Factors Influencing the Adoption of Outsourcing By Manufacturing Companies Listed On the NSE in Kenya

Abstract

Outsourcing refers to a situation where a business contracts its business processes to a third party. During this process, the business may transfer some of its resources (such as employees and assets) from one firm to another. Moreover, outsourcing is inclusive of both the domestic and the foreign markets; sometimes this may result to transfer of the business to another country. Outsourcing creates value within firms’ supply chains beyond those achieved through cost economies. Intermediate markets that provide specialized capabilities emerge as different industry conditions intensify the partitioning of production. As a result of greater information standardization and simplified coordination, clear administrative demarcations emerge along a value chain (Jacobides & Winter, 2005). This study focuses on the factors that influence adoption of outsourcing by manufacturing companies that are listed on the Nairobi Securities Exchange and aims at establishing the effects of outsourcing to a company. The study relied on specific objectives which included; establishing the importance of the need to reduce costs on the adoption of outsourcing by manufacturing firms, the importance of resource inadequacy on the adoption of outsourcing and the importance of adoption of outsourcing by competitors on its adoption by the manufacturing firms. To carry out the study, semi-structured questionnaires were administered to the respondents by the researchers. Out of the estimated sample size of 50 respondents, 43 respondents completed the interview thereby providing sufficient primary data to establish reliable results for the study. From the findings the researchers recommend that; when making the decision to adopt outsourcing, the firm should consider factors only pertinent to it individually, but consideration may also be given to the impact of outsourcing on other similarly placed firms which may have adopted it. Outsourcing should not be adopted blindly just because it has been adopted by other firms.