OUTSOURCING DECISION AND FIRM OPERATIONAL PRODUCTIVITY: A STUDY OF SELECTED OIL COMPANIES IN PORT HARCOURT, NIGERIA

Abstract

These study focuses on the relationship between outsourcing decision and firm productivity of selected oil companies in Port Harcourt, Nigeria. The rationale behind the study is to ascertain effect of outsourcing decision (cost reduction, innovation and core competence as proxies) on firms’ operational performance (operational efficiency, service quality and customer satisfaction as proxies). The study was conducted amongst the managers of the fourteen (14) top oil marketing companies in Nigeria. The managers from the Legal departments, Finance/IT departments, Operations department, Procurement department and Marketing departments constitute the study population. The total target population is 156. Emphasis was placed on staff knowledge and information concerning the subject of the study. The sample size was determined using Taro Yamenes Formula at 112. In testing the reliability of the instrument statistically, Cronbach’s Alpha reliability was used at .87. Data generated from questionnaire were analyzed using simple percent and Pearson Moment Correlation Analysis for the hypothesis testing and this was done with the aid of Statistical Package for Social Science (SPSS) IBM version 25. The findings revealed that there is a significant and positive relationship between innovation and service quality at .502. Cost reduction has a significant and positive relationship with operational efficiency at .614. Core competence has a positive and significant relationship with customer satisfaction at .235. The study concluded that there is need for a company to assess the reasons for outsourcing because the right choice will boost their internal resources and improve their operational efficiency. The study therefore recommended that firms’ should outsource part of their operations with the aim of reducing operation cost. The implication is that when some parts of the operation are outsourced it will help to reduce overhead cost, which will in turn boost their profitability