The effect of outsourcing decisions on organizational performance : a case study of the brewing industry in Kenya

Abstract

This study is designed to examine the relationship between outsourcing and organizational performance at East Africa Breweries Limited (EABL), a leading alcohol and non-alcoholic branded company in Kenya. For the purpose of analysis, organizational performance in this study refers to profitability, cost efficiency and productivity. Outsourcing is a management strategy by which an organization delegates major, non-core functions to specialized service providers. The main objective of carrying out this study is to establish the extent to which EABL's outsourcing of non-core functions affects its organizational performance. The researcher applied a correlation research design which is quantitative. The researcher analyzed the relationship between outsourcing and organizational performance to establish whether there is a positive or negative correlation and subsequently measured the effects on organization performance in terms of profitability, productivity and cost efficiency. The targeted population comprised of all senior management staff at EABL. The researcher collected data from the population through questionnaires and interviews. The results from the data analysis were interpreted and presented in the form of tables, graphs and continuous pros. The results of the data analysis showed that outsourcing decisions are implemented mainly as cost cutting business strategies. This is based on the respondents majority support for outsourcing decisions to improve on cost efficiency and OLS results indicating correlation between outsourcing and cost efficiency as most practical and achievable. The researcher recommends that other than cost savings, companies should explore other strategic reasons for outsourcing decisions including access to capabilities for instance human talent (intellectual property), operational systems and processes, or physical resources.