National Institute of Technology 2009-1st Sem M.B.A International Business IV Sem - - Question Paper

Outsourcing has become extremely popular in the business of computer manufacturing. Components makers (E.g. Intel in microprocessors, Seagate in hard disk drives) supply to big and small manufacturers worldwide. Computer companies buy components from these manufacturers, assemble them in their own factories, and sell complete systems to buyers. A related concept in the computer industry is known as “stealth manufacturing” which calls for outsourcing the true assembly of the computers themselves, as well as the job of shipping them to distributors and other intermediaries.

Outsourcing is highly visible in the info technology (IT) sector. It has been estimated that worldwide Outsourcing of the IT related activities (activities relating to creation, storing and dissemination of Information) was about $50 billion in the mid-1990’s and the figure is growing. The market for IT Outsourcing is expected to exceed $125 billion in the year 2005.

Human resource function is a different area involved in outsourcing. Potential activities include payroll, benefits administration, and contract staffing. More than 72 percent of the Indian companies are Outsourcing their HR functions.

Outsourcing has obtained a new area of application-defense. The US government is increasing relying on private firms to fight the war in Iraq. It is estimated that civilian contractors are handling 20-30 percent of essential military support services in Iraq. These civilian contractors are called Private Military Companies (PMCs). The popular PMCs across the world are DynCorp, Vinnell, Military Professional Resources, and Aecom Govt. Services. The services given by these PMCs include training, oil field repairs, maintenance of war logistics, food, shelter, medicine, intelligence, security for heads of governments, and the like. Outsourcing of military services is providing to be less expensive and the only out way for a country like the US where the number of military personnel is too small compared to its International obligations and requirements.



Basic Make or Buy choices

• Country factors
• Technology factors
• Product factors
• Government policies
• Organizational problems


Country factors: Several features of countries can influence their attraction as sites for locating International facilities. Resource availability is 1 such factor. The availability and cost of resources is a primary factor which determines whether a country is suitable for location or not. As advocated by classical trade theorists countries that enjoy large low cost endowments of a factor of production will attract firms needing that factor of production. The pattern now being witnessed is the physical proximity ranging from the just-in-time manufacturing techniques. Because of this trend, US firms are reconsidering decisions to locate offshore.

Earning:   Approval pending.