December
1998 QUESTION 5 Total Marks: 20 Marks |
Click here to access other
questions
SUGGESTED SOLUTIONS |
| 5. | (a) Outsourcing – the use of people from outside an organisation to
carry out some aspect of the organisation’s business – has become very popular,
and can take several different forms. Explain carefully what is involved in each of three
forms of outsourcing listed below, give one advantage and one disadvantage of adopting
this form, and one example of a business areas in which it is commonly used. This is a fairly straightforward question and should
therefore be marked quite strictly. Candidates should only be awarded high marks if they
are able to show a good depth of understanding in their answers. The answers given below
are suggestions only, and other sensible answers should also receive credit. 3 marks are
available for the explanation of the form, and 1 mark each for one advantage, one
disadvantage, and one area in which the form is commonly used. |
|
| (i) Use of consultants. |
[6] | |
| Use of
consultants: this usually involves employing an individual on a fixed-term contract
(usually of weeks to months duration) (1 mark) who has some specialist skill or knowledge
which is of value to the company over this time period. In most business areas there is
usually a clearly defined market for consultants and many candidates from which to choose
(1 mark). Advantages include: use of consultants is extremely flexible (1 mark); or it can reduce costs through the reduction in fringe benefits such as pensions and redundancy payments (1 mark). Disadvantages include: consultants lack detailed knowledge of the company and may initially spend most of their time learning about the business (1 mark); or consultants lack commitment (1 mark). Common areas – any one of: accountancy (1 mark); software development (1 mark); specialist training (1 mark); any technical area (1 mark).
|
[6] |
|
| (ii) Use of personal
services contracts. |
[6] | |
| Use
of personal services contracts: this involves employing an individual on a short-term
contract (often through an employment agency) to perform a service role within the
business (1 mark). Such workers might often be employed alongside permanent staff
performing identical functions (e.g. secretaries, computer programmers) (1 mark). This
type of outsourcing is often used to try someone out in the company before they are
offered a permanent contract (1 mark). Advantages include: as for consultants, the main advantages are flexibility (1 mark); or reduction in costs through the reduction in fringe benefits such as pensions and redundancy payments (1 mark). Disadvantages include: lack of a clearly defined role within the organisation (1 mark); or lack of motivation due to feeling like a ‘second-class citizen’ (1 mark); or lack of job security (1 mark). Common areas – any one of: secretarial work (1 mark); computer programming (1 mark); manual labour (1 mark).
|
[6] |
|
| (iii) Use of suppliers of parts
and material. |
[6] | |
| Use
of suppliers of parts and material: this involves one business relying upon another
business to provide component parts or materials for inclusion in its products (1 mark).
This form of outsourcing must be undertaken very carefully and good communications are
essential between the businesses as each must be committed to the success of the joint
venture (1 mark), with the producer confident that it can depend upon the supplier in
terms of both quality and reliability, and the supplier confident that the producer will
maintain demand over time (1 mark).Advantages include: Economies of scale
(since the supplier can sell to more than one producer) (1 mark).
Disadvantages include: The failure of either partner can lead to the collapse of both businesses (1 mark). Common areas – any one of: Any major manufacturing industry, particularly cars and computers (1 mark).
|
[6] |
|
| (b) Give two examples of areas where outsourcing has been popular for several decades. | [2] | |
Construction (1 mark) and government (1 mark). |
[2] |