Impact Of Outsourcing On Honeywell Company Performance:

Impact of outsourcing on Honeywell company0.25
performance:1993
Introduction:101.304
Honeywell Company is based in New Jersey and0.29
deals with the manufacturing aerospace and control1994
products, it engages in outsourcing of its business95.564
and operations in India and china among other0.3245
countries. According to Mattiuzzi (2002) through1995
outsourcing Honeywell company reduced its technical95.652
manpower costs by 75% to 90% and overall labor0.39
costs declined by 50%,1996
This paper highlights the impact of outsourcing on the99.413
company's performance with reference to dividends0.45
paid out, the paper also analyses the trend in labor1997
productivity in the US and finally analyses the100
relationship between labor productivity in the0.52
aerospace industry and dividends paid, the following is1998
an analysis of the trend in dividends paid by the119.149
Honeywell Company.0.6
Dividends:1999
Honey well company divided payout has increased120.8
over the years, this increase can be associated with0.68
the increased efforts to increase labor productivity2000
through outsourcing, the following chart shows103.394
dividends paid out by the company over the years:0.752
data was retrieved from yahoo finance2001
(115.688
From the above chart it is evident that the divided0.752
payout level were low for the period 1976 to 19922002
with only slight increases, for the period 1992 to 2000118.649
the divided payout amount increased at an increasing0.752
rate and for the period 2000 to 2004 dividends2003
remained constant and for the period 2004 to 2008119.019
the divided payout amount increased at an increasing0.752
rate, this shows that there has been an increase in2004
the profitability of the company and this has been113.245
due to increased efforts top outsource cheap labor in0.752
other parts of the world.2005
Industry Productivity and cost:124.959
This section discusses the aerospace manufacturing0.824
industry labor productivity trends, data was retrieved2006
from BLS (117.935
From the above chart it is evident that productivity0.908
has increased over the years, labor productivityThis section highlights the relationship of costs of
increased gradually for the period 1987 to 1993 butlabor and profits in the aerospace industry, this
declined in the period 1993 to 1997. For the periodsection compared the relationship between dividends
1997 to 2000 labor productivity increased and thispaid out and labor productivity, the model to be
increase in labor productivity can also be associatedestimated using the regression analysis is as follows:
with outsourcing, this is because aerospaceY = a + bx where y is the dependent variable, x is
manufacturing companies have increased productivitythe independent variable, a is the constant of the
of labor through outsourcing.model and b is the slope of the model, in this case
Major findings:therefore y represents the dividend value paid out
From the above trends it is evident that theper year and x represents labor productivity,
profitability of the Honeywell company has increasedThe correlation coefficient of the data is 0.779486,
over the years, this increase can be attributed tothis shows that there is a strong but positive
reduced production costs that are realized throughrelationship between labor productivity and amount of
outsourcing, it is also evident that labor productivity individend paid, positive correlation shows that when
the aerospace industry has also gradually increasedone variable is increasing then the other variable is
over the years, their productivity level indicates thealso increasing, the following chart shows the
labor costs incurred by companies with relation toestimated model using excel:
production, it is therefore evident that throughThe above chart shows the line of best fit which is
outsourcing companies are able to increase theirthe regression line, from the above chart it is evident
profitability.that there is a positive relationship between the two
Other sources of data:variables although the estimation error is relatively
Data on labor productivity and divided yield could alsohigh, the estimated model can be stated as follows:y
be collected in other ways, the above are secondary= 0.7163 + 0.0122Xthe above model states that if
sources of data and other primary sources could bewe hold all factors constant and labor productivity
used in the collection of data, data can be collectedvalue (X) is zero then the dividend amount paid out
through interview and questionnaires, in order towill be 0.7163, the above model also states that if we
collect this data a research questionnaire should behold all factors constant and increase the value of
prepared or an interview conducted with thelabor productivity (X) by one unit then the level of
company representative where data could bedividend paid out will increase by 0.0122 units. From
collected and recorded. Primary sources are that bestthe above model therefore it is evident that there is
sources of data although they are time consuminga relationship between labor productivity and
and costly compared to secondary sources.dividends paid out, the model states that if labor
Regression analysis:productivity increases then the dividend paid will also
Data variables will include labor productivity andincrease.
dividends paid out each year for the company, theThe correlation of determination value for this model
following table shows the data used:r squared is 0.6076, this means that labor productivity
Yearlabor productivityexplains 60.76% of deviations in dividends paid out
Honeywell company dividendseach year, this analysis therefore shows that labor
1988productivity will influence the profitability of Honeywell
87.409company, these results show that the increase in
0.51875dividends paid out by the company can be associated
1989with increase in productivity of labor which is
87.646achieved through outsourcing.
0.45Conclusion:
1990The above analysis shows that Honeywell Company
89.095has increased its profitability over the years and this
0.45has been achieved through reduced labor costs, it is
1991evident that labor productivity in the US has
94.098increased over the years, the regression analysis
0.4shows the relationship between labor productivity
1992and dividends whereby increasing labor productivity
96.494will result into an increase in dividends paid.