The report aims to highlight the impact outsourcing has had on General Electric Company. This paper analyzed GEs decision to have multiple outsourcing partnerships.

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The report aims to highlight the impact outsourcing has had on General Electric Company. This paper analyzed GE’s decision to have multiple outsourcing partnerships. The paper also discusses the impact that outsourcing will have on US economy in general. The first part of the paper reveals how outsourcing has led GE to be a cost efficient, productive and profitable company. The findings outlined factors such as the success of GE Real Estate in Mexico. It also outlined GE’s successful steps in India in order to source products, services, and intellectual talent from India for its global businesses.

The next section of the paper discusses GE’s decision to have multiple outsourcing partnerships. It discusses the strategies of successful multiple outsourcing and consolidated it with GE’s steps of outsourcing its businesses in different countries.

In the last section the report elaborates different impact will outsourcing have on US economy. It contrasted the brighter side of outsourcing such as $100 worth of work sent abroad by U.S. companies; $130 to $145 will be reinvested in the U.S. economy. It also reveals the downside as it discusses how sending jobs abroad can affect American job market.

1.0 Introduction

1.1 Background

General Electric is a diversified technology, media and financial services company focused on solving some of the world's toughest problems. With products and services ranging from aircraft engines, power generation, water processing and security technology to medical imaging, business and consumer financing, media content and industrial products, the company serve customers in more than 100 countries and employ more than 327,000 people worldwide (General Electric Company, 2008).

GE is made up of four businesses, each of which includes a number of units aligned for growth. Its four global research centers attract the world's best technical minds. With more than 3,000 researchers working toward the next breakthrough, GE is positioned to continually innovate, invent and reinvent (General Electric Company, 2008).

GE was founded by Thomas A. Edison, who established Edison Electric Light Company in 1878. In 1892, a merger of Edison General Electric Company and Thomson-Houston Electric Company created General Electric Company. GE is the only company listed in the Dow Jones Industrial Index today that was also included in the original index in 1896 (General Electric Company, 2008).

Through outsourcing, which is defined as the procurement of products or services from sources that are external to the organization (Lankford & Parsa, 1999), GE established itself in more than 100 countries. It was one of the largest foreign investors in Japan, had an enormous presence in Europe, employed more than 20,000 in India, and was widely present in Latin America (Vietor and Veytsman, 2007).

1.2 Aims

The purpose of this report is to evaluate the impact that outsourcing has had on GE. It focuses on the American Outsourcing journal by Vietor and Veytsman (2007) in order to determine the impact that outsourcing will have on the US economy in general.

1.3 Scope

The report investigates how outsourcing has impact on General Electric. The paper focuses to analyze the company’s decision to have multiple outsourcing partnerships. It evaluates the firm’s operation in Asia, India, Latin America, and Europe and how it affected the organization performance metrics, cost-efficiency, productivity and profitability. The report also analyzes the impact that outsourcing will have on the US economy. It evaluates the impact that outsourcing will have on US workplace and also how outsourcing creates value in the US economy.

1.4 Methodology

The report has used various books, e-journals and websites.

1.5 Assumption

It is assumed that information collected for the purpose of the report is correct and relevant.

2.0 Discussion

2.1 Outsourcing

Outsourcing is a fashionable way of solving some business problems and there are numerous reports of its increasing use. Initially used primarily for information technology, a wide variety of business process is now outsourced. The use of outsourcing is becoming more sophisticated; more organizations are outsourcing responsibility for business processes (Beaumont & Sohal, 2004). For services, outsourcing usually involves the transfer of operational control to the suppliers. In the current environment of right-sizing, with a renewed focus on core business activities, companies can no longer assume that all organizational services must be provided and managed internally. Competitive advantage may be gained when products or services are produced more effectively and efficiently by outside suppliers. The advantages in outsourcing can be operational, strategic, or both. Operational advantages usually provide for short-term trouble avoidance, while strategic advantages offer long-term contributions in maximizing opportunities (Lankford & Parsa, 1999). It is estimated that every Fortune 500 company will consider outsourcing during this decade and that 20 percent of them will enter into a contract by the end of the decade. A variety of firms already exhibit this trend. General Electric Corporation has entered into a five-year, $500 million contract with Electronic Data Systems (EDS) to handle the corporation's desktop computer procurement, service, and maintenance activities (Behara et al., 1995). A recent study indicates that outsourcing operations is the trend of the future and that organization already outsourcing activities are pleased with the results. A year-long international study by Arthur Andersen and The Economist Intelligence Unit finds that 93 percent of corporations interviewed plan to outsource in the next three years. Of those that already outsource, 91 percent are satisfied with the results (Struebing, 1996). The next section of the paper will evaluate the impact that outsourcing has had on General Electric and analyze their decision to have multiple outsourcing partnerships.

2.2 Outsourcing Impact on GE

Based on transaction cost theory, when a firm has already integrated its operational functions, the decision to outsource such functions to the market should be made if it is necessary to create or protect firm value. By outsourcing tasks to specialist organizations, firms may better focus on their most value-creating activities, thereby maximizing the potential effectiveness of those activities. In addition, as outsourcing increases, costs may decline, and investment in facilities, equipment, and manpower can be reduced (Jiang, Frazier & Prater, 2006).

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Cost efficiency remains the primary explanation for outsourcing. Firms evaluate outsourcing to determine whether current operating costs can be reduced and if saved resources can be reinvested in more competitive processes (Jiang, Frazier & Prater, 2006). For example GE Mexico was GE’s largest operation outside of the United States. GE worked closely with the Mexican government to make sure that their target of 6% productivity growth was met. Some of GE’s businesses in Mexico were clear winners. For instance, GE’s Real Estate sector was a clear winner, with over $1 billion in financing in Mexico. GE had thus become ...

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