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Comprehensive Learning Assignment -1

Outsourcing Agreement
Shreeya Byanju
BUS 525 Strategic Management in a Globalized Society
Dr.Herschell Warlick
Westcliff University
21st February 2016

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Introduction
Outsourcing is a process of delegating portion of companys value chain activities such a
as supply, steps in design of the product, manufacturing, marketing, sales and other value added
activities to other companies or another party. It is actually strategy used by various companies to
reduce cost by assigning part of their companys function to external sources or suppliers rather
than accomplishing internally (Barrar & Gervais, 2006). Outsourcing involves both foreign as
well as domestic contracting. Primary reason behind companies making decision to outsource is
to minimize cost such as high taxes, excessive energy cost, high government regulation,
production or labor costs. It is sometimes more cheap to buy a product from companies with
relative advantage than to manufacture the product internally. Thus outsourcing is a powerful
cost-saving strategy when utilized appropriately.
Additionally many companies are likely to outsource to improve the effective allocation
of resources within a company. Organizations moreover outsource with the goal that they might
keep concentrating on their center business tasks while appointing repetitive tedious procedures
to outside agencies. However, outsourcing requires a high level of management and
standardization control to be productive. At the point when appropriately executed it has a
positive impact on an organization's income and can produce significant saving (Parlour,
2014). Consequently these days numerous companies are consistently undertaking outsource
procedure for various reasons according to their vision and purpose.
Dell Outsourcing strategy
One of the great example of manufacturing company that involve in outsourcing is Dell,
a privately owned American multinational computer technology corporation that produce, sells,
repairs and support computers and other related products and services (Hitt & Ireland, 2006).

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From the day of Dells incorporation, it has been outsourcing the computer manufacturing
components from other manufacturer with a specific end goal to reduce their production cost. Its
business strategy involves outsourcing some of its operation process such as distribution, sales
order processing and after sales service. Additionally Dell outsources supplier involvement
process and different system that supports them to Inovis, a US-based B2B outsourcing provider
that has taken responsibility for the operational function of transaction that takes place between
Dell and its suppliers (Clapperton, 2010). The primary reason behind doing such outsourcing is
that Dell perceives these parts of its operations as non central activities. That is why Dell
decided to outsource to concentrate on its main business processes, which is manufacturing and
designing computers. Another reasons for outsourcing the manufacturing components of PC is to
choose better components and suppliers instead of producing them oneself. Further the cost
reduction that an outsourcing agreement offered to the company is also major factor in it doing
so.
outsourcing activities include supply chain management, operation process sucs as
ditribiy

Dell is one of the leading PC manufacturers in the world.

A company are more likely to outsource a function because they want to reduce cost or sell off
assets to supplier.
lower operational and labor costs are among the primary reasons why companies choose to
outsource. Outsourcing enables an organization to pay full attention to its own particular
competencies and contract outside resources to handle different other tasks.