Principles of Management

Kingdom of Saudi Arabia Ministry of Education Saudi Electronic University

المملكة العربية السعودية وزارة التعليم الجامعة السعودية الإلكترونية

College of Administrative and Financial Sciences

Assignment 3 MGT101 (1st Term 2023-2024)

Deadline: 02/12/2023 @ 23:59

(To be posted/released to students on BB anytime in Week 10)

Course Name: Principles of Management	Student’s Name:
Course Code: MGT101	Student’s ID Number:
Semester: 1st	CRN:
Academic Year: 1445 H (2023-2024)1st Term

For Instructor’s Use only

Instructor’s Name:
Students’ Grade: /10	Level of Marks: High/Middle/Low

Instructions: Please Read them carefully

· This assignment is an individual assignment.

· Due date for Assignment 3 is 02/12/2023.

· The Assignment must be submitted on BB only in WORD format via allocated folder.

· Assignments submitted through email will not be accepted.

· Students are advised to make their work clear and well presented; marks may be reduced for poor presentation. This includes filling your information on the cover page.

· Students must mention question number clearly in their answer.

· Late submission will NOT be accepted.

· Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions.

· All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism).

Submissions without this cover page will NOT be accepted .

Students are strictly required to follow the instructions.

Assignment Purposes/Learning Outcomes:

After completion of Assignment-3 students will able to understand the

CLO1 State the concept of management functions, roles, skills of a manager and the different theories of management.

CLO2 Describe the current trends and challenges in global business management.

CLO4 Employ knowledge and techniques of strategic planning, problem solving, decision making and change management.

Assignment-3 Please go through the Caselets and answer the questions that follows. (Length of each answer should not be less then 200 words)

Part A

HR outsourcing offers real benefits

‘Today my company has 47 employees and enjoys a great relationship with CBR, our HR outsourcing firm. They have offered us increasing specialisation in HR functions as the business has grown. I don’t worry about HR details; I just focus on targeting new markets and segments. Employee administration is truly the least of my worries each day. New job applicants think we are a much bigger company than we are because of the professional recruitment services CBR offers. They also look after all legal compliance issues.’ (– Roger, landscape garden contractor, Phoenix, USA )

QUESTIONS

Explain the following terms from the text:

1. Outsourcing. (2 Marks) 2. HR function. Evaluate the advantages and disadvantages of outsourcing HR functions. (3 Marks)

Part B

British Airways (BA) – has outsourcing gone too far?

BA has outsourced more of its operations than any other major world airline. All of its ticketing and internet operations are designed and managed through Indian IT companies. BA now employs relatively few IT staff directly and these are all employed on key strategic projects. The development of the ‘shopping basket’ feature on ba.com is an example of BA’s tactical use of Indian IT companies. BA’s overhead cost per passenger is one of the lowest in the industry.

The strike at Gate Gourmet caused chaos on BA flights in 2005. The airline could not serve food on thousands of its flights due to the strike at its only outsourced producer of in-flight catering. This was a low-cost, high-risk strategy that backfired – BA employed no catering staff itself and other catering firms were unable to produce the quantity of meals that the airline needed during the lengthy strike.

(Source: www.silicon.com and www.personneltoday.com)

QUESTIONS

1. Explain two benefits to BA from outsourcing many of its operations. (2 Marks)

2. Analyse three possible problems to a business of reducing its core staff to an absolute minimum and using flexible workers and outsourced suppliers. (3 Marks)

ANSWERS:

Part A

1. Outsourcing. (2 Marks)

Answer-

Outsourcing, a pivotal business strategy of the modern era, has transformed the landscape of organizational management. It is a practice where companies delegate particular tasks, functions, or services to external third-party entities rather than retaining them within the confines of their operations (Kim et al.,2022). The driving force behind this strategic decision is the belief that external specialists bring to the table the essential expertise, resources, and efficiency needed to execute these functions more effectively.

The realm of outsourcing is expansive, encompassing various operational domains, including but not limited to manufacturing, customer support, information technology, and, as vividly illustrated in the provided text, human resources (HR). This practice allows companies to liberate themselves from the burdens of non-core functions, thereby sharpening their focus on their key competencies and strategic goals.

At its core, the primary objective of outsourcing is to refine business operations, curtail operational expenses, and, as a result, elevate overall efficiency. By outsourcing specific functions to external service providers, companies can capitalize on the specialized knowledge and capabilities of these experts (Kim et al.,2022). The outcome is a streamlined and cost-effective approach, allowing organizations to channel their resources and attention toward the core facets of their operations. This strategic realignment empowers businesses to not only boost their competitiveness but also remain agile and adaptable in the ever-evolving and dynamic business environment.

2. HR function. Evaluate the advantages and disadvantages of outsourcing HR functions. (3 Marks)

Answer-

Advantages

HR outsourcing firms are typically staffed with professionals who possess specialized knowledge and experience in human resources management. This expertise ensures the efficient and effective handling of HR tasks, from recruitment to compliance with employment laws and regulations (Taiser & Al-Zubaidi, 2022). By entrusting these functions to experts, companies can benefit from best practices and stay up-to-date with the latest HR trends. Outsourcing HR can lead to substantial cost savings. Companies no longer need to maintain an in-house HR department, which reduces labor and operational expenses, including salaries, benefits, and overhead costs. This financial advantage can be significant for businesses, particularly for small and medium-sized enterprises.

