ABSTRACT
The practice of outsourcing management in industry and organization is
universally acknowledged as effective instruments for competitiveness. Even in
small and medium enterprises (SMEs). This study tries to look at the role
outsourcing management can play in the development of small and medium
enterprises (SMEs), their current dilemma that prevent them from becoming
active players in the regional and global markets. The study also highlight the
benefit, risk and the kind of measure that need to be taken to enhance their
effective participation in the modern management technique (outsourcing) The
study draws on empirical studies undertaken on selected small and medium
enterprises in Benin City and part of Lagos state. The investigation supplies a
realistic result on the dilemma of outsourcing management to small and medium
enterprises. (SMEs).
other objectives of this study are: To ascertain if outsourcing
management create unique value for the Company’s Customer: To ascertain the net
risk or benefit associated with outsourcing non-competence area: To determine
if the involvement in outsourcing management by companies differentiate them
from the competitor: To determine if there are factors that limit SMEs from
participating in outsourcing the non-competence area, and finally to examine if
there is any relationship between outsourcing and retaining the service of
highly skilled experts. To effectively prosecute this research work, I
formulated the following hypothesis: Outsourcing management is a function of
the unique value created for the company’s customers: The risk or benefit that
accrues to organization is a function of outsourcing the non-competitive area:
Outsourcing management is significant in differentiating the organization from
its competitors: SMEs participation in outsourcing management is a function of
its contracting of non-competence areas: Outsourcing management by organization
is dependent on the extent they are able
to retain the services of highly skilled experts: this research work arrived at
the following findings that the participation of small and medium enterprises
in outsourcing management create a unique value for customers performance for
the resources expended: In addition there is a relationship between the
benefits that accrue to the organization outsourcing of non-competitive areas:
In other words SMEs involvement in outsourcing management can improve the
organization focus and can as well help to reduce risk: More still this
research revealed that outsourcing management can help to improve credibility
and image by differentiating SMEs from competitors: conclusively, outsourcing
management helps to increases the commitment of experts.
Table of Contents
Page
Certification – – – – – – – – i
Dedication – – – – – – – – ii
Acknowledgement – – – – – – iii
List of
table – – – – – – – iv
List of
Figure – – – – – – – v
Chapter One
- Background of the study – – – – 1
- Statement of Problem – – – – – 5
- Objective of the research – – – – – 7
- Research Question – – – – – 8
- Hypothesis – – – – – – – 8
- Significance of the study – – – – – 10
- Scope of the study – – – – – 12
1.8 Definitions of terms – – – – – 12
Chapter two
Literature Review – – – – – – 16
2.1 Introduction – – – – – – 16
2.2 Concept of Outsourcing – – – – 17
2.3 Outsourcing Management – – – – 19
2.4 Outsourcing Management in private or public sector of the economy – – 20
2.5 Business Process Re-Engineering (BPR) – – 21
2.6 Why do government companies prefer to outsource – – 23
2.7 Factors that Influences Decision to Outsource – – – 24
2.8 Process Outsourcing – – – – 27
2.9 Deciding to Outsource – – – – 28
2.10 Decision to outsource – – – – 29
2.11 Reasons for outsourcing – – – – 30
2.12 The Role of Managers in the outsourcing vision – – 31
2.13
Transition to Outsourcing – – – – 33
2.14 Creating the Enabling Environment to achieving the outsourcing vision – – 33
2.15 Adopt the 7 –Best Practice of Outsourcing- – 36
2.16 The Small and Medium Enterprises – Concept 38
2.17 The Role of Small and Medium
Enterprises (SMES) – – – – 42
2.18 Advantages of small and medium
scale enterprises – – – – 43
2.19 The Dilemma of Small and Medium Size Enterprises in Nigeria – – – – 44
- Constraining of Small and Medium Enterprises Development in Nigeria – – 45
- How Small and Medium Enterprises can Benefit from the Policy of outsourcing – – 51
- A Comparative Analysis of Outsourcing Globally – France, Italy and Japan. – – 53
2.23
Summary of the Literature review – – 60
References – – – – – – 61
Chapter 3
Research Methodology – – – – – 63
- Introduction – – – – – – 63
- Research Design – – – – – 64
- Sampling Procedure – – – – – 65
- Sources of Data – – – – – 65
- Statistical tools for Analysis – – – – 66
- References – – – – – – 68
Chapter 4
4.1
Presentation and analysis of Data – – – 69
4.2
Testing of Hypothesis – – – – 70
Chapter 5
Summary of Finding, Recommendation and conclusion – – 80
- Summary of Finding – – – – – 82
- Recommendation – – – – – 83
- conclusion – – – – – – 85
Appendix
References
LIST OF TABLES
page
4.1 Questionnaire
Returns – – – – – – – – – – – – – – – – – – – – –
69
4.2 Responses
to Questionnaire – – — – – – – – – – – — — –
– – – 70
4.3 Responses
to Question six in table 4.2- – – – – – –
– – – – – – -72
4.4 Responses
to Question nine in table 4.2 — — – — – – –
– – – 74
4.5 Responses
to Question eleven in table 4.2 – – – – — –
— — -75
4.6 Responses
to Question Twelve in table 4.2 – – — – – – –
— -78
4.7 Responses
to Question thirteen in table 4.2 – – – – –
— — – 80
LIST OF FIGURES Page
Figure 4.1 Sketch
showing the result of
