model in presenting one message; however, the message is thinly represented by off shoring manufacturing of products that drastically eliminates jobs. The company’s brand identity and brand equity is appropriately reduced in the markets the illustrated key points infuse in the declining interests of the product. The brand identity of the company products are essentially to marketing within the right context of the particular culture (Dibb, 2007). This measure could reinforce the brand marketability of the company at whole that provides an opportunity to grow the company in a new direction if implementation of off shoring is effective in brand positioning.

The noted phases of the positioning of the brand of the product and manufacturing are crucial to go through the corresponding paths for an effective share in the international market. (See Figure A).

Brand                                        Positioning Brand Name Selection Brand                              Sponsorship Brand Development
Attributes Benefits Beliefs and Values Selection Protection Manufacturer’s brand Private brand Licensing                                                 Co-branding Multi-brands and New brands manufactured off shoring

Figure A.

In order to create a more favorably company brand, according to authors Harbhajan and Varinder a commitment of the company must continue the acceptable products and service when off shoring the tasks to another entity to sustain brand positioning by producing quality.

Therefore, the communication model by the usage of trading off the willingness to provide workable products with no faulty components sustains the primarily demographic segmentation to not reduce the company’s overall operation (Williams, 2008). Consequently, the company’s pursuit to increase the exposure for the advancement product mechanics to demonstrate a higher quality, in order, to accomplish this goal the company international marketing researching team will need to address any such non-addressing trend in the constant changing environment platform.

The measure in assessing any non-addressing trend outlined by Harbhajan and Varinder outlined the notion that perils of a company, such as Mattel Corporation, is to limit dangerous consequence in faulty production. The Mattel Corporation focused little on keeping the branding of the toy products up to par and much on the concept to save costs to reap profits on the backend.  The Mattel Company core primary attributes failed considerably in preventing the dangers to the fundamental consumer base, in order to ensure brand equity. The danger to children due to the use of strong magnets that could detach created a distant identification in the brand of Mattel Corporation toys and resulted in comprising brand positioning.

The strong magnets in some of the toys manufactured by China allowed the Mattel brand to diminish the overall concept in the initial quest for off shoring business manufacturing production. In late 2007, the Mattel Company had to recall over 17 million products due to the extensive upset of damaging foreign materials in the product. The parents of the children that were affected greatly demonstrated the dismay by not displaying loyalty. In an effort to settle concerns in the United States, the Mattel Corporation instituted a new policy on production of toy products.

The aftermath did very minimal in resolving the recourse of discern of not only the falter manufacturing of the product – the growing concern that jobs were being off shoring to China that contributed to the economic concerns in the country. These consequences outlined in the literature review by Harbhajan and Varinder of “Outsourcing & Offshoring in the 21st – Social Economic Perspective (2006)” provides the basis of the socio-economic impact within the country that off shoring its manufacturing production line to a discerning degree.

Harbhajan and Varinder argued that the observations to the core makeup of a company’s attempt to merge the culture expectations are comparable with the paradigms of socio-economic theories. The most noted is the social exchange theory and power-politics theory that in the case of Mattel Corporation related to enduring pursuing a significant share of dominance by any means of infusing their brand in the market. In the “Principles of Political Economy (1909)” by John Stuart Mill theorized the profound benefits of production on a very large scale.

The observation by Mr. Mill had outlined the connection of specialization and the division of labor. Mr. Mill did argue in his literary review that the larger the enterprise, the farther the division of labor may be carried. This is one of the principal causes of large manufactories (Mill, 1885, p.81).   John Stuart Mill further outlined that as a general rule the expenses of a business do not increase by any means proportionally to the quantity of the business (Mill, 1885, p.82).

Mill explained that that the large system of production is inevitable (p.83). Therefore, the understanding to why the corporation in one country will consider the initiative for off shoring to another country and not only render more profits but to sustain the flow of increase production – that will assure meeting manufacturing needs of the business.

The counteract affect to companies, in the case of Mattel Corporation, is the backlash of the brand identity meltdown due to the quality mechanism that failed consumers expectations and the reduce amount of any available jobs. The additional dangers of materials that are harmful creates enormous problems at the home based country, however, the concern for quality measures in the off shoring country is not imperative. The implications of this imbalance fosters a major strain in the company’s socio-economy by a reduced brand loyalty and the strained of financial advantages in the market industry.