By outsourcing HR functions, business leaders can redirect their attention to strategic goals and core business activities. This shift in focus allows companies to allocate resources and energy to areas that directly impact their growth and competitive edge. It also frees up valuable time that would have otherwise been spent on administrative HR tasks. HR outsourcing providers offer scalability and flexibility, which is especially valuable for businesses experiencing growth or fluctuations in their workforce (Taiser & Al-Zubaidi, 2022). Outsourced HR services can adapt to changing needs, whether that involves quickly scaling up during periods of expansion or reducing services during quieter times. This flexibility enhances a company's agility and responsiveness.

Disadvantages

When outsourcing HR functions, companies may feel they are relinquishing control over critical aspects of their business, particularly those related to personnel management. This loss of control can lead to concerns about maintaining the company's unique organizational culture and ensuring HR policies align with the company's values and goals (Taiser & Al-Zubaidi, 2022). Sharing sensitive employee data with external providers raises concerns about confidentiality and data security. Organizations must ensure that their outsourcing partners have effective data protection measures in place to prevent data breaches or unauthorized access to employee information.

The outsourcing firm may sometimes align differently with the client company's objectives and values. Differences in priorities, strategies, or organizational culture can lead to conflicts of interest, potentially impacting the quality of HR services and the overall success of the outsourcing relationship (Taiser & Al-Zubaidi, 2022). While outsourcing can reduce direct HR costs, hidden or unforeseen expenses may arise in managing the outsourcing relationship. These expenses could include legal fees for contract negotiations or disputes, additional costs for customizing services, or penalties for non-compliance with service agreements. Businesses must carefully manage these potential hidden costs to ensure the overall cost-effectiveness of outsourcing HR functions.

Part B

1. Explain two benefits to BA from outsourcing many of its operations. (2 Marks)

Answer-

British Airways (BA) has strategically harnessed outsourcing, which has yielded substantial advantages for the airline.

One of the most prominent benefits of outsourcing for BA is the significant reduction in operational costs. By leveraging the cost advantages of outsourcing to Indian IT companies for ticketing and internet operations, BA can substantially save labor and overhead costs (Kim et al.,2022). This not only enhances the airline's bottom line but also allows for more competitive pricing in the highly price-sensitive aviation industry. Lower operating costs translate into more affordable ticket prices, making BA a more appealing choice for passengers. Moreover, by maintaining relatively few IT staff directly, BA avoids the burden of unnecessary fixed labor costs, which enables the efficient allocation of resources, contributing to cost-effectiveness and profitability.

Outsourcing non-core functions empowers BA to direct its attention and resources towards its core business activities, such as transporting passengers and cargo. By diverting the complexities of IT management and other ancillary tasks to external specialists, the airline can sharpen its strategic focus on enhancing the quality of its core services (Kim et al.,2022). This strategic concentration enables BA to invest in key projects, innovate within its core competencies, and maintain a competitive edge in the aviation sector. Outsourcing IT management, for instance, grants access to specialist service providers' expertise, leading to greater efficiency and effectiveness in managing these functions. Ultimately, this allows BA to excel in delivering its primary services and exceed customer expectations.

2. Analyse three possible problems to a business of reducing its core staff to an absolute minimum and using flexible workers and outsourced suppliers. (3 Marks)

Answer-

One significant problem that can arise from reducing core staff to a minimum and relying heavily on flexible workers and outsourced suppliers is maintaining consistent quality. When an organization needs more direct control over its workforce, there is an increased risk of inconsistencies in product or service quality (Taiser & Al-Zubaidi, 2022). Different temporary workers or external suppliers may have varying standards, resulting in quality issues that can negatively impact customer satisfaction and the company's reputation.

By minimizing core staff, a company may inadvertently reduce its in-house expertise. More reliance on flexible workers and outsourced suppliers can lead to a loss of institutional knowledge and specialized skills within the organization (Taiser & Al-Zubaidi, 2022). This can limit the company's ability to adapt to unforeseen challenges or develop innovative solutions, potentially hindering long-term competitiveness.

Finally, depending extensively on external suppliers for critical components or services can expose a business to supply chain vulnerabilities. Disruptions in the supply chain, whether due to geopolitical issues, natural disasters, or other unforeseen events, can have severe consequences (Sharma et al., 2023). For instance, as seen with BA's experience during the Gate Gourmet strike, relying solely on an outsourced producer for in-flight catering can leave a company vulnerable to disruptions that affect its ability to deliver essential services. This highlights the importance of diversifying suppliers and maintaining contingency plans when reducing core staff to a minimum and relying on external partners.

References

Kim, S. T., Lee, H. H., Hwang, T., & Park, B. (2022). The impact of relationship quality on supply chain performance in logistics outsourcing.  Journal of Managerial Issues,  34(1), 23-40.

Sharma, S. K., Srivastava, P. R., Kumar, A., Jindal, A., & Gupta, S. (2023). Supply chain vulnerability assessment for manufacturing industry.  Annals of Operations Research,  326(2), 653-683.

Taiser, H. B., & Al-Zubaidi, G. D. (2022). The impact of outsourcing of human resource activities on organizational Resilience:(Field research in a sample of premium class hotels-in Iraq).  resmilitaris,  12(2), 3534-3550.