Assignment 1- 10%Program + Semester BUS-1-G3Course Name: Introduction to Business conceptsSection CodeBU 1363-G3Fall- 2018Type of EvaluationAssignment 1Percentage Weight of Total Evaluation10%Course InstructorSyeda Rownak AfzaDue DateWeek 6, Oct. 12Total Marks:/10Task : Read the case and answer the questions.During the last decade or so, outsourcing has become increasingly popular because (a) it helps firms focus attention on their core activities and avoid getting sidetracked by secondary activities, and (b) it reduces costs. The Bank of Montreal (BMO), for example, outsourced its human resource processing services to Exult Inc., which now manages payroll and benefits administration, employee records, HR call centre services, and other functions that used to be performed in-house at BMO. The new arrangement means a 20 percent reduction in HR costs for BMO, and it also frees up BMO managers to concentrate on more value-added work.Outsourcing decisions like the one at BMO involve moving jobs from one company to another within Canada, but most outsourcing involves moving jobs from Canada to a foreign country (oftencalled offshoring). Because of this, much concern has been evident about Canadian job losses. But outsourcing may actually be beneficial to Canada. If you wonder how that could be possible, the reasoning goes something like this: Canadian companies outsource certain kinds of work in order to take advantage of low-cost foreign suppliers. This allows Canadian companies to reduce their costs and increase their productivity which, in turn, helps them to be more competitive in global markets. Greater competitiveness of Canadian firms in international markets means more success, more jobs, and a higher standard of living for Canadians.What about the Canadian workers who lose their jobs when companies outsource work to foreign countries? An interesting study conducted by the Peterson Institute for International Economics found that only one in 25 laid-off workers lost their job because of outsourcing. But even if we accept the argument that outsourcing doesn't actually hurt a lot of Canadian workers, there are still other concerns about the practice of outsourcing. For example, a 2006 study by the Toronto-based Centre for Outsourcing Research and Education found that less than 50 percent of companies that have tried outsourcing are satisfied with it. One of the reasons is that members of the "stay-back team"—the individuals who are responsible for managing the new outsourcing relationship—are under pressure to not only cut costs, butalso to increase the quality of the services that have been outsourced. A study by Dun & Bradstreet found that one-quarter of all outsourcing relationships fail within two years, and one-half fail within five years. In addition, many executives feel that suppliers too often don't understand what they are supposed to do, that they charge too much, and that they provide poor service. Moreover, when disruptions occur in the supply chain, the costs to both parties can be high. For one thing, replacing failed outsourced operations can be very expensive, especially if the firm wants to go back to performing the outsourced activity itself. Another risk is the loss of control over both operations and information.A fairly dramatic example of some of these problems is that of Boeing Co., which is having many problems getting its new 787 Dreamliner jet airplane to the market on time. In April 2008, Boeing announced that it was pushing back the new jet's market debut until the fall of 2009. The company is now likely to deliver just 25 planes in 2009 instead of the 112 that it was supposed to deliver. Originally, Boeing was supposed to deliver the first 787 to All Nippon Airways in May 2008, but it had recently pushed back that date to early 2009. Now the date has been pushed back until much later in 2009. These delays will cost Boeing millions of dollars in penalties for failure to deliver the new aircraft on time to the 50 different airlines that have placed orders for nearly 900 of the new jets. It will also harm Boeing's reputation for reliability.Why did these problems develop at Boeing? One culprit is outsourcing. To reduce development costs for the 787, Boeing decided to have different parts suppliers build different sections of the plane. These parts suppliers are located all over the world. For example, the nose section is made by a subsidiary of Toronto-based Onex Corp., the rear fuselage section is made at a factory in South Carolina, the middle fuselage section is made in Italy, and the wings are made in Japan. The idea was that these various sections (subassemblies) would then be assembled at Boeing's Seattle, Washington production facility.To make this system work, a great deal of discretion was given to the various makers of these subassemblies. But several major problems have arisen: (1) the first 787 subassembly that was sent to Seattle by a supplier was missing literally thousands of parts; (2) parts suppliers have had trouble handling tasks that Boeing employees knew how to do because of their many years’ experience in building airplanes (for example, Boeing engineers discovered that the "wing box"—which connects the plane's wings to the fuselage and also holds fuel—wasnâ€TMt strong enough, so hundreds of fasteners were added to strengthen it); (3) suppliers outsourced key tasks like engineering to still other companies; and (4) subassemblies have not been completed on time (for example, the Italian company got behind schedule because it had difficulty getting approval to build its factory in an olive grove).
