Outsourcing in Today's Business World

Topics: Management, Strategic management, David Ricardo Pages: 4 (1342 words) Published: October 23, 2011
In a world of globalization, U.S. companies are constantly seeking strategies to become more competitive. Important objectives of the strategic response have been to reduce costs, stay ahead of competition, and enhance profits. Outsourcing has become a main cost-cutting strategy in the twenty-first century. It occurs when a company moves work out of the enterprise. A special report in the Canadian Business Review magazine refers to outsourcing as a strategic tool. The author, Michael F. Corbett, states that in the 1920s and 1930s, the model hat has shaped our thinking about organization has been that of a large, integrated corporation that own, manage, and directly control most or all of its assets and resources. However, today's organizations are increasingly turning to outsourcing and changing the way they do business. As a result, outsourcing becomes a tool that challenges managers to think about creating more flexible organizations based on core competencies and mutually beneficial, long-term outside relationships. I agree with the author in this area. It is impossible for any organization to have expertise in all areas of the company. Therefore, it is wiser to outsource some of the work to other organizations that can do it more efficiently in order to save time and money. How well this process will work depends on the relationship between the parties. Therefore, it is a key element to develop a fair and honest relationship in which both parties can benefit by working together.

The author further went on to explain that as organizations adopt an outsourcing strategy, they often find themselves beginning to focus more on their expertise. In another word, organizations are assessing their strengths and advantages and doing the right thing. I totally agree with the author in this sense because it reminds me of the economist David Ricardo's principle of comparative advantage. The theory states that gain will be maximized when each nation, in this case...
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