Opportunities And Challenges In Outsourcing Business Operations In Bangladesh: A Case Study On Nike

Project Objective

Examine the Opportunities and Challenges in Outsourcing Business Operations in Bangladesh.

Businesses usually adopt outsourcing for the major reason for minimizing the cost of business operations. Outsourcing is commonly preferred by multinational firms because it primarily reduces the cost of business activities and increases the efficiency of operations. Companies in developed countries frequently implement outsourcing due to the complexity of their business operations. However, due to globalization, developing countries like Bangladesh, China and India have also adopted outsourcing. Outsourcing takes place both in the production sector and in the service industry (Lun et al. 2016).

However, outsourcing can negatively affect the business operations, therefore, calls for an analysis of the cons and pros of outsourcing business operations to provide an in-depth understanding of its effects on the business.  Multiple studies have been carried out on the impacts of outsourcing on various business operations (Motahari-Nezhad et al., 2009; Artto et al., 2008; Narayanan et al., 2011). However, little emphasis has been placed on developing countries. This study will, therefore, seek to examine the challenges and opportunities of outsourcing business operations with the case study of Nike in Bangladesh as an emerging country.

The objective of this study will be to examine the opportunities and challenges in outsourcing business operations in Bangladesh. Furthermore, this study will

The scope of this paper is confined to reviewing the negative and positive effects of outsourcing business operations. The possible opportunities for outsourcing in the current global market will also be discussed. The case study of the study will focus on Nike Company in Bangladesh. Therefore it will be imperative that the economic background of Bangladesh is assessed to give an insight into the present condition of business in the country that fosters outsourcing of business operations like that of Nike. This will not only examine the outsourcing business opportunities for Nike but will also recommend strategies to Nike on how to effectively outsource its business strategies.

The government of Bangladesh has trade policies that favor foreign cash inflow thus fostering outsourcing. The outsourcing policy is more advantageous to the IT department. The involvement of Bangladesh in the international market is primarily attributed to its outsourcing policy. Kaur and Sharma (2017), observes that improved data quality that is collected from the servers of the customers is the main driver of outsourcing.

Bangladesh is listed as being amongst the emerging economies of the BRICS countries, and this is majorly attributed to its culture of promoting international business. Additionally, its geographical location of proximity to India which is the fastest growing economy globally has boosted its business operations from domestic to the global market.

Project Scope

Choi et al. (2017) noted that much more business opportunities in business operations are only possible through effective outsourcing strategy. It also enables multinational financial corporations to focus on the development of soft skills through effective business communication. Nike is an American international company with thriving business in Bangladesh because of outsourcing. This has also enabled the firm to improve its cultural diversity.  Chatzoudes et al. (2015) found out that outsourcing motivates the employees by increasing their cultural awareness.

The Nike brand is one of the largest firms in the sportswear sector with its manufacturing units distributed across the world, which makes it supply chain more effective. The challenges of outsourcing can be addressed by improving the quality of the supply chain. Nike benefits from outsourcing by reducing the expenses of recruiting employees. The organization hires employees from countries like Bangladesh, China and India thus improving its customer care services. Chou et al. (2015) also noted that reduction of cost of operations is the main benefit of outsourcing.

According to Lacity and Willcocks (2013) outsourcing of business operations has a competitive advantage. Nike is currently under stiff competition from other established sports companies like Adidas and Reebok, but its outsourcing operations have enabled it to enhance its supply chain and to access customers with quality and quantity products quickly.  The main challenge facing business operations in the US are the restrictive tax laws which also increases the cost of supply chain due to high import duty. Outsourcing in such cases reduces operational costs for Nike. Mahmood (2015) states that outsourcing business operations increase financial opportunity.

Lacity and Willcocks (2017) suggest that outsourcing is disadvantaged by the high costs of initial market entry which also raises the cost of business activities. However, the market entry costs in Bangladesh are very low because of the business competition is much smaller and this may have a negative impact on the business performance of international firms. Nike can take advantage of the low labor costs to minimize the cost of its customer care service. However, the bordering India and China countries have increased competition in trade doing the foreign businesses to undergo low levels of business operations. Bangladesh can resolve this issue by lowering the market entry tax and providing highly skilled human resources (Askari et al. 2015).  

