The Sourcing Decision: Location of Functions

Question 1

A process in which resources are
purchased from others through long-term
contracts instead of being made within the
company.

Answer 1

Outsourcing

Question 2

The outsourcing of an activity or
function to a provider in another country.

Answer 2

Offshoring

Question 3

A study of 91 outsourcing efforts conducted by
European and North American firms found
seven major errors that should be avoided:

Answer 3

1. Outsourcing activities that should not be
   outsourced:
2. Selecting the wrong vendor:
3. Writing a poor contract
4. Overlooking personnel issues
5. Losing control over the outsourced activity:
6. Overlooking the hidden costs of
   outsourcing:
7. Failing to plan an exit strategy:

Question 4

In determining functional strategy, the
strategist must:

Answer 4

-Identify the company’s or business
unit’s core competencies
- Ensure that the competencies are
continually being strengthened
- Manage the competencies in such a way
that best preserves the competitive
advantage they create.

Question 5

A type of vertical
integration in which a firm internally produces
less than half of its own requirements and buys
the rest from outside suppliers.

Answer 5

Taper integration

Question 6

A growth strategy
under which a firm makes 100% of its key
supplies internally and completely controls its
distributors.

Answer 6

Full vertical integration