An Appraisal of Outsourcing on Organizational Effectiveness (Case Study of Unilever Plc)
Chapter One
OBJECTIVE OF THE STUDY
The objectives of the study are;
- To ascertain the effect of outsourcing on organization effectiveness
- To determine whether cost affects organizational effectiveness
- To ascertain the relationship between outsourcing strategies and organization effectiveness
- To ascertain the effect of outsourcing on organization profitability
CHAPTER TWO
REVIEW OF RELATED LITERATURE
INTRODUCTION
Dwindling resources and market competitiveness have forced organizations to scrutinize their methods of producing goods and services and make changes in their processes in order to maximize economic returns. To be able to survive and be profitable in current globalization era, organizations have pursued continuous improvement, leaned up production, reengineered business processes, and integrated supply chains (Brannemo, 2006). Over the past decades there is a growing realization of the important contribution of sourcing strategy on organizational performance (Cousins et al., 2006). Outsourcing is a management strategy by which an organization delegates major, non-core functions to specialized and efficient service providers. According to Corbett (1999) outsourcing is nothing less than the wholistic restructuring of corporations around core competencies and outside relationships. Yankelovih (2003) indicated that two-third of companies world-wide outsource at least one business process to an external third party. This practice appears to be most common in the U.S., Canada, and Australia, where 72 percent of outsourcing is being sought. Javaligi (1998) noted that successful implementation of an outsourcing strategy has been credited with helping to cut cost increase capacity, improve capacity and improve quality. Kotabe (1998) argued that there could be negative long-term consequences of outsourcing resulting from a company’s dependence on independent suppliers. Such reliance on outsourcing may make it inherently difficult for the company to sustain its long-term competitive advantage without engaging in the developmental activities of the constantly evolving design and engineering technologies. This view point was corroborated by Corley (2000) when he examined the outcomes of technology sourcing partnerships from the sourcing firms’ point of view and found out that, equity-based alliances were more effective than contract-based outsourcing. Steensma, Kevin and Corley (2000) suggest that the outcomes from technology partnerships for sourcing firms depend on the interaction between technology attributes and the interdependence between source and sourcing firms. Klaas et al (2001), suggest that the influence of organizational characteristics is highly contingent, suggesting that organizational characteristics have different effects on various types of outsourcing activities outsourced. As such, it appears that many factors such as pay level, promotional opportunities and demand uncertainty should be considered when deciding to outsource functions or activities. Kotabe (1998) identifies three types of performance measures as necessary components in any outsourcing performance measurement system: strategic measures; financial measures; and quality measures. Malhorta (1997) used additional dimensions of market performance such as costs savings, cycle time, customer satisfaction, and productivity to measure the effectiveness of outsourcing strategy. Foster (1999) argue from a different perspective, obstacles such as poor choices of sourcing partners, inadequate planning and training/skills needed to manage outsourcing activities and poor organizational communication have also been identified as key determinant of the success of outsourcing projects . Lau and Hurley (1997) examined the relationship between outsourcing and profitability margin and they found that Chrysler’s profit margin is four times as high as that of GM due to effective outsourcing strategy. Frayer, Scannell, and Thomas (2000) suggest that companies are increasingly viewing outsourcing strategies as a means of reducing costs, increasing quality, and enhancing a firm’s overall competitive position. According to Ellram et al. (2007), outsourcing has implications for day-to-day management and performance, as well as strategic implications. Therefore, companies must outsource intelligently. Outsourcing decisions may affect company’s cost structures, long-term competitive situation and can also alter the nature of risks that the company must manage (Brannemo, 2006). Hence, it is crucial for management to understand and have a clear conceptual framework of their outsourcing decision. Furthermore, it will also important that company must know the benefits and risks of outsourcing. The increasing use of outsourcing arrangements, as well as the unfamiliar complexity associated with it especially in developing countries suggests the need to probe further about how to effectively utilize this strategy.
CHAPTER THREE
RESEARCH METHODOLOGY
Research design
The researcher used descriptive research survey design in building up this project work the choice of this research design was considered appropriate because of its advantages of identifying attributes of a large population from a group of individuals. The design was suitable for the study as the study sought to an appraisal of outsourcing on organizational effectiveness
Sources of data collection
Data were collected from two main sources namely:
(i)Primary source and
(ii)Secondary source
Primary source:
These are materials of statistical investigation which were collected by the research for a particular purpose. They can be obtained through a survey, observation questionnaire or as experiment; the researcher has adopted the questionnaire method for this study.
Secondary source:
These are data from textbook Journal handset etc. they arise as byproducts of the same other purposes. Example administration, various other unpublished works and write ups were also used.
Population of the study
Population of a study is a group of persons or aggregate items, things the researcher is interested in getting information an appraisal of outsourcing on organizational effectiveness. 200 staff Unilever plc Lagos State was selected randomly by the researcher as the population of the study.
CHAPTER FOUR
PRESENTATION ANALYSIS INTERPRETATION OF DATA
Introduction
Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey. This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain an appraisal of outsourcing on organizational effectiveness
In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of an outsourcing on organizational effectiveness
Summary
This study was on an appraisal of outsourcing on organizational effectiveness. Four objectives were raised which included: To ascertain the effect of outsourcing on organization effectiveness, to determine whether cost affects organizational effectiveness, to ascertain the relationship between outsourcing strategies and organization effectiveness, to ascertain the effect of outsourcing on organization profitability. In line with these objectives, two research hypotheses were formulated and two null hypotheses were posited. The total population for the study is 200 staff of unilever plc, Lagos State. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made up human resource managers, supervisors, production managers and stock controllers were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies
Conclusion
Companies may choose to incorporate outsourcing in their corporate strategies with a bid to reduce cost and risk while increasing efficiency. Strategic outsourcing results in improved organizational performance by reducing costs and risks associated with in-house production, increasing operational efficiency, and therefore increasing profitability and growth. Well managed outsourcing results in both short term cost reduction and long term efficiency and sustainable performance.
Recommendation
This study recommends that firms should adopt strategic and well thought out outsourcing partnerships in order to continuously reduce operating costs for growth. Cost should not be the only driving factor for outsourcing. Managers should consider other factors too while evaluating the cost and benefit of outsourcing, so as to ensure that the maximum benefit is achieved from the strategy in terms of reduced costs and risks, increased efficiency. It is therefore imperative that strategic outsourcing should not only generate short term results in term of reduced costs but also yield long term benefits such as operational efficiency and long term growth.
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