ABSTRACT
This project focused on the effects of
outsourcing strategies on organization performance with special reference to
Nigeria Breweries Plc. The importance of outsourcing strategies in
organizations cannot be overemphasized, hence the need for this research work.
The objective of this study were to examine the relationship between
outsourcing and organizaiton performance and to asses uses of outsourcing by
organizaiton to gain competitive advantage
over its competitors. Based on these objectives, data were sourced
through the use of survey research method and data was collected from a sample
size of 99 respondents which was arrived at through the use of quantitative
method. The study found out that outsourcing strategy help organizations to cut
cost, increase profitability and productivity which in turn leads to higher organizaitonal
performance. Therefore, it was recommended that organizations should embrace
the outsourcing strategies and improve service delivery to their customers.
Also, organizations should continue to monitor the contractor’s activities and
establish constant communication.
TABLE OF CONTENT
Pages
Title i
Certification ii
Dedication iii
Acknowledgement iv
Abstract v
Table of content vi
CHAPTER
ONE
INTRODUCTION
1.1 Background to the study 1
1.1.1 Initial stages in teh evolution of outsourcing
2
1.2
Statement of research problem 4
1.3 Objectives of the study 5
1.4 Research questions 6
1.5 Research hypothesis 6
1.6 Significance
of the study 7
1.7 Limitation of the study 8
1.8
Definition of terms 9
CHAPTER
TWO
LITERATURE
REVIEW
2.0 Introduction 10
2.1 The concept of outsourcing 11
2.2 Why do companies outsource? 15
2.3 Main factors influencing
successful outsourcing 15
2.3.1 Open communication 16
2.3.2 Executive support 17
2.4 Contracts and service level
agreements 18
2.5 Types of outsourcing 19
2.5.1 Local outsourcing 19
2.5.2 Offshore outsourcing 20
2.5.3 Technological service
outsourcing 23
2.5.4 Business process outsourcing 24
2.5.5 Knowledge process outsourcing
25
2.6 Outsourcing process 26
2.7 Theory of outsourcing process 30
2.7.1 Transaction cost economics 35
2.7.2 Relational view 36
2.7.3 Core competences 37
2.7.4 Resources – based view 37
2.7.5 Evolutionary economics 38
2.7.6 Agency theory 40
2.7.7 Knowlegde – based view 41
2.7.8 Neoclassical economics theory
41
2.7.9 Social exchange theory 42
2.7.10 Economy of information 43
CHAPTER
THREE
RESEARCH
METHOD
3.0 Introduction 44
3.1 Research design 45
3.2 Re-statement of research
questions 46
3.3 Re-statement of research
hypothesis 46
3.4 Sample and sampling techniques 47
3.5 Characteristics of population
of the study 48
3.6 Instrumentation 49
3.7 Validity and reliability 49
3.8 Procedure for data collection 50
3.9 Procedure for data
analysis 50
CHAPTER
FOUR
ANALYSIS
OF DATA
4.0 Introduction 51
4.1 Data presentation 51
4.2 Presentation
and analysis of data according
to
research questionnaire 54
4.3 Testing of hypothesis 62
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary 67
5.2 Recommendations 68
5.3
Conclusion 69
Bibliography 72
Questionnaire 75
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Since
the industrial revolution, companies have grappled with how they can exploit
their competitive advantages to increase their markets and their profit. The
model for most of the 20th century was a large integrated company
that can “own, manage and can directly control” its assets. In the 1950’s and
1960’s the rallying cry was diversification to broaden corporate bases and take
advantages of economies of scale. By diversifying companies expect to protect
profit, even though expansion required multiple layers of management.
Subsequently,
organizations attempting to compete globally in the 1970’s and 1980’s were
handicapped by a lack of agility that resulted from bloated management
structures. To increase their flexibility and creativity, many large companies
developed a new strategy of focusing on their core business, which required
identifying critical processes and
deciding which could be out sourced.
1.1.1 Initial Stages In
The Evolution Of Outsourcing
Outsourcing
was not formally identified as business strategy until 1989 (Mullins, 1996).
However, most organizations were not totally self-sufficient; they outsourced
those functions for which they had no competency internally. Publishers, for
example have often phased composition, printing and fulfillment services. The use of these essential but ancillary
services might be termed the baseline stage in the evolution of outsourcing.
Outsourcing support services is the next stage. In the 1990’s as organizations
began to focus more on cost-saving measures, they started to outsource those
functions necessary to run a company but not related specifically to the core business. Managers contracted
with emerging services companies to deliver accounting, human resources, data processing,
internal mail distribution, security, plant maintenance and the likes as a
matter of “good housekeeping”. Outsourcing components to affect cost saving in
key functions is yet another stage managers set to improve their finances.
