<h3>What is out-sourcing?</h3>
Outsourcing is a strategic decision by a company to reduce costs and increase efficiency by hiring another individual or company to perform tasks, provide services, or handle operations that were previously done by employees within the company. In other words, outsourcing is the practice of getting certain job functions done outside a company.
<h3>This is how companies outsource certain functions:</h3>
Company A is rapidly growing and is in need of more office space. However, the company is situated in a very expensive location and there is no room to expand. The company can outsource some of the work that takes up office space to reduce the need for additional space.
Company B enjoyed great success over the past year and is currently looking to expand its product line. However, the company is constrained by a limited amount of workers. Therefore, to expand its product line in-house, Company B would need to slow down production on some of its existing products. The company can outsource the work to an external local factory to lessen its labor constraint.
Company C is a car manufacturer facing increasing raw material and labor costs. Therefore, the profit margin on its manufactured goods is steadily decreasing as costs increase. The company can outsource part of its production process, e.g., the manufacturing and installing of windows in their cars. Assembling time and costs can be saved by outsourcing an expensive production process to an external company that can do it at a cheaper cost.
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