Effect Of Outsourcing Decision On Organizational Performance In The Manufacturing Industry
[A CASE OF UNGA GROUP LIMITED]

1.2. Statement of the Problem

The world has embraced the phenomenon of outsourcing and companies have adopted its principles to help them expand into other markets (Bender 2009). Strategic management of outsourcing is perhaps the most powerful tool in management, and outsourcing of innovation is its frontier (Quinn 2000). Firms and Industries under the context of increasing use of outsourcing arrangements, as well as the unfamiliar complexity, are unaware of how to effectively utilize this strategy to improve their performance (Bender, 2009).

On the basis of organizational estimate of total turnover, practicing managers in manufacturing firms are attempting to establish the nature and type of outsourcing required to reach goals of higher profitability and higher organizational performance (Uddin, 2005). The concept of outsourcing is one that according to Gilley and Rasheed, (2000) is currently being keenly considered based on the current business environment of high competitiveness.

However, although the extent of outsourcing and other approaches to flexibility have been well documented in developed countries (Gilley and Rasheed, 2000; Uddin, 2005; Quinn, Doorley and Paquette, 2000), little attempt had been made to evaluate such practices in the Kenyan context, paving way for this study whose focus was specifically in the manufacturing industry and taking special focus of Unga Group Limited.

1.3 Purpose of the Study

The purpose of the study was to establish the effect of outsourcing decision on organizational performance of Unga Group Limited

1.4 Research Objectives

1. To establish the effect of outsourcing for employee competence as a strategy to enhance organizational performance of Unga Group Limited.

2. To find out the effect of outsourcing for cost reduction on organizational performance of Unga Group Limited

3. To examine the effect of outsourcing for innovativeness on organizational performance of Unga Group Limited

4. To determine the effect of outsourcing to focus on core competencies on organizational performance of Unga Group Limited

1.5 Research Questions

1. What is the effect of outsourcing for Employee competence on organizational Performance at Unga Group Limited?

2. What is the effect of outsourcing for cost reduction on organizational Performance at Unga Group Limited?

3. What is the effect of outsourcing for innovation on organizational Performance at Unga Group Limited?

4. What is the effect of outsourcing for focus on core competencies on organizational Performance at Unga Group Limited?

1.6 Hypotheses

H01: There is no significant effect of outsourcing for employee competence on organizational performance of Unga Group Limited

H02: There is no significant effect of outsourcing for cost reduction on organizational performance of Unga Group Limited

H03: There is no significant effect of outsourcing for innovativeness on organizational performance of Unga Group Limited

H04: There is no significant effect of outsourcing to focus on core competencies on organizational performance of Unga Group Limited

1.7 Significance of the Study

This study will be beneficial to the manufacturing industry in their bid to fully comprehend the issues that are particularly inherent in outsourcing decisions and this will help them improve on their performance and competitiveness. The study will also help outsourcing firms to understand the main drivers of outsourcing decision in the manufacturing industry and how they can then respond to the available opportunities. Finally the study will be helpful to fellow academicians to add the findings of this study to their body of knowledge.

1.8 Delimitations of the Study

The study focused on the effect of outsourcing decision on organizational performance of Unga Group Limited. It targeted the management and staff of the flour manufacturing industry in Nairobi Region. It was done between the months of February 2014 to May 2014.

1.9 Limitations of the Study

As a working student who needs to balance studies with full time employment, the researcher could not undertake an extensive and exhaustive research limiting the researcher to a small sample and less research. The researcher took leave and also trained research assistants to help carry out the research. The researcher also used ICT by emailing questionnaires to the target respondents.