The SunTrust Bank’s Objective to Outsourcing Service Processes

The SunTrust Bank Incorporated recently expanded its operations with over 1,600 retail branches and 2,509 ATMs in Alabama, Arkansas, Florida, and Maryland. The bank expansion contributed to providing customers a full range of technology-based banking channels, including Internet, PC, and automated telephone banking. SunTrust Bank subsidiaries perform the services of deposit, credit, trust, and investment services solidify the bank’s assets to over $179 billion in the first quarter of 2008. The bank is known as the nation’s largest and strongest financial holding company and strives to continue to hold such status.

In order to sustaining the ranking in the financial industry, the SunTrust Bank Corporation formulated divisions to cater to a diversified consumer driven market. Therefore, the portfolio diversification through subsidiaries provides mortgage banking, brokerage, investment management, equipment leasing, and capital market services. The diversification created a means for extended workforce within the confinements to streamline the project management of divisions that do not increase operation costs. The senior management, board of directors, and the stakeholders garner concern for the demand managing divisions that contributed to additional expenditures.

Therefore, the usage of outsourcing of division processes allowed addressing the immediate concerns and providing the needed business growth. The outsourcing of processes in the divisions seemed to satisfy the company’s objective for streamlining, however, the relocation of jobs contributes to lay off employees. In addition, the politics of the formation of outsourcing within the matrix of the company establishes a negative publicity impact in the community. Furthermore, the issue of a successful transition to utilizing outsourcing creates problems with the project management aspect for a concrete integration that filters bad service to customers.

According to Douglas Brown and Scott Wilson in “Black Book of Outsourcing: How to Manage the Changes, Challenges and Opportunities (2005),” the theoretical antecedent framework is the theory of economics of a scale that a rationale for the bigger corporate paradigm – that has become the upmost objective to using outsourcing.  The fast growing aspect of the world utilizing outsourcing to an estimate of $6 trillion in the coming year, in which, the forecast results from Forester Research dictates by 2015, 3.3 million jobs accounting for $136 billion in wages will move to outsourcing entities either within the U.S.A or India, China, and Russia.  The IT outsourcing global revenue grew from $184 billion in 2003to over $256billion in 2008 and the IDC estimates business process outsourcing (BPO) in Europe to grow up to $72 billion Euros in the coming years.

The mission of most companies as in SunTrust Bank Incorporated to the reason for outsourcing is the benefit to the end customers by reducing costs and improving productivity. Although, the concepts outlined By Brown and Wilson in “Black Book of Outsourcing: How to Manage the Changes, Challenges and Opportunities (2005),” is the impact on companies using outsourcing that affects the influence of customers towards the company.  The key points presented in the literature are the conflicts of the labor within the restraints of the project management and ethical issues associated with outsourcing.

The effects of strategic outsourcing activities fail to meet the core values of the company when no attention is on the influence on individual customers and internal staff employees (Fill, 2007). The individual customers are expecting the same type customer service and outcome from the company and when it is not received a negative impression will occur. The company senior management team at SunTrust Bank usually does not understand or realize the significance of the displeasure and continue on the same path to using outsourcing. The individual customer preferences emphasis the criteria are for certain services or products and when any areas are not at par a severe consequence occurs.

Similarly, the criticism of outsourcing is focused on the changing employment issues that are related to the globalization of the labor force and its effects on the actual organization. The problems occur with the organization with limited consideration to the backend-customers, in the pursuit of the organization to managed operational costs and processes within the diversified divisions.  The maneuvering on balancing the outsourcing can render caution to companies to protect their brand image, reputation, core skills, and property rights when processes are outsourced to other entities. Therefore, the social facilitation is crucial to establishing the needed awareness of how the synergy of outsourcing activities can actually emerge potential negative effects. (See Figure B).

Social Facilitation
   
The presence of other group members enhances the performances of well-learned behaviors that have been performed repeatedly in the past. The presence of other group members impairs the performance of difficult, complex, or novel behaviors that involve considerable expenditure of effort.

Figure B.

The concerns with managing social facilitation is crucial for companies, according to Brown and Wilson in the Black Book of Outsourcing: How to Manage the Changes, Challenges and Opportunities (2005),”  to reduce brand disloyalty and increase customer complaints due to concerns of cultural differences that hampers project management principal the key is to understanding the principals of project management. The aspects of transferring the processes through outsourcing to other entities create a lower service standards and loss of privacy that streams from insufficient project management utilized.

