McGraw-Hill/Irwin Strategic Management, 10/e Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Logistyka w strategiach rynkowych Element 5

4-2 These benefits are measured in terms of cash, costs and technology and include: – Freed resources for other organizational uses – Reduced operating costs for manufacturing – Simplified cost controls – Increased access to world-class capabilities – Increased focus on own core tasks Benefits of Outsourcing

4-3 Possible loss of control over important process and infrastructure capabilities Difficulty in reversing the decision to subcontract Need to acquire or develop new and more demanding management skills involved in moving from manufacturing to managing the supply chain – Need to give purchasing a more prominent role in a diversified organization, which requires changes in the organizational culture Disadvantages of Outsourcing

4-4 The Hollow Corporation Manufacturing tasks are increasingly delegated to low-cost regions such as the Far East (China), Eastern and Central Europe and Mexico Manufacturing corporations in the U.S. increasingly concentrate on final assembly tasks, repairs and service and distribution As a result, the manufacturing organizations in the U.S. become “hollow” and key manufacturing and development capabilities are lost

4-5 Level of Outsourcing Exhibit 9-3. Trends in component outsourcing for US manufacturers Levels of Outsourcing Percent of U.S. Manufacturers ActualCumulativeActualCumulative Percent of components outsourced : None Percent of components made outside the U.S. : None

4-6 The Hollow Corporation Exhibit 9-4. The real cost of importing $1 billion of consumer products into the U.S. is estimated at $1.43 billion Area of Cost of the Economy $ Millions Imported automobiles1,000 Other vehicles engaged in hauling raw materials and finished products200 Steel and fabricated metal parts184 Machine tools98 Rubber and plastics67 Nonferrous metals46 Chemicals40 Other manufacturing343 Wholesale and retail margins, transportation, warehousing and utilities348 Mining47 Finance and insurance39 Plant construction16 Total$2,428

4-7 Joint ventures are particularly attractive when potential partners have similar needs and pursuing new opportunities alone is too risky or too expansive It is a win-win situation beneficial to all involved Examples of industries with significant increase in joint venture formation are communication systems (e-commerce), IT and services Joint Ventures

4-8 Reasons for Forming Joint Ventures Exhibit 9-5 Operational advantages n Reduces uncertainty n Shares investment and risk n Process capability sharing that results in: Increased utilization of processes Reduction in process duplication Wider product ranges can be accommodated n Shares facilities in other parts of the supply chain (e.g. distribution channels) n Increases technological know-how by: Facilitating information exchange Potentially creating critical mass in areas such as R&D Broadening expertise in complex or “hot”areas (e.g. IT systems, e-commerce, engineering and product development n Strengthening market intelligence n Helps retain key staff due to: Increased job scope Providing better career opportunities Strategic advantages n Strengthens current strategic position Pioneers developments into new segments Rationalizes existing segments Reduces competitive volatility n Preempts competitors Facilitates access to new markets and customers Supports growth in market share Strengthens negotiating position Gains access to global markets n Augments strategic position Creates and develops synergies Transfers technology and skills Offers the opportunity to either divest or lever investments and capabilities

4-9 10/8/20159 The End