Offshore outsourcing is the process of obtaining goods or services from another country. Organizations conduct outsourcing when the costs of producing the products within the business entity are higher than when obtained elsewhere. With globalization taking effect in the modern business environment, offshore outsourcing has become a common thing.
Criteria for offshore outsourcing
A company should consider several factors when making offshore outsourcing decisions. These decisions are legal affairs associated with outsourcing in the countries involved in the transactions. The cost of selecting the outsourcing firm should be considered to avoid too many additional costs. Also, the transaction costs involved should be considered to ensure the whole process is profitable. The management should also consider the quality of products being outsourced. Offshore outsourcing deals with making transactions between different countries, and the administration must learn the cultural aspects of the people involved in the entire business. The political climate prevailing in the countries in which a firm operates is an essential factor to consider when conducting offshore outsourcing. The politics in a country affect its economic activities, which may determine foreign firms’ ability to penetrate their markets (Batta, 2010).
Licensing
Licensing is the process of permitting a business person to perform activities in the name of another at a fee. Licensing has the advantage that it increases a company’s sales volume because the products are sold in many places. It also expands the market share of a company. A company can penetrate markets with many entry barriers by licensing firms within the country to sell its products. Licensing has the disadvantage of exposing a business to competitors because the trade secrets are easily shared among licensed companies (Walter & Murray, 1998). Profits are shared among the firms involved in the entire process compared to when the company would have used its resources to enter a new market. Also, there is no direct link between the prominent firm and the customers. Thus, the management may not know the exact needs of the customers (Schlesinger, 2009). Examples of companies using licensing as a global marketing strategy are Starbucks Inc., Nokia, and others.
Global strategic partnership
The global strategic partnership is a business concept where firms from different countries unite to run business. This strategy allows firms to pool resources to operate in international markets. This strategy is used by firms to penetrate some markets that cannot be penetrated due to many trade barriers. Global strategic partnerships are different from traditional forms of international strategic alliances. Firms using the conventional system aim to penetrate the market alone by acquiring other firms in different countries.
On the other hand, the global strategic partnership allows firms to pool resources for a joint venture. The overall aim is to provide synergies to the partners in the business. Firms are using this strategy to expand their businesses and penetrate the global markets. The members of a worldwide strategic partnership assist each other to penetrate markets in which they operate. For example, Symantec Inc. has invited several companies such as HP, Fujitsu, Atos Origin, and others to pool their resources towards penetrating global markets. Each company assists the other in marketing its brands in the countries it operates in. this strategy has helped the partners penetrate markets in which each firm operates (Symantec, 2010).
In conclusion, outsourcing is a crucial business practice in the modern business environment, and firms should embrace these ideas. Offshore outsourcing requires a firm to have the right strategies for dealing with different people from different backgrounds. Licensing has been found to help a firm enter new markets, but there is the risk of exposing business secrets.
References
Batta, M. J. (2010). Factors influencing the outsourcing decision. Web.
Schlesinger, H. (2009). Pros and cons of licensed products. Vending Times, 49(9).
Symantec. (2010). Global strategic partners. Web.
Walter, I. and Murray, T. (1998). Handbook of international management. John Wiley and Sons. ISBN 047160674X, 9780471606741.