Term paper on outsourcing practices of Berger Paint Bangladesh

Outsourcing is the purchase of a value creating activity from an external supplier. It became a prominent strategic action among many types of companies. Firms engaging in effective outsourcing increase their flexibility, mitigate risks and reduce their capital investments. The auto manufacturing industry and more recently the electronics industry are examples of this situation. As with other strategic management process decisions, careful study is required before the firm decides to engage in outsourcing .By outsourcing activities in which the firm lacks competence, it can fully concentrate on those areas in which it can create value. Value generated by outsourcing must be sufficient to cover a firm’s costsnts. The auto manufacturing industry and more recently the electronics industry are examples of this situation. As with other strategic manageme. There are four skills are essential for managers involved in outsourcing programs. These skills are:- strategic thinking, deal making, partnership governance and change management. Managers should understand whether and how outsourcing creates competitive advantage within their company. So they need to be able to strategically when outsourcing is essential to undertake. Moreover, this is the age of globalization. Now multinational or global companies are going toward the outsourcing their different operation functions; such as product design and development, technologies, row materials, packaging, and even the research and development. Basically those outsourced functions have impact on the firm’s productivity, cost, profitability, effectiveness etc. That’s why the companies who are going toward the outsourcing are competitively doing well performance than others. So, today to survive in the competition both of the global and domestic companies require the outsourcing their operation and other functions. 

Company profile:-

Here the Berger Paint Bangladesh Limited (BPBL) has selected to discuss it’s outsourcing practices and their impact on the business performance The Berger paint Bangladesh organization profiles given as follows;-

 

Berger Paint Bangladesh Limited:-

Berger Paint Bangladesh Limited (BPBL) has involved in paint business science 1950 in Bangladesh when paints were first imported from Berger UK and Then from Berger Pakistan. In 1970, Berger Paint Bangladesh limited erstwhile Jenson & Nicholson had set up its paint factory in Chittagong at an estimated investment of TK.4 million. The name of the company was changed from J&N (Bangladesh) limited to Barger paints Bangladesh Limited (member of world wide BERGER group) on 1^st January 1980. In August 2000, J&N investment (Asia) Ltd purchased government shareholding. Now, Berger paint Bangladesh Limited is 100% owned by J&N investment (Asia) Limited, UK.

Over the decades, Berger has evolved as to become the leading paint solution provider in this country and has diversified into every sphere of the industry from decorative paints to industrial coatings, from marine coatings to powder coatings and what not.

 

Vision:-

The vision of the Berger Paint Bangladesh Limited (BPBL) is –“being an innovative and technology driven company consistently delivering world class products ensuring best consumer satisfaction through continuous value added services provided by highly professional and committed team.”

 

Mission:-

The mission statements of the Berger Paint Bangladesh Limited are-

=>We shall increase our turnover by 100% in the next five years.

=> We shall remain socially committed ethical company.

 

Products:-

Berger has successfully established its’ products in Bangladesh paint market. Its’ well established products are Berger illusion, luxury silk, Robbialac plastic  Emulsion, Jhilik,  Robbialac synthetic Matt, Robbialac Aluminum paint, wood keeper etc.

Activity profile:-

(1)Row material collection activities:-

Berger Paint Bangladesh Limited performs row material collection activities to produce world class paint in the market of Bangladesh. It collects the finest color elements from the well-known suppliers in the world. Collected row materials are transported and stored at the certain condition to having the constant quality.

(2)Manufacturing activities:-

After the collection of row materials Berger Paint Bangladesh Limited (BPBL) conducts the manufacturing activities of finished products. It manufactures different types of color through the advance technology and processes. Berger already has a lot of several brands of color established in the market. Different types of colors specifically need different machines and processes. With these different types of machines and technologies Berger is successfully manufacturing its color paint products in Bangladesh.

 

 (3)Promotional activities:-

BPBL does its promotional activities to promote the manufactured products. It performs the advertising promotion, sales promotion and consumer promotion activities. The advertising promotion is conducted through the electronic media, print media and billboard. Berger offers sales promotion both to customers and traders. Trade promotion occurs more frequently then consumer promotion, because the success in the market highly depends on the dealers and distributors involvement. The consumer promotion is also performed by the BPBL that means offering various gift items to consumers for buying Berger paints. These are the promotional activities performed by the Berger.

 

(4)Distribution activities:-                 

Another Very important activity of distribution of products is precisely performed by the Berger in Bangladesh. It has larger distribution networks all over in the country. Dealers are main source of distribution for Berger. Moreover, it has sales depots in 7 parts of Bangladesh; namely-Chittagong, Commilla, Sylhet, Dhaka, Rajshahi, Bogra and Khulna. Dealers can place their orders via sales people of Berger or through direct placement of order in any of the sales depots. These sales depots Of Berger obtain their stocks directly from the factory.

