Offshore Outsourcing : - What's so great about that?

Abstract: Background – Offshore outsourcing is to source activities that were previously produced in-house. It is a concept that has become a trend the last years and its advantages are often taken for granted. Many firms believe that a delegation of the production to low-cost countries enhances their competitiveness and that they get closer to new markets. This might instead be on the expense of the Swedish employment and investments. Some firms chose not to delegate parts of their production but can still stay competitive in their market. Purpose – The purpose with this thesis is to investigate what lies behind small firm’s strategies not to use offshore outsourcing. Frame of References – A strategy is to position the firm in its competitive market. The firm has to defend their position in their market to stay competitive. Overall cost leadership and differentiation are two common strategies where the firm has to perform more efficiently than their competitors. A strategy makes the firm unique and by that achieving competitive advantage. A strategy can be to use offshore outsourcing. The main reasons for offshore outsourcing are to lower costs, increase the firm focus, and to raise the innovation ability. Several disadvantages can also be identified about offshore outsourcing: the dependence on external suppliers, and loss of control over activities, and the possibility of a failing relationship and/or decrease of morale among workers. Method – The method chosen for this thesis is a qualitative study. Semi-structured interviewed were conducted with three small firms. They were personal interviews with open-ended questions. Conclusions – The firm sees their in-house capabilities and tries to develop them before deciding to offshore outsource. Firms that do not offshore outsource are less driven by material and cheap labour and feel that it is important to consider the overall costs. Swedish occupations will be lost as a consequence of offshore outsourcing and will generate serious consequences for the Swedish labour market. Knowledge and competences are high in firms that do not use offshore outsourcing. It is developed within the firm and it is creates a competitive advantage.