Schulte et al. (2015) observe that stability nature of the economy of Bangladesh regarding inflation rate is an investment itself for foreign businesses to acquire rapid access in the market as they aim at developing stable business growth. The economic market of Bangladesh also makes it possible to forecast the developing labor demand that can be another opportunity for Nike.

Literature Review

Poor technology growth in Bangladesh is a challenge to foreign companies because it increases the risk of losing essential data concerning financial and internal business activities. Additionally, complex outsourcing requires developed soft skills which Bangladesh doesn’t have. This poses a significant challenge in communication because the operations of the call centers substantially rely on high-speed bandwidth.

Askari et al. (2015) observe that the dynamic global business market is another challenge facing outsourcing. The imposition of stringent laws that limit outsourcing by the American government because of lack of job opportunities in the internal market is one of the current challenges of outsourcing.

The outsourcing department also faces immense challenges in a financial transaction. The cost of financial transactions in the multinational companies is very high especially in emerging countries whose transaction systems have not been digitalized. Betz et al. (2014) observe that organizations face ethical risks in attempting to lower costs of financial transactions by compromising business quality. Nike has to rely on traditional transfer methods in Bangladesh just like other companies because of lack resources to upgrade to digital systems of payments.

Outsourcing is also linked to wastage of talents and human resource. Outsourcing firms recruit employees from foreign third party agents and thus wasting the internal human resources and abilities because they are not used. This makes it impossible for the company to develop internal talent which is necessary for workplace sustainability. Additionally, effective communication with the clients and shareholders is compromised since the communication plans are executed by third-party outsourcing agents (Chen et al. 2015). Another cause of business communication challenges is the real cultural diversity between Bangladesh and the US.

Primary Question

What are the challenges and opportunities of outsourcing business functions at Nike, Bangladesh?

Secondary Questions

What is the extent of outsourcing business operations at Nike, Bangladesh?

Which business functions are outsourced at Nike, Bangladesh?

This study will adopt both qualitative and quantitative approaches (mixed method). According to Creswell and Creswell (2017), the mixed approach enables the combination of different techniques which generates different statistical analyses, thus providing comprehensive results.

Qualitative Research

The study used the qualitative method to establish a detailed understanding of the topic under investigation. The first step was to formulate research questions aimed at providing solutions to the research topic. This was achieved through an in-depth literature review of materials associated with the subject under investigation. A case study design will be adopted because it is the most appropriate in situations where there is need of an in-depth assessment of one study unit (Onwuegbuzie et al. 2012 and Garg and Kothari, 2014). Purposive sampling and random sampling is to be used to select the sample size of the study. The target population will be the heads and assistants of all units in the organization, which is 500 employees. Sample size will be obtained using the formula of Mugenda, and Mugenda (2012) of 10% of the target population. Data will be collected from a sample size of 50 employees using guided interviews. The received data will then be analyzed by content analysis.

Research Questions

Quantitative Research

The study will use a descriptive design because it establishes the magnitude of the phenomena under study (Mugenda, and Mugenda, 2012). The researcher will formulate a structured questionnaire with close-ended questions for collecting data since it promotes comparability (Bryman and Bell, 2015). The target population will consist of all heads and assistant heads of departments at Nike in Bangladesh which are 500. Sample size will be generated using Mugenda, and Mugenda (2012) formula of 10% of the target population which is 50 employees. The sample will be developed using purposive and random sampling technique. This method is to ensure that all subjects in the sample participated in the study. The researcher will personally disseminate the questionnaires to the respondents and collect them within thirteen days. The gathered data will then be checked for comprehensibility and inclusiveness, grouped, coded and tabulated. SPSS was then used to analyze the data and presented in the form of charts and graphs.

