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 is a strategic business approach that involves contracting out certain business functions or processes to external service providers rather than handling them internally. This approach is adopted to optimize business operations, reduce costs, and enhance efficiency. Organizations choose to outsource for various reasons, primarily to access specialized skills, resources, and technologies that may not be available in-house. Outsourcing involves a wide range of functions, such as customer support, IT services, manufacturing, and, in the context of Roger's situation, HR-related tasks through an HR outsourcing firm (Charles & Ochieng, 2023).

One of the primary reasons for outsourcing is the potential for cost savings. It enables companies to pay for services as needed rather than maintaining a full-scale in-house department, benefiting smaller businesses like Roger's landscape garden contracting company. By outsourcing HR functions, Roger can streamline his operations, allocate resources more efficiently, and focus on core business activities, such as targeting new markets and segments.

Another significant advantage of outsourcing, as illustrated in Roger's case, is the ability to access specialized expertise. HR outsourcing firms like CBR have the experience and knowledge to manage HR functions efficiently, ensuring compliance with labor laws and regulations (Patel et al., 2019). They are updated on the latest industry trends and legal requirements, which can be challenging for small businesses to do independently.

Furthermore, outsourcing can create the perception that a company is larger and more professionally managed, as Roger mentions. This can be mainly advantageous when dealing with job applicants and clients, enhancing the company's reputation and credibility. Additionally, outsourcing HR functions can help ensure legal compliance by entrusting HR experts to handle issues related to labor laws, employee benefits, and other regulatory matters (Charles & Ochieng, 2023).

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

Answer-

Outsourcing HR functions can provide various advantages and disadvantages, which require careful consideration when delegating human resources tasks to external service providers.

Advantages

One of the most significant advantages of outsourcing HR functions is cost reduction. Organizations can pay for HR services as needed, avoiding the expense of maintaining a full in-house HR department. This is especially beneficial for smaller businesses, as it allows them to access professional HR services without the financial burden of hiring a dedicated HR team.

HR outsourcing firms specialize in HR management, possessing specialized knowledge and expertise (Charles & Ochieng, 2023). This ensures that HR tasks are handled efficiently and comply with the latest regulations and industry best practices. It also guarantees that employees are managed effectively, from recruitment to payroll and benefits administration.

Outsourcing HR enables the organization's leadership to allocate more time and resources to their core business activities. Rather than getting bogged down in HR-related tasks, they can concentrate on strategic planning, product development, market expansion, and other activities that drive the organization's growth. HR outsourcing provides flexibility and scalability. As a company grows or experiences fluctuations in HR requirements, it can adjust the level of HR services accordingly (Patel et al., 2019). This adaptability allows businesses to align their HR support with their evolving needs.

Disadvantages

One of the primary disadvantages of outsourcing HR functions is the reduction in direct control over HR processes and decisions. When HR responsibilities are delegated to external service providers, the organization may have limited influence over critical HR-related choices. This can be a concern if specific HR functions are crucial to the organization's success and require closer oversight.

Outsourcing HR often involves sharing sensitive employee data with external service providers. This sharing poses potential risks related to data security, privacy, and confidentiality. It is essential to establish robust data protection measures and ensure that the outsourced provider adheres to the necessary security standards.

The quality of HR services from outsourcing firms may exhibit variations. Inconsistencies in service delivery can lead to disruptions in HR functions, affecting employee satisfaction and overall business operations (Patel et al., 2019). Maintaining consistent service quality and reliability is crucial when choosing an outsourcing partner.

Part B

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

Answer-

Cost Reduction: Outsourcing allows British Airways (BA) to reduce costs significantly. By partnering with Indian IT companies for ticketing and internet operations, BA can tap into cost-effective labor markets. Labor costs in countries like India are often lower than in the UK, making it an attractive option for BA to reduce operational expenses. This cost-saving approach enables BA to maintain competitiveness in the airline industry, especially when facing fluctuating fuel prices and economic uncertainties (Erdoğan, 2022). By outsourcing these operations, BA can better manage its financial resources and allocate them to other critical aspects of its business, such as safety, security, and customer service.

Operational Efficiency and Focus on Core Competencies: Outsourcing non-core functions, such as ticketing and internet operations, allows BA to enhance operational efficiency and concentrate on its core competencies. As a leading airline, BA's primary focus should be flight operations, safety, customer service, and strategic planning. Outsourcing specialized tasks to external experts in the field ensures that these functions are handled efficiently and professionally, reducing the burden on BA's internal staff. This shift in focus enables BA to dedicate more resources, time, and expertise to areas directly impacting its core business and the passenger experience (Erdoğan, 2022). It also helps the airline remain agile and responsive to market dynamics, which is crucial in the highly competitive aviation industry. By leveraging external partners for non-core functions, BA can adapt to market changes and improve its operational performance.

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

Answer-

One of the primary challenges of reducing core staff to a minimum and relying on outsourced suppliers is losing control over critical business functions. When essential functions are outsourced, the organization may have limited influence over how these functions are performed (Mazikana, 2023). BA may need help to ensure that outsourced service providers meet its quality and performance standards. This can lead to consistency in service quality and operational disruptions. For instance, if outsourced IT companies fail to meet BA's service level agreements, it can result in technical issues, customer complaints, and damaged brand reputation.

More reliance on external suppliers with robust risk management and contingency plans can be a significant problem (Mazikana, 2023). BA's dependency on a single outsourced producer of in-flight catering, as seen during the Gate Gourmet strike in 2005, exposed the airline to a high level of risk. The airline needed an alternative catering staff in place, leading to significant disruptions in meal services and negative impacts on passenger satisfaction. Businesses must anticipate potential disruptions, like labor strikes or supplier issues, and have contingency plans to mitigate such risks effectively. Failing to do so can result in operational vulnerabilities and financial losses.

Reducing core staff and relying extensively on outsourced labor can strain employee relations and harm the company's reputation. For instance, the employment of relatively few IT staff directly can create concerns about job security among the workforce. If employees perceive a lack of job stability, it may negatively impact morale and engagement (Du Toit et al.,2021). Additionally, any disputes or issues with outsourced labor, especially if they become public, can harm BA's reputation. This can result in a loss of customer trust, particularly if the airline cannot deliver services as expected due to labor-related disruptions or quality issues.

References

Charles, M., & Ochieng, S. B. (2023). Strategic outsourcing and firm performance: a review of literature.  International Journal of Social Science and Humanities Research (IJSSHR) ISSN 2959-7056 (o); 2959-7048 (p),  1(1), 20-29.

Du Toit, D., & Heinecken, L. (2021). Is outsourcing better? Clients' views on contracting in domestic cleaning services.  Employee Relations: The International Journal,  43(5), 1147-1162.

Erdoğan, D. (2022). Strategic Outsourcing in Airline Business. In  Corporate Governance, Sustainability, and Information Systems in the Aviation Sector, Volume I (pp. 195-211). Singapore: Springer Nature Singapore.

Mazikana, A. T. (2023). The Influence of Outsourcing on Organizational Performance in the Cement Industry.  Available at SSRN 4377788.

Patel, C., Budhwar, P., Witzemann, A., & Katou, A. (2019). HR outsourcing: The impact on HR's strategic role and remaining in-house HR function.  Journal of Business Research,  103, 397-406.