Change and Continuity in Contemporary Business

Impact of globalization on the way organizations conduct their businesses overseas, in the light of increased outsourcing. The strategies adopted by General Electric. Offshore Outsourcing Business Models. Factors for affect the success of the outsourcing.
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Introduction

The world economy is largely distinguished by the processes of globalization that are implemented by strengthening the role of the world's largest corporations and increased competition between them. In modern conditions, one of the tools to increase companies' competitiveness is the improvement of the efficiency and value of their brand portfolios. At the same time to increase the value of the brands, companies reduce the number of local brands, using a global branding. Most firms accomplish this by reducing the costs of adaptation to local conditions and the general lowering of costs to source/deliver their brands to international markets which contribute to increase the value of brands-this is called a global strategy.However, nowadays any company may face competition in anywhere in the world. Most of the world's largest companies have ability to produce and operate their products and services in many other countries, and they have global brands which can be famous in the world.

The aim of the course work is to evaluate the impact of globalisation on the companies' business activities overseas, on the basis of the increased outsourcing. In accordance with the intended purpose of the report the following objectives are provided:

methodological principles needed to transform the management of companies in the face of increasing competition and the development processes of economic globalization;

development strategy for the company's competitiveness through the use of the outsourcing in order to maximize the efficiency of internal and external sources of business growth;

strategies adopted by the company as outlined in the case study (General Electric).

Impact of globalisation on the way organisations conduct their businesses overseas, in the light of increased outsourcing

Globalization of the world economy leads to a constant increase of international competition between products, companies, sectors and countries, resulting an aspiration of main actors in international economic relations to enhance their competitiveness in the global economic environment, by using advantages of international division of labour, and deep eningparticipation in it. As economic evolution is inevitable, the companies will always chose cost-benefit strategies transferring production or service jobs to abroad attaining lowest labour cost.

Furthermore, global financial crises have further updated the problem by forcing all countries and entities to seek new forms of international cooperation. However, the changes that companies try to make are more difficult than ever. Many analytics say that most of these change efforts fail to achieve companies' goals, putting even more pressure on managers to find a new major innovation which can help the company to be more competitive. The example of these major areas of change that can affect every organisation can be off shoring and outsourcing strategies. The effectiveness of these strategies is confirmed by international practice, indicating that at the moment, more than half of foreign companies are using outsourcing in its business for cost efficiency.

Global outsourcing is a form of business organization on an international scale and reflects the processes of economic globalization including: Liberalization of trade and services, globalization and associated free movement of technology, know-how and products of human labour form a new environment of modern business. According to the director of General Electric; “a real global company is that, which uses the intelligence and resources from all over the world”. (Adamov, 2009)

A typical example of global outsourcing is offshore programming, which is a significant part of the total market of IT-outsourcing. Nowadays, active resource providers on the market of offshore programming are India, China, Mexico, Ireland and Eastern Europe. The scope of the work is transferred to the place where it is running efficiently and cost-effectively. The process of globalization has opened new horizons for outsourcing non-essential and did sign the geographical location of companies.

Thus, the entire modern management concept is aimed to improve the efficiency and competitiveness of the company. If in the 90s of the last century as the main themes in the discussion of outsourcing were cost savings and introduction of new information technologies in management, but now it focused on the building strategic alliances in the global outsourcing projects.Also former forms of employment become ineffective, due to the globalization, increased competition in global markets, and global financial crisis. Therefore it led to the development of new human resource management areas as out-staffing.

However, in Europe until the 60s of last century out-staffing was not so famous in business circles. For example, only in 1956, after opening a new office in London by Manpower began promoting of this service. Over the next 15 years all the major recruiting agencies opened their offices in London, Paris and Amsterdam. The company currently has more than 4,400 Manpower Offices in 73 countries. Kelly Services now has offices in 37 countries, and Swiss Adecco provides its services in 7000 offices in 60 countries. (The Origin of, 2011)

In the current circumstances, the task for managers is to create highly competitive and efficient systems out of the company. It is also necessary to reduce the service costs of business processes, which often leads to a complete transformation of the structure of business through the introduction of new high-performance tools, such as outsourcing and out-staffing.

Consequently, in today's business making management decisions leaders must use all previously accumulated expertise and experience to perform tasks involving highly skilled specialists and implement innovations, which is possible only with deep expertise in the key area.

Outsourcing

Outsourcing idea started to develop in the United States in the field of information technology as a cost effective method, and then spread to the traditional types of business(automotive, aviation, light industry, food industry, etc.). The theoretical elaboration of basic principles and practical recommendations for the use of outsourcing has become popular in developing counties. In fact, more than 500 countries from United States are already outsourcing to India, China, and other developing countries. (Robert B., 1998)

Many foreign companies transfer series job functions to free-lance professionals to reduce costs. Nowadays, centre of this outsourcing are India and China, where wages are lower than in Europe and the USA. The facts that salaries of employees in these countries are much lower than their European and American colleges and responsibilities which they pass are even more. According to Richard H., (2007), lowering labour costs is one of the main reasons for companies that choose outsourcing. For example, in United States a company pays for a financial manager $35 per hour, but in India it can be paid $10 per hour. Cost difference in the manufacturing sector even higher. Employees working in United States earn between $11 and $20 per hour, but it can be replaced by the same workers in China and Mexico who are willing to work for $1 and $2.50 per hour. (Richard H., 2007).

Outsourcing and off shoring are used as a way to reduce production costs, but in most cases for the companies that have sustainable growth, regularly referring to these methods to achieve strategic objectives - to acquire the capabilities that they do not have at home, or enhance the ones they have. Scholars found that 85% of the best companies use outsourcing solutions for a variety of roles, searching talented staff from the world and quickly bringing to market new products and transform its business model. In other words, they went farfrom cost savings.

Leading companies are using outsourcing to achieve five main strategic objectives:

Entry to global talent. Lack of talent especially in emerging markets may stop the growth of the company. For example, Texas Instruments overcame these difficulties by creating search centres in India. The centre not only helped to reduce costs, but also became a rich source of talented people, ensuring the company to increase influx of patents. (Glass door, 2009)

Creating long-term partnerships which reduce risk and capture value. Although the risks of the outsourcing in recent years have grown, many companies continue to keep their partners in a distance. Whereas in fact they have to exercise co...