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Original Business Model vs Outsourcing: What is The Best Strategy - Term Paper Example

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This paper "Original Business Model vs Outsourcing: What is The Best Strategy?" draws attention to potential problems and issues around making sourcing decision in contrast to developing the supplier customer relationship. It will also try to suggest the balancing point between the two extremes…
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Original Business Model vs Outsourcing: What is The Best Strategy
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Download file to see previous pages  Between two extremes of sourcing to the extent where businesses with outsourcing had to bear the high cost as compared to benefits or moving back to a basic model of performing all support services by itself; it is high time for businesses to decide the balance. Hence, this repeated theme of giving out and taking business function back has put emphasis on the in-depth and critical assessment of the factors that shall be considered significantly upon on making sourcing decision (Williams, 2012). The scope of this report has been determined around the same assessment. It draws attention to potential problems and issues while making sourcing decision and developing a supplier-customer relationship. It will also try to suggest the balancing point between the two extremes. SOURCING Sourcing in general term implies to practices and policies for identifying, evaluating and engaging suppliers of goods and services. There are large numbers of sourcing policies such as outsourcing, in-sourcing, strategic sourcing, global sourcing and so on and so forth. The pivotal point around which the entire sourcing mechanism revolves is mainly driven by the firms understanding of its core competency; much easier said than done (Prahalad and Hamel, 2006). Sourcing of supplier varies from industry to industry; within the industry from firm to firm and even with the firm for various functions. POTENTIAL PROBLEM Souring, mainly aimed to get operational efficiencies, is also being adapted to access skills and expertise that cannot be made part of the firm (Beaumont and Sohal, 2004). Firms, in order to conduct sourcing, need to clearly state sourcing issues encompassing what, why, which process of decision making to conduct, how to implement the decision of outsourcing and finally how to implement the decision (Dibbern, Goles, Hirschheim, and Jayatilaka, 2004). Moreover, these questions are affected by associated costs, and discrepancies in defining the scope as well as a requirement from the outside supplier (Beaumont and Sohal, 2004). The other impediment to making an outsourcing decision is the resulting benefit to the firm. Sizeable literature is presently discussing the impact of outsourcing on profitability. This factor must appear with more prominence with cost reduction being mentioned as the main motive behind this strategy employment (Gorg and Hanley, 2004). However, the results are not as predicted and empirical evidence showed that outsourcing does not always have a positive impact on profitability. For instance, Kimura (2002) in Japanese context found no positive impact while Gorzig and Stephan (2002 ) found that outsourcing is beneficial for material element while outsourcing of services has negative relation in manufacturing of German manufacturing concerns. Hence, profitability is not always extracted by outsourcing business functions and the results vary based on receiving impact from many factors (Gilley and Rasheed, 2000).  ...Download file to see next pagesRead More
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