EFFECTS OF OUTSOURCING OF SERVICES ON PERFORMANCE OF MANUFACTURING COMPANIES IN ELDORET AND NANDI HILLS, KENYA (Published)
At the present, firms are increasingly using outsourcing of services to improve the firm’s effectiveness, productivity, profitability, quality of products, quality workforce. Private sector expenditure is substantial. Owing to the enormous amount of money involved and the fact that the money comes from the private stakeholders and business, thus, they demand accountability and efficiency. The general objective of this study was to examine the effects of outsourcing on organizational performance. Specific Objectives were; to examine the effect of outsource marketing activities, outsource technology and innovation activities. The study is anchored by two theories, Resource-Based View Theory and Principal Agent Theory. Explanatory research design was utilized in this study. Data was collected from a sample of 81 respondents from the private sector manufacturing companies translating to a response rate of 90%. A likert scale type of questionnaire was used to solicit primary data. The data analysis methods used were descriptive and inferential statistics, utilizing a multiple regression analysis model. The study findings showed that outsourced marketing activities have significant effect on performance of firm. Similarly, outsourced technology activities has significant effects on firm performance. The study concludes that outsourcing marketing allows firms to reduce costs and enhances their portfolio hence impacting positively on performance. They should outsource website design and maintenance services since it is cost effective. Also, firms should also outsource telephone maintenance services so as to spend less on wage. Firms should use external transport and logistics agencies for distribution of their products since it reduces on cost enormously and use advertising firms to market their products.