Does global outsourcing improve firm performance

By: Prudence K. Magezi

Outsourcing is a strategic tool that many companies have embraced over the years. It especially picked up pace with the emergency of BRIC nations as the focal point of cheap manufacturing and cheap labour, which attracted many firms to outsource production to especially China. Using case studies, this essay will examine whether global outsourcing actually has a positive impact on firm performance or not. A number of scholars have argued that outsourcing does improve firm performance. For instance Domberger and Fernandez (1999) noticed that firms which outsourced had improved profitability as a result of lower costs. In a study they carried out on 7500 companies including multinationals like IBM and Anderson Consulting as well as local firms in Australia, results showed outsourcing of cleaning services saved firms an average of 46% over in-house performance of the tasks.

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