The
current stages in the evolution of outsourcing is the development of strategic
partnership. Until recently it had been axiomatic that no organization would
outsource core competencies, those functions that give the company a strategic
advantage or make it unique. Often a core competency is also defined as any
function that gets close to customers. In 1990’s outsourcing some core
functions may be good strategy not anathema. For example some organizations
outsource customers services, precisely because it is so important.
Eastman Kodak’s decision to outsource the information
technology system that undergrid its business was considered revolutionary in
1989, but it was actually the result of
rethinking what their business was about. They were quickly followed by
dozens of major corporations whose
technology to get access to information they needed. The focus today is less on
ownership and more on developing strategic partnership to bring about enhanced
result.
Consequently
organizations are likely to select outsourcing on the basis of who can deliver
more effective results for a specific function than on whether the function is
core or commodity.
1.3 STATEMENT OF RESEARCH PROBLEM
Outsourcing
refers to the delegation of one or more business process to an external
provider who then owns, manages and administers selected processes based on
defined measurable performance matrices. As much as outsourcing has been
accepted and employed by organizations, it has been observed that some
organization still perform poorly.
The
reasons for organization failure are not far fetched, problems ranging from the
inability of the service provider to
solve a problem to fit into client organization’s corporate structure and
strategy due to inadequate knowledge and inputs concerning corporate aims and
objective.
Outsourced
arrangements are often long term (projects) requiring services provider to
understand organization’s current and future business strategy and potential
changing business profile. Cases abound
when the reverse is the case and as such it becomes rather difficult (to avoid
unprofitable and unfavourable contractual arrangement).
1.3 OBJECTIVES OF THE
STUDY
The
aim of this study is to examine outsourcing as a strategy for organization
performance.
Its
objectives include; To
1. Determine
how firms can minimize the cost of outsourcing and at the same time maximize
their company’s objectives.
2. Examine
outsourcing problems and profer solution as
to improve organization
performance
3. Asses
uses of outsourcing by organization to gain competitive advantage over its
competitors
4. Examine
the relationship between outsourcing and organization performance.
5. Indentify/
examine key factors for consideration when organization decide to outsource
1.4 RESEARCH QUESTIONS
1. Does
outsourcing strategies improve organization performance?
2. What
is the relationship between outsourcing and sales turnover?
3. To
what extent does outsourcing strategies reduce cost of production of an
organization?
4. What
is the effect of outsourcing on job quality?
5. What
is the relationship between outsourcing and employment generation in Nigeria?
1.5 RESEARCH HYPOTHESIS
The
null (Ho) and alternative (HI) hypothesis are formulated
below to aid hypothesis testing.
Hypothesis 1
Ho: There is no significant relationship between
outsourcing strategies and sales turnover
HI: There is significant relationship between
outsourcing strategies and sales turnover
Hypothesis
2
Ho: There is no significant relationship between
outsourcing and organizations competitive advantage
HI: There is significant relationship between
outsourcing and organizations competitive advantage
1.6 SIGNIFICANCE OF THE STUDY
The
significance of the study exposes the researcher to the importance of
outsourcing strategy that include:
1. It
aids and enhance productivity among organizations
2. The
study will enable organization to cut their overhead cost.
3. The
study will enable organizations to increase their efficiency.
4. The
study will enable organizations to improve quality of their product and
services
5. The
study will enable organizations to gain competitive edge over its competitors
6. The
study will aid the release of organization resources for other core activities
7. To
improve customer/ client/ consumer satisfaction
1.7 LIMITATION OF THE
STUDY
The
research work demanded that the project
should be completed within a specific period of time which limits further
investigation into the study.
Uncooperative
attitude of some respondents may pose a
great threat to researchers conclusions.
Inadequate
textbooks prevent more comprehensive current literature review in the
study.
1.8
DEFINITION OF TERMS
For
the purpose of this study, the following word shall be
defined.
Out-Sourcing:
is a strategy that concentrates an organization’s resources on its core
competencies allowing the organization to achieve a definable preeminence and
provide a unique value for customers
Market: The
state of trade in particular types of goods as shown by prices or the rate of
which things are bought and sold.
Target Market: Target
market for this purpose shall mean a well define set of customers who need the
company's plan to satisfy
Strategy: Skill
in planning or managing an affair well
Strategy Management: This is defined
as the set of decision and actions resulting in formulation and implementation
of strategies designed to achieve the objective of an organization.
Competitive: Able
to do as well or better than others or having a strong urge to win.
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