IGCSE Development Studies: Specimen Questions with Answers 44 - 45 of 98

Explanation

“Practice of hiring a company outside the company to carry out tasks and services and produce goods in the similar manner as it was performed by the company՚s own employees.”

The above statement explains about outsourcing. Outsourcing is defined as a process of transfer of complete business which was traditionally operated and managed internally to an independently external service provider.

It includes:

• Complete Transfer of all associated internal business process activities.
• When outsourced, the people, equipment, technology, facilities, and other assets are not maintained internally by the organization.

Explanation

Outsourcing decreases the barriers to entry and increases the competition across the globe. It allows new entrants to enter the industries at lower cost.

Some of the Key Impacts of Outsourcing Are

• Increased growth of business- Outsourcing is a new win-win situation it helps the companies to avail themselves of better-quality services at reasonable rates which yields flow of money to the hosting companies.
• Reduced risk- Many countries from UK and US prefer outsourcing their services to various developing countries which has a pool of talent and follow strict data security policy. When companies outsource to the developing countries the risk of breach of data and sub-standard services are reduced.
• Increased business efficiency- When companies opt for outsourcing, they get extra time to focus on the core areas which helps them in increasing the overall business efficiency.