Question

search on “outsourcing.” Identify at least two companies in different industries that have entered into outsourcing agreements with firms with specialized services. In addition, describe what value chain activities the companies have chosen to outsource. Do any of these outsourcing agreements seem likely to threaten any of the companies’ competitive capabilities? Are companies using strategic alliances to manage their outsourcing? Note: The following companies should not be considered for this answer: IBM, Grupo Gigante (Mexico), NCR Corporation, and Co-op Financial Services., whirlpool, Ford.

Answer 1

Outsourcing refers to the process of letting work out to another company i.e a third party to get the work done. The primary reason to outsource the work is to reduce the cost . The decision for the company whether to outsource the work depends on a variety of factors. The outsourcing decision is made after accessing the regions in which the company is operating and the direction in which they re headed. The company generally tries to outsource the indirect back office activities to countries where they could achieve the same with lower costs. Ex - JP Morgan Chase has outsourced many of their back end work to South Asian countries where they can get the job done with a much cheaper rate.

On te other hand many companies invest in outsourcing to gain appropriate market knowledge when they want to enter new markets. Ex - Cocacola hired BCG to learn about the African markets before venturing into the markets. The several factors which a company looks into are the quality, speed of the process, dependibility of communications, flexibility and cost of operations included while outsourcing it.

Nike which is a global footwear brand outsources its manufacturing activities to Asian countries. The primary reason for doing so is gaining competitive advantage in costs. The company has seen that it is significntly able to reduce its prices in production because of cheap labour available in the developing economies.

This will be significantly useful to the company when it tries to enter new markets as it has already started to face immense competition from competitors such as Adidas, Puma, New Balance etc.

H&M which is a leading global apparel brand present in over 58 countries outsources the entire production to countires in Asia. Achieving significant reduction in prices while maintaining the quality of the produce. the focus of the brand has been on the latest fashion while maintaining reduced prices, which they are able to achieve through outsourcing. For the same reason they were able to open quite a number of stores in various locations all over the world within a short period of time.