The implementation of the developing the chosen project management principals within the outsourcing company proved to not stay aligned to the set out objectives of the company. Moreover, the action to implement a more tailored made infusion of outsourcing services such as IT, customer service, processing claims or loans presented a challenging aspect to keeping back end customers satisfied. The matrix being used by most corporations did not capture the importance of a good project management operation in order to assure the outsourcing was being conducting to the organization expectations.

In this measure, a new strategic implementation to begin steps of a new focus on the demographics associated with the outsourced divisional tasks and deciding what would be a low risk processes to actually outsource. The goal is to achieve success with a forecast revenue sales portfolio in order to reach new ground for the upmost potential of higher returns if the right decision making occurs by choosing the correct division to outsource.

The analysis of most companies details the challenging outcomes from the delivery of deliverables in the project management initiatives from the outsource entity. The main reasons are within the functional setup with the right project structures at the outsource entity on behalf of the parent organization – that at times creates a framework of difficulty to delivering the same quality and service at the same level of the organization.

The project structures are unique and necessary for organizations to meeting its core initiative to manage the changing environment for a successful transition and implementation. The goal for companies, such as SunTrust Bank, is to manage the change in the ability to tap into the certain areas that are necessary to complete deliverables and identify dependencies.

In recent analysis of the changing ways to maneuver the impact of outsourcing an identification of project structures presented that a unique characteristic to the specific task or processes to be outsourced. The goal is establish the right project structure to ensure the outcomes are met by reducing the backlash of outsourcing that could create a poor result of service to consumers.

The Project Manager knowledge on the limitations provides understandings to the senior management team, board of directors, and the stakeholders on the detail ranges for adaptability on each structure preference to complete the project. The importance of a competent Project Manager (PM) is the understanding of the processes involved to each area of the focused structure. The knowledge of the Project Manager on the advantages and disadvantages of each structure provide the goals of the project synergy the outsourcing concepts within the offsite entity.  In addition, the Project Manager especially must master the utilization of the core objectives of outsourced process that can be complicated such as IT management that with any slight of errors can result to loss of information on a large scale.

Therefore, the goal for the Project Manager is to deliver the deliverable to senior management for the stakeholder by using the right structure to getting the outsource outcomes completing within the changed environment successfully (PMBOK Guide, 2004). In the case with SunTrust Bank, the functional sets of pure-project organization is the ideally prospect to utilized and managing the changing environment in the outsourcing initiatives. Mainly, the usage of pure-project organization is considered for the large and complex projects to accomplish the scope of a diversified project. The large projects are mostly used by the pure-project functional method due to the efficient and effective outcome.

In the pure-organization framework, the potential of mishaps in a difficult and complex environment while enforcing the processes can render a negative outcome to working successful with the outsource entity. The key is the focused Project Manager to be the center competent in directing the quality standards and services from the outsource entity.  (See Figure C).

  Pure – Project  Organization  
Program Manager Marketing Manufacturing R&D
Manager, Project A ? ? ?
marketing ? ? ?
manufacturing ? ? ?
R& D ? ? ?
finance ? ? ?
personnel ? ? ?
Manager, Project B ? ? ?
marketing ? ? ?
manufacturing ? ? ?
R & D ? ? ?
finance ? ? ?
personnel ? ? ?

Figure C.

The banking industry such as SunTrust Bank can often of times becomes too comfortable with the shift of globalization model towards a solid corporate outsource – that conducting tasks by being overseen thru effective project management. The outsourcing mechanics can be a complicated undertaking for all levels of management due to ineffective project management skills because of lacking outsourcing governance. According to Brown and Wilson (2005), the reported outsourcing challenges are about 58% a lack of a good process for specifying the outsourcing work which is crucial to establishing a productive outcome.

The notion from the outsource entity perspective is the need for the changing matrix from the organization that provides a limited view of expectations for delivering the services required. The dilemma of the senior management team of the organization is the decision to either continue the outsource commitment when the quality of service is not being received. The core reason for companies as that of SunTrust is to provide a wider range of services to diversify the portfolio through lowering firm costs by using outsourced professionals to manage the workflow. The elimination of jobs and possible reduced brand equity triggers the market of poor service that resulted by the outsourced entity.

