Week 7 Flashcards
What is Outsourcing?
the strategic use of outside resources to perform activities traditionally handled by internal staff and resources
Advantages of Outsourcing
Flexibility- To quickly move activities company is the best at performing that particular activity
Lower costs or better performance - Use a company that specializes in the activity and benefits from economies of scale
Focus - Focus a company’s attention on being good at a narrower range of activities
Minimizes the capital investment - required to grow
Reasons for Outsourcing
Traditional role - reaction to problem
-Reduction and control of costs
- Avoid large capital investment costs, brah wtf is that
- Insufficient resources available, when you don’t have the resources
Modern role - business strategy
- allows company to focus on their core competencies
- keeping up with cutting edge technology bs?..
-Creating values for the organization and its customers … dumb as well
-Building partnerships… make new friends
Problems with Outsourcing
Loss of Control
Increased cash outflow
Confidentiality and security
Selection of supplier
Too dependent on service provider
Loss of staff or moral problems
Time consuming
Provider may not understand business environment
Provider slow to react to changes in strategy
Dangers of Outsourcing
Loss of Capabilities
- may set in motion the loss of capabilities that may be important for the future (innovation) and create a future competitor
- not learning the new stuff on your own can’t grow
Loss of Control/Power
- may give an outside supplier undue power or control if the outsourced activity is critical to success
Strategic Alliances
Any cooperative efort between two or more independent organizations to develop manufacture or sell products or services
How do strategic alliances asset firms
They may complement a firm’s value chain
They may focus on similar value chain activities
They enable:
Firm’s to achieve their goals faster
Lower cost
Fewer legal repercussions
An alliance qualifies as strategic if: It has the potential to affect a firm’s competitive advantage
How strategic alliances create value
Improve current operations
Shaping the competitive environment
Facilitating entry and exit
Why do firms enter strategic alliances
Strengthen competitive position
*Enter new markets
*Hedge against uncertainty
Access critical complementary assets
Learn new capabilities
Types of strategic alliances (3)
Contractual or non equity alliance: two or more firms write a contract to govern their relationship. Ownership is shared between the companies
- licensing agreements
- supply agreements
- distribution agreements
Equity alliance: the collaborating firms in alliance supplement contract with * equity holdings in their alliance partners
Joint venture: creation of a new entity where both firms provide assets or knowledge processes or technology
Ways to create value in alliances (4)
- Combine unique resources
- Pool similar resources
- Create new alliance specific resources
- Lower transaction costs** make things cheaper
Three phases of alliance management
- partner selection and alliance formation - choose ur partner
- alliance design and governance - lay some ground rules
- Post formation alliance management - redefine the management
Can lead to a competitive advantage
Risks of Alliances
Hold-up
When one partner tries to exploit the alliance specific investments made by another partner
- make money off their partner by making it theirs
Misrepresentation
When one partner in an alliance creates false expectations about the resources it brings to the relationship or fails to deliver what it originally promised
- not keeping promises
