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Discuss the implications for UK service sector firms that have off shed IT or administrative functions to low cost economies, such as India.

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Introduction

Discuss the implications for UK service sector firms that have off shed IT or administrative functions to low cost economies, such as India. The relocation of certain industries or functions from the UK to other low-cost economies abroad has raised a number of issues over the years. From a management perspective, it is seen as a great way of reducing overheads. However, customers have identified this as a drawback in most industries today. Firstly, transferring parts of a business to a low cost economy decreases overall expenses as mentioned earlier. This could be that, the value of the pound is much stronger than that of the currency in these low cost economies so businesses have to pay much lesser total overheads. As these firms receive their revenue in pounds sterling, they would rather pay out their expenses such as electricity in Indian rupee which is about 0.01% of a pound. This is an ideological tool in exploiting different economies efficiently. ...read more.

Middle

Without driving in enough customers through quality business management, the firm will certainly fall short of demand thus diseconomies of scale. Moreover, service sector firms might transfer parts of its business to places such as India to be able to benefit from cheaper land. Since in the UK, there are many restrictions to the acquisition of land, different taxes and legal permits to be able to acquire a location, it is a much wiser idea to locate in places where there are much fewer red tapes or barriers which could reduce costs. The difficulty however, could be the maintenance of quality customer services since these functions are nowhere near close to the department responsible for maintaining good customer relationships. Having mentioned all these positive implications, there may be some negatives attached to transferring a part of a business to another location. Critically, there may be some difficult ethical issues involved with this process. It may not be of good benefit to the economy if businesses were to shut down and create employment in another part of the world since employment is one of the main boosts to the economy. ...read more.

Conclusion

A number of UK service sector companies have attracted the media over allegations of worker exploitation in low cost economies on order to reduce costs. Such media representations might reduce demand for a firm's services or might also make workers feel unsafe at the workplace. These could directly have links with the mobility of demand for the firm's services. Also, it is seen as a way to avoid competition in the market which then again, ruins the public image of the firm. Overall then, offshoring is a great business technique which exploits different markets but at the same time reduces costs effectively. However, it brings about some ethical issues such as the impact on the economy and also could be seen to be very costly in terms of training staff in other parts of the world because of language barrier. Also, does not take the interest of its customers who are a great asset to every firm, into concern. It is therefore with no doubt that most businesses are moving back to the UK since it has been discovered that the negatives of offshoring do outweigh the positives. ?? ?? ?? ?? EKOW SIMPSON ...read more.

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