The SunTrust Bank implemented outsourcing of their services and processes from mortgage loan documentation to IT – that posed a significant reduction of employees in the United States which contributed to concerns by consumers on the competencies in the business.  The benefit for a higher production with lower costs encourages the SunTrust Bank management decision of conducting outsourcing relationships within the every changing business environment to successfully sustain as a leader in the financial market.

Conclusion

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My understanding of the core reasons that companies used off shoring or outsourcing is the pursuit for saving the operational costs and streamlining the productivity of the operations. The fundamental objective is for sustaining a status of a leader in the preferred industry. Therefore, the choice for meeting the company’s financial needs and brand equity is the upmost objective to satisfying investor needs.  The organization and the supplier enter a contractual agreement that defines the transferred of services either through off shoring or outsourcing that gears towards the needed aspects of the particular project.

My personal experience working for a financial institution exposed the after affects of such contractual agreements by means of outsourcing, in which created the loss of my job. The severity created extreme stress and financial hardship. The reasons presented by the corporation stated the current trends in the market that resulted in the decision to eliminate my job duties as well as my coworkers, in order for the company to stay marketable. The consequence of the outsourcing presented challenges for my family that endured an unexpected loss of stable income. In addition, the identified loss was the opportunity to continue the year of service and the acquired vacation time no longer available.

Therefore, the feeling of resentment towards the company that decided to save money is very difficult to accept – that even with today’s’ unstable economy empowered another business to perform my actual job duties. The aftermath of the job elimination exposed the harsh reality on how companies utilized outsourcing to cut corners in operational costs. The outsourcing aspect might look as a promising choice for the senior executives of the company; however, the effects to families are substantial in all areas of living. The economy has a significant influence on the decisions of the corporation but the lasting effect on the foundation of the family is difficult to re-establishing a sense of security.

The decision for off shoring also presented discernment towards companies that use cheap labor in another country that uses unhealthy materials in products. The toys, for instance, that are manufactured limits the availability to purchasing the products for my child. The resolution offered by the company by ordering a recall due to the unhealthy materials used by China or India still creates an unpleasant outlook towards the retailer. The notion is that if the production of toys were kept in the home based county the concern of unhealthy materials would not be an issue.

The off shoring of manufacturing toys for cheap labor and operational costs prevents the purchasing of toys that my child would want to receive because of the faulty effects. The brand identity by the company has not changed my decision to seek out a toy or educational product due to the recent recalls and the relation to infusing the economy with the loss of jobs.  Moreover, the personal experience created a sense of not wanting to purchase any products made off shoring, in the hopes of making a difference to the reduction of product quality and availability of jobs.

Being personally and professionally affected by outsourcing and off shoring, the experience has been very negative. In the past several years, the influence of outsourcing and off shoring was unheard of in my household and the jobs were plentiful as well as no mention of unhealthy products. Today, however, the terms of outsourcing and off shoring gives me an unpleasant comfort zone as the struggle to make ends meet in a challenging economy is an everyday difficult reality.

References

Harbhajan, Kehal S. & Varinder, P. (2006), Outsourcing & Off Shoring in the 21st Social-Economic Perspective, Idea Group Publishing

Collis, Jill (2003) Business Research. Palgrave Macmillan; 2nd Ed edition

Dibb, R. (2007). Marketing: Concepts and Strategies. Houghton Mifflin (Academic); Euro Ed. edition

Fill, Chris (2007) Marketing Communications: Engagement, Strategies and Practice: Enhanced Media Edition. Financial Times/ Prentice Hall; 4 edition

Friedman, Thomas (2007) The World Is Flat, Retrieved June 16, 2008, from http://www.thomaslfriedman.com/worldisflat.htm

Mill, John S. (1909) Principals of Political Economy with Some of Their Applications to Social Philosophy, London: Longmans, Green and Co., ed. William J. Ashley, 1909(1848 1st Edition) Retrieved June 17, 2008, from http://www.econlib.org/library/Mill/mlP15.html

Duening, Thomas N. & Click, Rick L. (2005) Essentials of Business Process Outsourcing, John Wiley & Sons, Incorporated

Brown, Douglas & Wilson, Scott (2005) Black Book of Outsourcing: How to Manage the Changes, Challenges and Opportunities, John Wiley & Sons, Incorporated

PMBOK Guide (2004) A Guide to the Project Management Body of Knowledge. Third Edition. PMI Global Standard

Williams, Meri (2008) The Principles of Project Management, Site Point Incorporated

 

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