Outsourcing can be regarded as one of the byproducts of globalization. Many early movers benefited from this strategy especially when it comes to the production of the products (Carbaugh, 2015). Outsourcing has been associated with a competitive advantage, but it led to significant losses for some firms (Mourdoukoutas, 2013). HP is one of the leaders in the area of computer manufacturing, and it is valued for the quality of products and services provided. The company has also employed the strategy of outsourcing, which is associated with some advantages and disadvantages.
One of the major advantages of the outsourcing is the reduction of costs. For instance, HP moves its production facilities to Asian countries including but not confined to China (Buckman, 2004). The labor costs in such countries as China, India, Taiwan and so on are very low compared to one in the USA. Moreover, governments of these countries are willing to attract more investors and provide the favorable environment for foreign companies. This was especially true in the 2000s when Asian countries introduced various policies that made the production costs very low (Buckman, 2004). Another advantage of outsourcing is the focus on the core activity. Such companies as Google benefit from outsourcing as they focused on their core activities including product development, marketing, and after-sale services in the USA (Mourdoukoutas, 2013). The R&D operations can also be outsourced, but in the initial stages (when the competition is not intense).
However, outsourcing is likely to be harmful as well. For example, if the R&D process is outsourced, the supply chain can transform into a disintegrated process (Mourdoukoutas, 2013). This is associated with various risks. The subcontractors may fail to provide the necessary materials and details or distribute products properly, which may disrupt the entire supply chain. Subcontractors often sign contracts with many companies, which is associated with additional risks as the subcontractors are not focused on particular projects and may prioritize their tasks at the expense of some companies. Furthermore, the quality of products can be affected, which is the most serious risk as high quality is one of HP’s competitive advantages. The loss of important and confidential data can pose significant threats to the company’s performance.
Outsourcing also has adverse effects on employees’ morale, as American employees often feel they may lose their jobs due to the availability of low labor force (Carbaugh, 2015). The environment in the working place worsens, and loyalty of employees reduces. Clearly, turnover and the loss of high-profile employees may negatively affect any company. It is noteworthy that the business environment in Asian countries (which are traditional destinations) is worsening as the governments are imposing more restrictions. Minimum wages have also increased, which leads to the increase of costs (Carbaugh, 2015). It is possible to note that the vast majority of manufacturing companies may face similar issues when outsourcing.
On balance, it is possible to note that outsourcing can be beneficial for early movers, but it can have detrimental effects for followers. The advantages of the outsourcing include reduction of costs and the focus on core activities. However, the disadvantages involve disruption of the supply chain, lower quality of products, low morale of employees’ and the risks to confidentiality. Therefore, it is possible to note that HP and other computer manufacturing companies may outsource production processes, but they should keep the rest of operations in the USA.
Reference List
Buckman, R. (2004). H-P outsourcing: Beyond China. The Wall Street Journal. Web.
Carbaugh, R. (2015). Contemporary economics: An applications approach. New York, NY: Routledge.
Mourdoukoutas, P. (2013). How Hewlett-Packard and Dell destroyed their PC advantages… Piece-by-piece. Forbes. Web.