THE ECONOMICS OF OUTSOURCING IN A DE-INTEGRATING INDUSTRY

Many large firms in low scale economy industries are actively considering outsourcing options, in the face of competition from smaller more efficient players. A framework is developed for determining which set of products and activities to outsource and which to keep in-house supported by review of...

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Bibliographic Details
Published in:Journal of international business research 2008-01, Vol.7 (1), p.47
Main Authors: Ghani, Jawaid A, Rana, Arif I, Bhutta, M Khurrum S
Format: Article
Language:English
Subjects:
Capital costs
Cost control
Economic development
Economic growth
Economies of scale
Emerging markets
Footwear industry
Industrial development
Manufacturers
Outsourcing
Small & medium sized enterprises-SME
Studies
Suppliers
Supply chain management
Textiles
Transaction costs
Vertical integration
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Summary:Many large firms in low scale economy industries are actively considering outsourcing options, in the face of competition from smaller more efficient players. A framework is developed for determining which set of products and activities to outsource and which to keep in-house supported by review of the theoretical literature and case-studies of outsourcing decisions at two large vertically integrated footwear manufacturers in Pakistan. The framework suggests activities being consider ed for outsourcing be evaluatedin terms of level of proprietary knowledge, economies of scale, inefficiencies of vertical integration, transactional costs, and the existence of reliable vendors. It is suggested that activities with low levels ofproprietary knowledge and activities where cost savings due to outsourcing justify the increased transaction costs, should be outsourced. [PUBLICATION ABSTRACT]
ISSN:1544-0222
1544-0230