Outsourcing Case Analysis

However, there should be a great understanding of the outsourcing process for it to be successful. The decision to outsource is important because a wrong decision could lead to the failure of the business. Various internal and external factors contribute to the need for outsourcing manufacturing. The increasing competition of companies in the global marketplace is the main reason most manufacturing companies outsource manufacturing services to have a competitive advantage over competing companies. As the companies opt to reduce the prices of their products, they try to reduce the manufacturing costs through outsourcing to other countries that have relatively lower production cost (Favreu, 2007). The process of producing in China then importing the produce back to the United States is easy. It is somewhat complex to understand the underlying economic conditions that force companies to opt to outsource their manufacturing outside the country.

The political environment in the United States is favorable to support all forms of business in the United States. For a lay person, he or she may wonder why a big corporation like Apple Inc. does not manufacture within the United States. Apple’s manufacturing company is located in Zhengzhou, with over 350,000 employees. The tax strategy of Apple starts once the products pass through the tax facility located some yards from the factory. Another benefit that outsourcing gives Apple company is the ability for the company to downsize or upsize its production. The demand for Apple products has been increasing in the recent past, requiring the company to increase its production to meet the increasing demand. Additionally, manufacturing ensures the conversion of low-value raw materials to valuable products to increase the economy of the country (Kazmer, 2014).

This is due to the expected job creation that manufacturing would bring as well as the increase in tax collection. This indicates that the decision to outsource does not affect the company only, but the entire country as well. Despite the belief that labor costs are the major reasons for outsourcing, other reasons like competitive strategy and supply chain designs also play a key role. Kezmer (2014) believes that the increase in foreign outsourcing of United States firms is due to the increase in transaction costs of transportation and information in the local market. This led to an increase in access to overseas manufacturers whose costs are relatively low. Outsourcing also puts pressure on the manufacturing company to produce products in bulk at a reduced cost per product. Foxconn, the company that manufactures Apple products in China is forced to keep its costs to the minimum, leading to continuous troubles with its workforce.

This may affect the product quality if the manufacturing company faces problems in balancing the available resources to produce the desired product quality. Currently, the quality of Apple products is superior to the other products produced by other companies. Therefore, in the short-term, the company’s products are market leaders. Conclusion Outsourcing is an important business strategy as it enables the company to check on its production cost. Various internal and external factors lead the management to make this business decision. It is known to have its benefits and disadvantages. Apple Company has been successful in the outsourcing of manufacturing services from China. However, it needs to address some issues that may affect its employees, product quality, sales, and reputation in the long-run. Hauschild, M. Z. Long term impacts of international outsourcing of manufacturing on sustainability.

 CIRP Annals, 63(1), 41-44. Schieberl, J.