Question

Topic: Student Questions

The Outsourcing Business

Posted by Anonymous on 8/28/2004 at 12:13 PM ET 250 Points
why organizations may outsourse their products to be promoted or sell by others?

what are the prons & cons of outsoursing?

what are the criteria of successful outsoursing?

what are the precausions?



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RESPONSES

  • Posted by Peter (henna gaijin) on 8/28/2004 at 12:40 PM Member
    Can you describe what you mean by outsourcing? perhaps give an example?

    Are you just talking about using another firm (such as a Distributor or Manufacturer's Rep) to handle your sales?

    Are you talking about 'Offshoring' (offshore outsourcing, BPO, etc.)?

    Thanks.
  • Posted by Blaine Wilkerson on 8/28/2004 at 12:59 PM Member
    1. To save and make more money more efficiently. It is cheaper and wiser to allow already established sales channels to distribute your product, versus building your own stores in every major city across the globe.

    2. Well, some of the pros are listed above. The cons are a risk to inconsistent branding. Improper pricing, etc. You have little control over how others display your products without visiting each and every store.

    3. Criteria is the same as when looking for anyone else, either a person or company who can represent your product well. It's subjective.

    4. Beware of going too big at first. For example, if you just produced a new product and struck a deal with Wal-mart. kiss it good-bye and start thinking of something else. Why? Huge retailers will drive the wholesale price down to nothing, then place the product in a less than prestigious store and sell it for pennys. You will ether be destroyed brand-wise, or driven to bankruptcy by the lack of profit...and guess who sweeps in to buy your company and or patents for your product?

    Watch out for the vultures.

    I hope this helps. There are many more statements to make, but these should get you started.
  • Posted by Carl Crawford on 8/28/2004 at 1:54 PM Member
    hi mtalaat,

    !i am a student and dont know much about this but i will tell you want i think.

    organizations outsourse because they:

    # dont have the skills to sell/adveriste there product

    this is because they might not focus on advertising and or selling the product. they might just be just good at making the product.

    # it is cheaper to get someone else to do it.

    it may be cheaper to get a company that has the resourse/skills/time to go out and promote/sell the product.

    Pro: it is sending jobs to other contries. this stimulates trades and amkesa stronger economy, in the long run this creates more jobs.

    this means that once the lower skilled jobs are gone the better jobs are left to the residents of the outsoursing company to snap up.

    Con: however, this is tough to swallow for employees of the country that out sourses. who are facing the possible loss of jobs and a tougher job market.

    Con: there are loss of jobs even in a growing economy. eg the USA. Although the golbal out look supports outsourseing of both IT and manufacturing, Americans are resisting sending jobs overseas.

    Con: more and more companys are sending jobs to countrys to like india and south america to be able to compete. there is a worry in the indian comunity about a possiable backlash of opioin and a fear of politial backlash against the outsoursed country which is bosting there economy

    Con: there is a fear about INFERIOR PRODUCTS.

    Con: Some Indian companies misrepresent their people-skill-set by actually altering their employees resume's to impress the US company.

    the basic reason for outsourcing is to lower cost. unfortunately, a basic reason can become the only reason very easliy. US companies often use all their energy and negotiations to squeeze rates only and not demand exceptional quality.

    try these links to more information:

    https://globalization.about.com/gi/dynamic/offsite.htm?site=http%3A%2F%2Fww...

    https://globalization.about.com/od/outsourcing/i/Offshoring.htm

    https://globalization.about.com/gi/dynamic/offsite.htm?site=http%3A%2F%2Fww...

    https://globalization.about.com/gi/dynamic/offsite.htm?site=http%3A%2F%2Fww...

    this website has a wealth of information on it about the pros and cons of outsoursing:

    https://comment.cio.com/comments/12079.html

    try this google searh for some answers to criteria for successful outsoursing:

    https://www.google.com/search?hl=en&lr=&ie=UTF-8&q=outsourcing+criteria+of+...

    here are seven steps to sucessful outsourseing it is a MUST READ:

    https://www.outsourcinginstitute.com/oi_index/seven_steps.html

    Hope this helps you

    Have a nice day

    Sweetasman01

  • Posted by Carl Crawford on 8/28/2004 at 1:56 PM Member
    oh crap!!!!!

    sorry about the post. i spent a while researching for you and then after i posted i found out i had research the wrong DAM thing. bugger!!!!!!

    next time can you PLEASE make your question CLEARER and PROVIDE details.

    oh well sorry for the swearing

    Hope this helps you

    Have a nice day

    Sweetasman01

  • Posted by Peter (henna gaijin) on 8/28/2004 at 3:39 PM Accepted
    Thank you for the follow up and clarification! Much appreciated.

    Jett said "It is cheaper and wiser to allow already established sales channels to distribute your product, versus building your own stores in every major city across the globe. " Quite true. Outsourcing your sales channels allows you to take advantage of channels already being in place, the company you outsourcing to already having relationships with your prospective customers, and is much less expensive for you to get sales started.

    One major con is that you will have less control over your sales. The folks making the sales are not your employees, so you can't control as well what they say to the customer. You are also separated from the end customer, so it is more of a challenge to learn about the customer's needs, how they are really using your product, etc.
  • Posted by Peter (henna gaijin) on 8/28/2004 at 3:46 PM Accepted
    Sorry about the separate response. I had to thinka nd look up a thing or two related to your questions on "criteria for success" and "precauitions".

    Truthfully, outsourcing sales (like by using a distributor or a manufacturer's rep) is not all that different in my mind that having your own sales force. You may have a little more control with your own sales, but in general no one really controls a sales person anyway. You just have to do your best to guiide them and understand what motivates them (their incentive plan).

    There is are a couple of interesting articles on what product marketers should understand about sales, which are appropriate for your question also. Go to https://www.productmarketing.com and click "Articles" and then "Sales and Tools". Look for "Ten Things Product Managers Should Know About Sales" and "Nine Things Product Managers Should Know About Supporting Sales"
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