Academic journal article International Review of Management and Business Research

Structural Relationships of Predictors Influencing Outsourcing Decision in Malaysian Hotel Industry

Academic journal article International Review of Management and Business Research

Structural Relationships of Predictors Influencing Outsourcing Decision in Malaysian Hotel Industry

Article excerpt

Introduction

Trend of outsourcing has been implemented on three phases starting way back at the era of the Big Bang, the Bandwagon and the Barrierless Organizations (Hatonen & Eriksson, 2009). These three eras give a big impact towards many organizations in term of crucial strategy development which brings profits and victory. The Outsourcing Revolution book written by Corbett in 2004 expresses that the occurrence of outsourcing is not a new thing and had gone through few revolution and transformation since its introduction.

Outsourcing is defined as the procurement of products and services from sources that are external to the organization (Lankford & Parsa, 2009). This allows the outsiders to take responsibilities for some aspects of management of activities in the organization (Winterton, 2000). According to Hoetker (2005), outsourcing has become a vital and complex activity in strategic decision area of organizations throughout the years. Complex organizations are interested to be a part of outsourcing activity because they believe that outsourcing can contribute to cost reduction as well as efficiency improvement which can be adapted in various mechanisms (Blumberg, 2008). Zhu, Hsu and Lillie (2001) also state that outsourcing has become an important strategic tool in today's competitive business environment. Moreover, Morgan (2012) mentions that industries nowadays need to experience the new era of convenience sourcing and not assume that outsourcing is all about cost reduction in service market.

The hotel outsourcing activities mainly involved in production, distribution of product as well as services to customers. In relation to that, Verginis and Wood (2009) express that outsourcing is a part of the fabric in hotel operations. Lamminmaki (2011) also supports that the nature of hospitality industry indicate the suitability of this industry to perform outsource. Sieburg (2002) also agrees that outsourcing has become an important aspect of modern hotel management.

Malaysia is one of the most popular tourist destinations in the ASEAN region. According to Ministry of Tourism Malaysia (2012), international tourist arrivals in Malaysia will grow at a Compound Annual Growth Rate (CAGR) of around 8% during the forecast period from year 2011 to year 2013, thereby, surpassing RM 70 billion by 2013. The rising of hospitality business have been shown through the total tourist arrivals and receipts in Malaysia. In order to accommodate the anticipated rise in business, hotels have to focus on their core operations hence outsourcing could be an alternative way to manage their noncore processes and activities such ashuman capital, information management, accounting and housekeeping (Sani, Dezdar & Ainin, 2013).

Nowadays, the outsourcing activities are widely practiced by many organizations. Outsourcing define as an approach to obtained the service from an external providers to perform their internally activities in an organization (Domberger, 2008). Kadir (2007) points out that Malaysia is a leading destination for the establishment of shared services and outsourcing hubs due to its low costs, modern infrastructure, business environment and high levels of global integration.

Major problems happen to an organizations is when they try to do everything themselves and this may incur vastly higher operating, training, research and marketing expenses. Besides, it will also increase the deployment expenses which are expenses that have to be passed onto the customer. Besides that, some organization does not have expertise or the skills needed to perform specific task or activities, so they have to turn to outsourcing. Sometimes when the organization expands their operations especially into a new geographic or location, the problem is they do not have access to the required resources within their organization. Because of all this reasons outsourcing is considered to be very important to an organization to be successful in their businesses. …

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