What does 'outsourcing' refer to in a business context?

Outsourcing refers to the practice of contracting out specific business functions or processes to external third-party providers. This strategy is employed by companies to focus on their core competencies while delegating non-core activities to specialized firms that can perform these functions more efficiently or cost-effectively. By outsourcing, businesses can often reduce operational costs, increase flexibility, and access a wider pool of expertise and technology without the overhead associated with maintaining those services internally.

The concept emphasizes leveraging external resources to enhance productivity, improve service quality, and drive innovation. This approach can encompass a variety of functions including customer service, IT support, manufacturing processes, and logistics, among others. In this way, outsourcing can be a strategic move that enables businesses to remain competitive in their respective markets.

The other options describe practices such as internal expansion, hiring in-house specialists, or establishing new departments, which do not align with the core definition of outsourcing. These options emphasize increasing internal capabilities rather than utilizing external resources, which distinguishes outsourcing as a unique and strategic business decision.