The Impact of Strategic Outsourcing on Organizational Performance: A Case Study of Bidco Africa Limited

Abstract

ABSTRACT This research was a study on the effect of outsourcing strategy on organizational performance. The research was based on Bidco Africa Limited, a market leader in the fast moving consumer goods (FMCG) manufacturing industry in Kenya. The purpose of the study was to establish what influences the decision to outsource and how that decision affects the overall performance of the company. The study was conducted in the period between September 2015 and April 2016. The research questions were: What is the effect of cost-driven outsourcing on organizational performance?; What is the effect of innovation-driven outsourcing on organizational performance?; and What is the effect of focus-driven outsourcing on organizational performance? The study employed a descriptive research design. Out of the study population of 1,000 employees of the company, a sample size of 90 was taken, whose elements was selected using a simple random sampling technique. Questionnaires were used as the primary data collection instrument. The response rate was 91 percent, with 82 questionnaires properly filled out of the issued 90 questionnaires. Data was analyzed using descriptive statistics, correlation and regression analysis then presented in tables. The findings of the study were: cost driven outsourcing, innovation driven outsourcing, and focus driven outsourcing had a significant influence on organizational performance at Bidco Africa Ltd. The study found that cost driven outsourcing led to improved organizational performance by reducing costs and risks while increasing operational efficiency, both in the short term and long term. Further, the study found that innovation driven outsourcing improved organizational performance by enabling it to create, develop and deliver value to the market faster than its competitors. The success of innovation driven outsourcing however was found to be largely dependent on cost control and core competencies focus, hence must be evaluated carefully. Finally, the study found that focus driven outsourcing assists a company to free up its resources so as to concentrate on its core business, which leads to improved organizational performance.

The study concludes that strategic outsourcing results in improved organizational performance by reducing both costs and risks, increasing flexibility for innovation as well as freeing up key resources for core competency building. This leads to improved sales, better profits, more satisfied customers and better market share. This study recommends that firms should adopt strategic and well thought out outsourcing partnerships in order to continuously reduce operating costs for growth, both in the short term and long term. Additionally, innovation should not be outsourced until a company has carefully evaluated its value chain and successfully determined its non-core activities which it can subsequently outsource. Outsourcing strategy should be so structured that it enables the organization to concentrate its efforts on building its core competencies to a best-in-world level, so as to generate competitive advantage. The researcher recommends further studies in the following area within the manufacturing industry in Kenya: An evaluation of the effect of strategic outsourcing on the performance of public manufacturing firms in Kenya.