Validity and Reliability

The researcher will conduct data validation during the coding process in the SPSS software by coding simple range and constraint validation to ascertain consistency and sequence of the input characters. Furthermore, cross-reference validation will be incorporated in the tests. Data reliability will be done using a test-retest approach where six participants will be used to test the questionnaires, and any noticeable errors note and changed. The six respondents will be excluded from the actual research.

Research Limitations

The study focuses on a single company, and the findings might vary from the opportunities and challenges faced by other firms in the sports industry when outsourcing business functions. This is because every company used different strategies for market differentiation. The small sample size of the study may limit the generalization of the findings to a broader context or different economic markets

Research Schedule

Conclusion

The growing economic market of Bangladesh has received much attention in literature for various reasons. In relation to outsourcing, the Bangladesh business market is regarded as the most appropriate.

Therefore, the decision by Nike Company to outsource in this market is timely and appropriate for many reasons. The Bangladesh market is characteristic of its stable inflation rate, government trade policies which encourages high amounts of foreign cash flow, and favourable geographic location with China India. However, the technological infrastructure of Bangladesh which is key to effective outsourcing is under-developed. Therefore, before Nike can fully outsource its important business functions, they need to weigh the existing opportunities and challenges. 

Research Design and Methodology

References

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Askari, M.M.U.R., Zabeen, S.S. and Uddin, K.M., 2015. Problems and Prospects of IT and IT Enabled Services Outsourcing in Bangladesh. Journal of Tariff and Trade, p.34.

Betz, S., Oberweis, A. and Stephan, R., 2014. Knowledge transfer in offshore outsourcing software development projects: an analysis of the challenges and solutions from German clients. Expert Systems, 31(3), pp.282-297.

Bryman, A. and Bell, E., 2015. Business research methods. Oxford University Press, USA.

Chatzoudes, D., Chatzoglou, P. and Vraimaki, E., 2015. The central role of knowledge management in business operations: Developing a new conceptual framework. Business Process Management Journal, 21(5), pp.1117-1139.

Chen, H.M., Kazman, R., Haziyev, S. and Hrytsay, O., 2015, May. Big data system development: An embedded case study with a global outsourcing firm. In Proceedings of the First International Workshop on BIG Data Software Engineering(pp. 44-50). IEEE Press.

Choi, T.M., Chan, H.K. and Yue, X., 2017. Recent development in big data analytics for business operations and risk management. IEEE transactions on cybernetics, 47(1), pp.81-92.

Chou, S.W., Techatassanasoontorn, A.A. and Hung, I.H., 2015. Understanding commitment in business process outsourcing relationships. Information & Management, 52(1), pp.30-43.

Creswell, J.W. and Creswell, J.D., 2017. Research design: Qualitative, quantitative, and mixed methods approaches. Sage publications.

Garg, G. and Kothari, C.R., 2014. Research Methodology. Methods and Techniques. New Age International Publishers. New Delhi-110002.

Kaur, K. and Sharma, R., 2017, July. Critical: Threat model for an outsourcing business. In Computing, Communication and Networking Technologies (ICCCNT), 2017 8th International Conference on (pp. 1-5). IEEE.

Lacity, M.C. and Willcocks, L.P., 2013. Outsourcing business processes for innovation. MIT Sloan management review, 54(3), p.63.

Lun, Y.V., Shang, K.C., Lai, K.H. and Cheng, T.C.E., 2016. Examining the influence of organizational capability in innovative business operations and the mediation of profitability on customer satisfaction: An application in intermodal transport operators in Taiwan. International Journal of Production Economics, 171, pp.179-188.

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Motahari-Nezhad, H.R., Stephenson, B. and Singhal, S., 2009. Outsourcing business to cloud computing services: Opportunities and challenges. IEEE Internet Computing, 10(4), pp.1-17.

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Narayanan, S., Jayaraman, V., Luo, Y. and Swaminathan, J.M., 2011. The antecedents of process integration in business process outsourcing and its effect on firm performance. Journal of Operations Management, 29(1-2), pp.3-16.

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