the test on hypothesis II – – – – –
— – — – – – — – – –
73
Fig. 4.2 Sketch showing the result of the test of hypothesis II -75
Fig. 4.3 Sketch showing the result of the test of hypothesis II – — – – – -76
Fig. 4.4 Sketch showing the result of the test of hypothesis IV — – – – – 79 Fig. 4.5 Sketch showing the result of the test of hypothesis V – – – -80
CHAPTER ONE
1.1 BACKGROUND OF THE STUDY
As companies’ attempts to focus on
core competences, many are considering outsourcing various aspects of their
in-house operations. The rapid growth in outsourcing has occurred because
organizations are struggling to cope with the demands on their skills. Aoki
1988- says when products becomes increasingly differentiated and renewed, the
best strategy appears to focus on core competences and let other firms deal
with production of other parts, machine maintenance or distribution. Almost
every organization outsource in some way. Typically, the function being
outsourced is considered non-core to the business. The decision to outsource is
often made in the interest of lowering firm or making better use of time and
energy costs, redirecting or conserving energy directed at the competences of a
particular business, or to make more efficient use of land, labour, capital,
(information) technology and resources. It is essentially a division of labour.
Although outsourcing has been around
as long as work specialization has existed, in recent history, companies began employing
the outsourcing model to carryout narrow functions that could be done more
efficiently and therefore more cost-effectively by other companies with
specialized tools and facilities and specially trained personnel.
Currently, outsourcing takes many
forms; organizations still hire service providers to handle distinct business
processes or whole operations such as benefits management. Companies have
latched onto outsourcing as a route to almost immediate savings and quality
improvement.
In their bid to be more competitive
and relevant in today’s global environment, most companies are constantly
restructuring their business; downsizing them so as to become cost efficient,
more responsive to customers, and to maintain or gain competitive advantage. In
order to achieve these goals, companies have to outsource those services that
they do not have competitive ability leaving their core competent.
Goldfrab and
Heller (2001) Outsourcing is contracting with another company or person
to do a particular function or the passing of service provision or production
to another internal or external party. Researchers such as Hilton et al. (2001)
and Rainborn et al. (1999) regard it as a ‘strategic cost management tool’ and
as ‘a strategy in business’ by Diering and Click (2005) ‘not only because it
can help to reduce cost, but also because it potentially enables firms to
concentrate on their core activities. The areas of core competence will
encompass those activities where the company possesses competitive advantage,
which enables them to perform better, and at lower cost than its competitors.
As a result, managers evolve strategies that progressively tend to exploit a
company’s core competences. Small and medium enterprises in Nigeria cannot
be left out. ( Egabor (2008) says small and medium enterprises can
prospectively propel a country’s economic development and growth.
SMEs boost employment, capital
formation and indigenous technology. The small and medium enterprises in Nigeria faces
myriad of problems, which hinder its development and affect growth negatively.
These problems include poor infrastructure, high transaction cost, low demand
for locally made goods and lack of competitive advantage are impacting against
the performance or even the existence of small scale enterprises Emoleke, (2006).
These preferences stem from the fact that some of the locally made goods are
not durable and are inferior to the imported ones. Because competition has
become stiff and force, the imperatives of globalization have all combine to
force organizations to seek better ways of optimizing their competitive
advantage and outsourcing those services that others can make more cheaply than
they can make it. It is time; SMEs in Nigeria begin to appreciate the
evolution of outsourcing and its effects on their overall technical workforces.
SMEs has to be encouraged to be involved in outsourcing policy, for this will
enable them to use their skills and capital productively to produce goods and
services they know best to produce.
The researcher is of the opinion that
companies should not regard outsourcing management as a cure for all
organizational problems, thereby neglecting other management functions like
planning, organizing and controlling e.t.c. The researcher will also like to warn
against a situation where management will hastily dabble into outsourcing
without adequate preparation for it.
In conclusion, this paper therefore is
an attempt to critically evaluate how outsourcing can positively enable
companies to retain the services of highly skilled experts, whose full-time
employment is not justified.
This research tries to look at their (SMEs)
current predicament characterized by numerous constraints that prevent SMEs
from participating in outsourcing management, there by hindering them from
realizing their full potential as instrument of development and highlight the
kind of measures that need to be taken to enhance their effectiveness and
competitiveness so that they can become effective players in the markets.
1.2 STATEMENT OF PROBLEM
OUTSOURCING MANAGEMENT: THE DILEMMA OF SMALL AND MEDIUM ENTERPRISES
