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Strategic Management : Offshoring Strategy

Introduction

Offshoring refers to business decisions where a company in a particular country tries to employ workers in another country to carry out the task that was once done the locals. It is recognized as an international way of outsourcing where a lot of companies in the western nations are attracted by the lower labor and other cost in the third world countries. Offshoring has become for many years a feature of a modern global economy since the time when the rich country manufacturers began to invest heavily on their manufacturing activities.  Australia has adopted the strategy to help boost the capacity of the Australian economy to compete effectively in the global markets, especially in the production of nutraceutical products which are food products. They are mainly made of vitamins and some traces of minerals whose main role is to provide health benefits through prevention and treatment of the chronic diseases. This paper therefore seeks to evaluate the viability of the offshoring as a strategy that can be adopted by companies both locally and internationally.

Reasons why the industries will continue to be based in Australia

Food processing industries in Australia have the obligation to support the businesses in Australia through designing better methods food storage and processing and even establishing advanced techniques for manufacturing that is primarily aimed at reducing costs and increasing production efficiency. The main objective of establishing food processing industry is to boost the capacity of the Australian economy to compete effectively in the global markets, especially in the production of nutraceutical products which are food products which are mainly made of vitamins and some traces of minerals whose main role is to provide health benefits through prevention and treatment of the chronic diseases. The industry was designed to provide a cost effective and sustainable process that aimed at assisting in the production of these types of products as they try to minimize any possible wastes while enhancing efficiency through the reduction of energy consumption. These products of nutraceutical are highly valued among the Australian people and the whole world and they have the potential to enhance and boost the Australian export of agribusiness products (Cesnovar, 2006). These industries act as a training centers that provide the Australia communities with opportunities for educating the new generations that are specialized in  food processing, engineering and agrifood scientists  that will help in solving the real problems and major issues that have proved to be challenging to most of the manufacturing companies especially those dealing in food.

Stakeholder of the nutraceutical food processing company

Through the research, nutraceutical food processing industry has tried to create an enabling environment that over time has ensured that they stay competitive within the local and international markets. They have effectively achieved this through establishing and facilitating cost effective collaboration between a diverse range of industry partners that mainly produce food stuffs (Gannon, Doherty& Roper, 2012). The industry draws the expertise from the departments of the engineering, science, information and communication technologies and even the agriculture department. As they work to execute their functions, this industry is guided by the following set of objective; to develop products that are of high value from various food chains and to manufacture foods that are safe and healthy that can prevent and treat chronic and acute diseases. They also have an objective of establishing new production methods that will ensure cost effectiveness and sustainability in approaches of biotechnology and manufacturing processes to help maximize value from using the raw material while trying to minimize the production waste as they enhance efficiency through reduced energy consumption and enhanced shelf life of the products.

Impact of offshoring to the stakeholders of the nutraceutical industry

The success of these ventures has cost many manufacturing workers their jobs, especially in the western countries where people believed that white collar jobs in the west were immune from low wage foreign competitors. There are a lot of the significant benefits of offshoring just to mention a few, offshoring can save the business of up to 70% of the labor costs, which is mainly contributed by additional technology and the management overhead that is required to manage and supervise the oversea operations giving more benefits beyond reduced wage costs. Other advantages come as a result of the scale of operation in which most of the offshore provider operates at the large scale level and are well established making the attractive to productive work force from the developed countries who value working for over Sea Company. These advantages may lengthen the range of economically viable services that may be available to onshore companies who considers offshoring at the level of the business decision.

Other services that the companies can offshore

With the growth and development of the digital information and communication technologies over many years has created  great opportunities for the companies to offshore clerical jobs and high paying professional jobs (Jorfi, Jorfi, Yaccob, & Shah, 2011). Technologies have become too common that that is now seen to be used by many white collar workers and as a result telecommunication costs have sharply gone down. The main targets of service offshoring have therefore become jobs in the computer programming with the core functions such as the processing and billing and for the case of the customer services like call centers. Some companies have also tried to offshore medical work, architectural services and even financial advice. India in most cases has become the destinations for these kinds of jobs this is because it has a booming IT and business outsourcing sector with a lot of cheap and qualified labor force.

