Academic journal article International Journal of Business and Management Science

Measuring Outsourcing Performance of Malaysian Economic Transformation Program

Academic journal article International Journal of Business and Management Science

Measuring Outsourcing Performance of Malaysian Economic Transformation Program

Article excerpt

Abstract: The focus of this research is to find out the strategic relationship among the environmental dynamism, outsourcing success, and the performance of the relationship. Data was collected by postal survey from electrical and electronic manufacturing industries in Malaysia. In general, the results of multiple regressions indicated support for strategy relationships factor and outsourcing success. Finally, hierarchical regression analysis was carried out to determine the moderating effect of environmental dynamism on outsourcing success. The result of the study indicated full support of these moderating effects. This paper presents a useful source of information for practitioners who seeks to improve the outsourcing performance.

Keywords: Relational-oriented exchange, environmental dynamism, outsourcing performance


The Malaysia aims to become a more competitive developed country and achieve high-income economy by the year of 2020. Therefore, in order to achieve the vision, the nation has been carrying out an economic plan known as the Economic Transformation Programme (ETP), since October 2010. The objective of ETP is to increase the Gross Domestic Product (GDP) of Malaysia in which there will be a significant increase of employment opportunities where employees could enjoy higher paid jobs and strengthen their skills base.

According to Productivity Report 2010/2011, one of the main contributors to the nation's GDP is manufacturing industry (MPC, 2010). In the meantime, electrical and electronics (E&E) industry is an important engine of the economy growth as it is the largest contributor to the manufacturing sector. According to MIDA (2012), E&E significantly contributes to the manufacturing output (31%), exports (48.7%) as well as employment (33.7%) in the country. However, there could be factors affecting the performance in the manufacturing process. One of the potential factors could be the supply chain as this is where the factory obtains the raw materials. Consequently, there might be positive and negative relationships underlying supplier and manufacturer relationship and could affect the overall outcome.

The International Trade and Industry Ministry of Malaysia, Datuk Seri Mustapa Mohamed claimed that the country should improve and enhance national competitiveness by engaging and communicating actively within local and international levels (Bernama, 2011). Therefore, appropriate and successful local or international outsourcing is the determining key for companies to stand out from the competition. They generate greater value and enhance the competitive edge while they focus solely on their core competencies. This in turn saves them resources while they rely heavily on the outsourcing partners for operations and processes that are out of their area of expertise (Khong and Richardson, 2003). Research as well indicates that the major early reason for companies to start outsourcing is cost savings (Germain, Fedotor and Kratov, 2011; Murray and Kotabe, 1999; Walker and Weber, 1987). This synergy is beneficial to both parties in terms of monetary and non-monetary in the short and long run (Khong and Richardson, 2003). However, this is heavily dependent on the capability of the partner. It is imperative that skillful, credible and reliable partner is chosen (Elmuti, 2003; Ramanathan, 2009). Consequently, the successful outsourcing implementation strategy will help enhance competitiveness and financial performance, reduce cost, increase profitability, productivity, capacity, and efficiency of an organization (Elmuti, 2003; Karttunen, 2011).

There are two drives motivating organizations to specialize in limited key areas and practice outsourcing: a) Greater efficiencies, b) Cost reductions (McIvora, 2010). Nowadays, small medium companies outsource almost everything from administrative services, knowledge-intensive services, cleaning and catering services to information technology (Perunovic, Christoffersen and Mefford, 2012). …

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