Boeing is just one company that has experienced problems with outsourcing. Numerous reports of tainted products made in China—for example, children's toys, toothpaste, and seafood—have been reported in the news during the last year. When problems like these arise, a company's reputation suffers because it looks like the company is more interested in low-cost production than it is in high product quality. Higher costs may be the end result because of lawsuits and recalled products.There are several things managers can do to reduce the risks associated with outsourcing. Most generally, they must clearly stipulate how the outsourcing process is going to work and the amount of authority and responsibility that suppliers have. For example, the company doing the outsourcing must determine whether it is going to give the supplier the right to do further outsourcing. It must also stipulate performance expectations for the supplier, and specify how the product is to be made. Terrapin Communications Inc. has outsourced production of its main product—a high-tech bracelet called Safety Turtle which has an alarm that goes off if it is immersed in water—to Baja Technology Inc. in Zhuhai, China. Safety Turtle is designed for use by children, seniors, and people who work near water. The outsourcing agreement states that Baja must follow detailed instructions when making the bracelet (for example, Baja cannot substitute parts, and they must adhere closely to the bill of materials). Other things which can be done to reduce the risk of outsourcing problems are monitoring procedures the supplier uses when making the product or providing the service, visiting the supplier to inspect the premises, talking to the people who are actually making the product or delivering the service, and ensuring that needed information flows from the supplier back to the company.In spite of all these potential problems, outsourcing is likely here to stay because of the increasingly global nature of business and because competitive pressures to reduce costs are so intense. In the automobile business, for example, companies like Ford and GM have to compete with highly efficient foreign companies and must therefore cut costs wherever possible. Superior Industries International—a California-based company that makes aluminum wheels for Ford and GM—got blunt messages from both Ford and General Motors to match the price that Chinese wheel suppliers were charging or they would buy the items from a company that could match the price. Since 85 percent of Superior's business was with Ford and GM, it had little alternative but to start outsourcing some work to Chinese factories in order to lower its costs. To do this, Superior got involved in a joint venture with a Chinese company near Shanghai to build aluminum wheels. Wages in China average about 90 cents per hour compared to $22 per hour in North America. Even after taking into account the large distance between China and North American markets, the cost of Chinese-made radios, cables, brakes, and wheels is still 20 to 40 percent lower than products made in North America. This is causing jobs in the North American auto parts industry to disappear at a rapid rate. This trend has just started; since Ford and GM currently buy less than 5 percent of their parts from China, there is room for dramatically increased amounts of outsourcing.
The implication for jobs is not positive. Foreign companies that receive outsourced work are continually refining their own strategies to become even more competitive. For example, one of the best-known examples of outsourcing is the call centre industry in India. Outsourcing is very important to India—it brings in over US$40 billion to the economy of India and employs 1.6 million people—but some big changes are now occurring because Indian wages are rising and companies wanting to do outsourcing are starting to look at other, even lower-wage locations such as Vietnam and the Philippines. Indian companies like Wipro and Infosys are responding by performing more sophisticated services with higher profit margins. Wipro now offers to manage all of a company's information technology (IT) needs rather than just troubleshooting for the company's IT department, and Infosys has entered the management consulting field. These companies are also opening offices in other countries. Tata Consultancy Service has offices in Canada as well as in several South American countries, while Wipro has offices in Canada, the U.S., and the Middle East. All of this change means that a Canadian company with an Anglo-German parent firm might outsource its IT functions to a firm in India, and that firm would send the actual work to the Czech Republic. Thatâ€TMs globalization in action.Questions for Discussion1. What is outsourcing? Why do Canadian companies outsource work?2. Do you think that Canadian companies are treating Canadian workers unfairly when theyoutsource jobs to foreign countries? Defend your answer.3. "Canadian companies really don't have any alternative but to outsource. If they don't, they will notbe cost-competitive and will lose out in the global market. If that happens, all Canadians will be hurt." Do you agree or disagree with this statement? Explain.Source: Pearson Canada Inc, Introduction to Business Concepts, 2014--------------------------------------------------------------------------------------------------------------------------Assignment is due by Oct.12, 2018 before class time. Upload your assignment with the cover page in Google classroom; also a hardcopy is due in the class on before the class starts. Late submission ( after the class starts or during the break) is not acceptable and it will create deduction of your mark as pro-rated. In case of any clarification regarding your assignment, please e-mail me at
[email protected]. A rubric is attached with this assignment to give you more clear idea about what is expected from this assignment. Make sure that you have included all the references in APA format, including web pages and video links (if you have used any). Assessment CriteriaScoring GuideCriteriaRatings*1. Focus on assigned topic5432 12. Accuracy of facts5432 13. Requirements met5432 14. Critical analysis on topic5432 15. Overall presentation and formatting of the assignmentTotal:* Note: This Ratings column can be anything you want it to be, based on how you want the assessment to be set up. The important thing to keep in mind is that whatever you put in the Ratings column must be matched in the Rating Scale.Rating Scale1 -2Does not meet criterion3Meets criterion, shows competence4 -5Exceeds criterion by showing sophisticated insight, depth of reasoning, sensitivity, or attention to detailComments: