Question

Describe how outsourcing works. Why would a firm want to outsource?

Short answer

Outsourcing is the process of obtaining goods or services, from an outside supplier for any particular role or we can say non-fundamental roles in the firm or company.

Step-by-step solution

Way in which outsourcing works

Inoutsourcing one company or firm hires another company for any specific functional area or any existing activity which couldn’t be performed internally within the organization. This helps the company to focus on its main targeted area. Outsourcingis done when a company or firm wants any specific skilled work to be performed that they are not able to do.

Reasons behind firm going for outsourcing

1. Outsourcing is used as a cost-cutting tool for businesses as they can buy that particular product or service from outside cheaper as compared to produced by themselves.
2. Outsourcing enables the company to focus on their core business as all other non-functional activities to be done by outsourcing.
3. Outsourcing helps companies and firms to enhance their service quality.
4. Outsourcing solves capacity issues for businesses and firms as they can produce in masses from outside vendors which helps them to meet the higher demand in the market.
5. Outsourcing helps in the expansion of services offered by the companies and firms as they can reach more customers through outsourcing vendors.