External factors that affect the operation of the company that may make it adopt offshoring as a strategy

For the company to successfully manage the operations of the industry, there must be a proper human resource strategy that will ensure that the company goals and objective are achieved (Parnell, 2005). The human resource personnel must therefore understand that those factors that affect the activities of the HR are never static and hence they should work to ensure that they put a good strategy that will maximize recruitment and retention of the employees while at the same time tries to minimize issues of the employees

One of the external factors is the competition with other companies; the magnitude of the competition among the industries may have a greater effect on the ability of the company to recruit competent and highly qualified workers, especially when the industry giants know that the candidate seek them out. This makes it unnecessary to spend money on the advertisement that is aimed at informing the candidates on the recruitment date since the candidates can be able to visit the websites of the company at their own wish and time. For smaller companies, it might be very difficult since they may not have the same branding power or the reputation of the company might still be low disadvantaging them from actively seek qualified candidates  for very important position (Jaoua, & Radouche, 2014). It is therefore recommended for the human resource personnel to mainly focus on materials for recruitment that will ensure fair allocation of jobs to be able to promote the reputation of the company and attract applicants that are competent.

The next important factor is labor compensation; the amount of the labor that is available will be a motivating factor towards the amount of the compensation that businesses will offer to enable the company attracts qualified employees (Brown, 2005). In cases where the market is very saturated and the level of unemployment is also relatively higher than the available job opportunities, then the amount of the compensation that the business must offer will be relatively lower than when there are shortages of the candidates and the company must compete with other companies for the available number of the employees. This will force the human resource personnel to continuously evaluate and review the compensation structure following the industry and location salaries. This kind of strategy will ensure that the wages of the worker remain competitive enough that they are capable of attracting and retaining very important staff member while at the same time it remains low enough for the company to retain its financial competitiveness. The HR personnel must also ensure that the internal structure for compensation remains fair considering experience as a specialization when awarding compensation.

Internal factor

Internal factor like employee relations are also very critical as they can affect the activities of the HR not forgetting the internal policies and the procedures. For example, if the company is committed to carry out promotion from within the company, the human resource personnel must ensure that the employees are accorded the right and appropriate training for their development so that they can be ready for the promotion when it comes (Bo, 2005). To effectively implement this, the human resource personnel should monitor the number of the employees that are qualified and are eligible for retirement and do potential replacements or other staff members are trained to take over the responsibilities to ensure that the business knowledge are retained within the company. If the company is working under some union the human resource personnel must be involved and engaged in collective bargaining with the union on matters that are touching on the employee representatives (Poister& Streib, 2005). He must also respond to the external influences like political factors and the culture of the organization that may bring a lot of grievances and complaints within the industry.

Reasons against offshoring jobs
Economists have created a very contentious argument on whether western nations can retain their comparative advantage in some high technology fields. For the diehards of the offshoring, they argue that the cheapness and abundance of the labor in third world countries have contributed negatively on the comparative advantage of the western nations. In a competitive international economy, they argue that companies that are driven by the profit motives may not allow the opportunity that may reduce costs to pass. This makes the rich nations to lose their comparative advantage in a few areas since free trade enacts unequal distribution of costs and associated benefits. Companies and the shareholders in the company gain while the workers in these fields are faced by lower wages and some of them may even face unemployment (Harrington, & Ottenbacher, 2011). In the case of the rich nations their income from the exports are threatened as the imposed competition forces the commodity prices down. It is therefore important to note that a country can be worse off if the forces in the trade bring the domestic prices down for the products in which it has a comparative advantage. Offshoring demand a critical and fundamental rethink of the policy of the free trade agreement because benefits from comparative advantage can only hold if capital and workers are the only factors of production that are bound to the nations. It is also clear that offshoring ignores and violates the conditions that are necessary for a mutually beneficial free trade therefore real solution will only come up when the policy makers and the economist sit down and agree to end the confusion that exists between the free flow of goods and the free flow of the factors of production.

Conclusion

In conclusion, the savings are very important for the organization to help cover the manufacturing cost and other costs associated with business operations like overhead and still make a profit). It is important for the organizations acknowledge that specialization of labor and economies of scale in production are the mechanics used to achieve this level of efficiency. . Offshoring demand a critical and fundamental rethink of the policy of the free trade agreement because benefits from comparative advantage can only hold if capital and workers are the only factors of production that are bound to the nations. It is also clear that offshoring ignores and violates the conditions that are necessary for a mutually beneficial free trade therefore real solution will only come up when the policy makers and the economist sit down and agree to end the confusion that exists between the free flow of goods and the free flow of the factors of production

 

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