 

Activities Outsourced:-

 There are mainly two activities that the Berger Paint Bangladesh Limited (BPBL) does outsourcing. These activities are described as follows-

(1)Row material outsourcing:-

Berger collects its Row materials by outsourcing. Collection of row materials is one of the value creating activities for any organization. It has many benefits for the company like Berger. These benefits also depend on the quality and reputation of the supplier companies. Berger is outsourcing its row materials from some of the best known companies of the world such as-Mitsui, Mobil, Dupont, Hoechst and BASF are a few to name.

 

(2)Research and development agency outsourcing:-

Berger Paint Bangladesh Limited also involved with outsourcing of its research and development activities. It conducts the research and development activity by the outsider research and development agencies. Research and development activities are the most important activities for the development of any company. Skilled agencies can properly find out the marketing and other problems and provide the suggestion for the solution. For example-when the Berger wanted to create a new brand color named “jihilik” then the Research and development agency conducted a marketing research for, what kind of people prefer this brand. The researcher discovered that most of the rural people prefer this brand. This research of the skilled outsider agency helped Berger to be known about the market demand for its new product.

 

Impact of outsourcing in practice:-

The practices of outsourcing activities of the BPBL have some important impacts on its performances. The impacts on its costs, profitability, product quality, productivity and overall performance come out from the outsourcing activities. Outsourcing of row materials it reduces the cost of production of Berger and save the time for distinctly producing those row materials itself. So, as a result Berger gets High speed productivity. Another outsourcing of research and development agencies influences the sales and future plans of the Berger Paint Bangladesh Limited. Skilled outsider researchers’ research result provides the information about the current consumer demands for Berger color products which suggests for selling strategies. Moreover it shows the competitive position of the Berger in the market which helps Berger to take the strategic and competitive plans to perform competitively better in the market. In this way outsourcing of row materials and the research and development of Berger has positive impact on its business performances.

 

Strengths and weaknesses of outsourcing:-

Outsourcing of row materials and research and development of the Berger paint Bangladesh Limited has some considerable strength. These strengths are-

(1)Outsourcing of row materials reduces the overall costs of production.

(2)It increases the productivity of the Berger Paint Bangladesh Limited (BPBL).

(3)It also increases the profitability of the firm.

(4)Outsourcing of the skilled research and development agency increase the sales of the Berger.

(5)It helps the Berger to know about the current market demand about existing products.

(6)It shows the current competitive market position of the Berger.

 

These outsourcing of Berger has some weaknesses too. Those weaknesses are-

(1)The outsourced row materials must need an enough and certain conditioned place that is very expensive to maintain.

(2)To preserve the imported quality of outsourced row materials a sensitive system must be maintained. A simple mistake will spoil the imported quality of row materials.

(3)The outsourced research and development agency may be skilled but may not be well known about the business environment of Bangladesh which can badly affect the result of their research results.

 

Possible messages to improve effectiveness of outsourcing:-

To improve the effectiveness of outsourcing of the Berger, the weaknesses of the outsourcing have to be removed. The Berger should take care of its storage place that must be enough in size. After that the storage condition must be implied to properly preserve the outsourced raw materials. The transportation system of the row materials must be safe and quick. Moreover, to improve the outsourcing it is important to select the right research and development agency in which the researcher is really skilled and experienced about the local environment.

 

Summary:-

Here this term paper has completed based on outsourcing practices of the Berger Paint Bangladesh Limited (BPBL) and its impact on business performances. Outsourcing is practiced to gain a value creating activities by a firm. For the same purpose Berger is outsourcing its row materials and the research and development agency. The outsourcing of row materials increases the productivity, reduces the costs of production and also increases the profitability of the firm. Another outsourcing activity of research and development positively affects the performance of the Berger by providing information about consumer preferences, competitive market position and helping to take the future plans of the Berger. There are also some limitations of these outsourcing. These things have discussed in details in this term paper

 

Conclusion:-

By reviewing all the discussion of this term paper it is clear that the Berger Paint Bangladesh Limited (BPBL) outsourcing its row materials and research and development which are really important activities for this firm. These outsourcing activities have great impact on the business performances as we mentioned in sales, productivity, profitability, competitor analysis, marketing research. So, Berger should be involved with those outsourcing more effectively to conduct its performance more successfully.

Recommendations:-

(1)Berger should make a SOWT analysis to find out the strength, weaknesses, opportunities and threats for outsourcing.

(2)It should carefully outsource the research and development agency that is not only experienced but also skilled to research the market and competitors.

(3)It must need to ensure the quality of the row materials that is outsourced.