Haircuts Company’s Outsourcing Benefits Case Study

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Functions to outsource and how they would benefit Haircuts

Outsourcing is a business strategy that is used by business establishments to obtain some functions from external businesses (Handley & Benton Jr, 2009). If Haircuts has to outsource some of its functions from an external business entity, then it has to look for entities that have competitive advantages in their areas of specialization. One of the functions that the business can outsource is accounting. The firm can contract the function to an external business with a competitive advantage. This will enable the business to avoid hiring an accountant on a permanent basis. In fact, the business would only contract its accounting functions on a monthly or annual basis.

The business owner could also choose to contract the IT solution technology execution to an external business that has a competitive advantage in that area. This way, it will not buy and maintain the software, hardware and other facilities that are intended to support the technology. It will greatly reduce the costs associated with the running of the technology.

In addition, the business owner, can choose to engage barbers and workers to offer manicure services from external businesses. Contracting an external business to provide workers will significantly reduce labor costs and help the firm to save much money that could be used for other purposes like expansion.

Advantages of outsourcing

If the business plans to outsource functions described above, it would have the following advantages. First, it will benefit from a high level of expertise from the contracted firms because they will specialize in a given business area (Handley & Benton Jr, 2009). This will result in exemplary customer service that will attract and retain customers. The overall impact is improved financial performance of the business. Second, the outsourcing will help the firm to share risks of the business. In fact, the business will transfer most of its business risks to external businesses. Third, the business will have sufficient time to focus on its core activities (Weidenbaum, 2005).

Disadvantages

Although outsourcing will have many advantages for the business, it will also present some disadvantages that will have to be analyzed and prevented from impacting profitability of the business negatively (Weidenbaum, 2005). First, confidential customers’ data that will be contained in the proposed IT solution technology will be exposed to external businesses. Some workers of the external firms might use the confidential data for other purposes other than those intended to benefit Haircuts. Second, Haircuts might incur hidden costs that are associated with many business contracts. Third, the business might lack a strong focus on customers because the IT solution technology will be handled by an external business entity (Weidenbaum, 2005).

How to avoid the challenges

Haircuts can prevent the challenges by doing the following:

  1. Being in control of customer’s data that will be contained in the proposed IT solution technology.
  2. Involving a business or legal expert in signing the contracts so that clauses with hidden costs can be identified and discussed with the managers of external businesses.
  3. Concentrating on customers and using their personal data to understand business dynamics that would be used to expand the business.

Conclusion

Outsourcing will present an excellent avenue for Haircuts to contract business entities with expertise in their areas of business operations. The business will outsource firms to run the proposed IT technology, provide workers, and conduct book keeping functions. If the owner of the business will manage the challenges associated with outsourcing well, then the firm will realize improved growth and competitive advantage.

References

Handley, S. M., & Benton Jr, W. C. (2009). Unlocking the business outsourcing process model. Journal of operations management, 27(5), 344-361. Web.

Weidenbaum, M. (2005). Outsourcing: pros and cons. Business Horizons, 48(4), 311-315. Web.

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