Outsourcing for Multinational Companies

Outsourcing for Multinational Companies

Question Two. Many multinational companies often have to outsource all or part of their ‘value chain’ to countries outside their home base. a) With suitable examples (not the ones in case studies 1.2, 3.4, and 15.3 in the set textbook) explain the various reasons why multinationals operate abroad.b) Does outsourcing always bring benefits for multinationals and their home country? (a) Answer:Outsourcing could be defined as the shifting or delegating a company's day to day operations or business process to an external service provider, done in anticipation of a better quality, lower rates and in a sense getting an edge over one's competitors. Many Firms outsource their value chain activities in order to be competitive.Value Chain Analysis is the activities that take place in a business and relates them to an analysis of the competitive strength of the business.   Primary Activities: – those that are directly concerned with creating and delivering a product (e.g. component assembly).Secondary/support Activities: - these include functions such as Human Resource management, technological development.Recently, the removal of trade and investment barriers, swift advances in information and communications technology, and lower transportation costs have allowed low-productivity, labour-intensive operations to be shifted to places where labour is cheaper.This evolution has made it much easier for companies to shift segments of their business to different parts of the world, that is, to different points on the value chain. As a result, large volumes of products and services that once stayed in their countries of origin are now being consumed abroad.To cut costs in its growing business, the IT services subsidiary of Swedish transport Equipment Company AB Volvo moved some work abroad in 2002 to MindTree Consulting, a software services company in Bangalore, India. The subsidiary, Volvo Information Technology AB (Volvo IT), has an operation in Poland that is doing application...

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