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Outsourcing and sub-contracting


S:\triplea_resources\DP_topic_packs\business management\student_packs\media_ops_management\images\outsourcing.jpgAs markets become ever more competitive and global, firms are looking for ways to gain that 'extra edge'. Naturally, selling more products must be the main focus for any business, but increasingly it is the cost base of a firm that is receiving the greatest attention. If costs are lowered, the firm will have several choices. They can reduce prices and gain market share; they can retain price levels and make a larger profit margin, or of course, they may combine the two benefits.

One focus for cost reduction is the activities that a firm undertakes. Some of these activities are core to the firm's operations. In most cases the actual marketing of the product or service fits into this category. Some other activities, particular routine, and /or repetitive features are necessary, but the skills required might not be specific to the firm, nor skills, which they possess in great depth. Increasingly firms are asking the question whether they can outsource some of their operations, so they can focus on a limited number of key operations. An increasing range of activities, including IT services, training, payroll and public relations are now being outsourced. One area that has particularly been the object of outsourcing has been call-centre services, which over many years have increasingly been located in lower wage areas such as India and Latin America. These jobs are handled by separate companies that specialise in each service, and are often located overseas.

The specialised company that handles the outsourced work is often streamlined with world-class capabilities and access to new technology that the outsourcing business could not afford to buy on their own.