Generic Benchmarking
Global Communications, once a leader in the communications industry, has suffered from decreased profits over the past three years significantly due to a large abundance of competition. As a result the company devised a plan to step up its innovative technology, face its competition and reduce its overhead by outsourcing its labor overseas. This action will enable savings from cheaper labor to be reallocated to initiate innovative product and service designs, manufacturing and distribution costs. The outsourcing plan will result in layoffs of 40 % of Global Communications employees.
Unfortunately, Global Communications has not effectively communicated its goal to all its stakeholders in an amicable way nor did the company decide to get other opinions of how to reach the end stated goal.
While outsourcing has been considered a solution to reduce labor costs other companies have identified best practices strategies to reduce labor costs and increase profits. The company, IKEA, is just one of many examples of how profits can be increased without the necessity to outsource for cheap labor. When the founder, Ingvar Kamprad, expanded his business to selling furniture manufactured locally with wood from nearby forests, he opened a showroom. Soon after a price war began with major competitors and quality decreased. Competitors pressured manufacturers to boycott the company. In response IKEA began to design its own furniture resulting in improved quality and new designs. In time Kamprad realized it was cheaper to sell and ship dismantled furniture for customers to put together themselves.
IKEA has now expanded worldwide, invested in local economies and is a profitable company. Instead of outsourcing labor, IKEA designs its furn ...