Short Essay on Outsourcing

Most large companies in today's economy employ some sort of outsourcing of either services or products. In fact, "the model for most of the 20th century was a large integrated company that can own, manage, and directly control its assets" (Robert Handfield, Ph.D., "A Brief History of Outsourcing", NC State University). The first and obvious reason for outsourcing remains to reduce cost or save on efficiency, however, more and more companies are employing outsourcing for other strategic driven initiatives. Some of these reason can be:
1. To focus on core activities
2. Reduced overhead
3. Operational control
4. Staffing flexibility
5. Continuity and risk management
6. Development of internal staff
7. Risk sharing

One such company that uses outsourcing is Nike, Inc., a "corporation that is engaged in the design, development, manufacturing and worldwide marketing and selling of footwear, apparel, equipment, accessories and services" (www.reuters.com). In its earlier years of expansion, Nike acquired other businesses such as Cole Haan, Converse, Umbro and Bauer Hockey, among others. It has since then sold some of these acquisitions in an effort to refocus on its core activities. Although not an example of oursourcing, it does illustrate how important core activities are to a company. As great as diversification and acquisitions can be, they can take away focus from a company's star product, in turn affecting revenue. As part of their strategic planning, Nike probably weighed the cost benefits of outsourcing these acquisitions to others while retaining ownership, with the sale of these business lines altogether, and clearly selling was more financially beneficial for the company. But in other cases, outsourcing these business lines to others in order to concentrate on a core product or service can be the most sound strategy to