Aerospace Outsourcing

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Title of Assignment: Outsourcing and the AeroSpace Industry
Table of Contents
The origin of outsourcing in the Aerospace Industry……………………...….. . Page 3 Barriers to entry in the Monopoly and Oligopoly Industry……………………. .Page 4 Types of Outsourcing…………………………………………………………. . Page 4 The Demand for Outsourcing…………………………………………………. . Page 6 S.W.O.T. Analysis of Outsourcing……………………………………………. . Page 7 Gross Domestic Product …………………………………………………..….. . Page 9 The future of Outsourcing……………………………………………………. . Page 10 Is it Outsourcing or Offshoring………………………………………………. . Page 12 References…………………………………………………………..………… .Page 13 PowerPoint Presentation Slides

The origin of Outsourcing in the Aerospace Manufacturing
The term outsourcing is frequently used to describe a movement away from vertical integration - moving an activity outside the firm that formally was done within the firm. The term outsourcing also is used to describe an ongoing arrangement where a firm obtains a part or service from an external firm {text:bibliography-mark} . Outsourcing is not a new concept, for hundreds of years businesses have outsourced their needs; however, during the industrial evolution the US economy begun to acquire a greater need for outsourcing as costs of manufacturing became a concern, this move begun in the 1950’s and continued aggressively to the 1980’s and 1990’s as global competition placed a greater strain on the economic growth {text:bibliography-mark} . Outsourcing was not formally identified as a business strategy until 1989 (Mullin, 1996). In the beginning of this acclaimed activity, firms outsourced what was deemed essential; however, as the evolution of outsourcing occured - fueled by the need to ‘cut-cost’ continued, other functions which were important but not relative to the core competencies of the firm begun to be outsource as well. From an economic perspective outsourcing is an industry in itself which can be viewed from a micro-economic and macro-economic perspective, this indicates its demand and supply curve moves in respective directions as the need for it grows or diminishes just as any other markets within an economy. In saying this it can be a very broad subject and can carry large discussions; this paper will deviate towards outsourcing’s role in the commercial aerospace manufacturing industry which begun in 1954 with Boeing and remained dominated by Boeing, Airbus and Bombardier since 1986. Barriers to entry

Barriers to entry are one of the key incentives of the monopoly and oligopoly industry. The Aerospace industry, which is dominated by three main players, Boeing, Airbus and Bombardier is considered to be an oligopoly industry, because of the “Market Power” that is held by these firms. The industry has high fixed cost and is excessively capital intensive and time consuming, which serves as the key restriction not to be attractive for competition. In order to create value and share risk, the industry has fostered the idea of outsourcing. Outsourcing is using the facilities and services of a third party to supply good that would otherwise be created by the organization. Figure 1 details the major difference between a market with perfect competition and one that does not: {draw:frame}

Types of Outsourcing
The outsourcing framework begins with the decision to ‘make or buy,’ this would lead to ‘_insourcing__’_ (make) or outsourcing (buy). Outsourcing has two major components, ‘_inshoring_’ (in-land) or ‘_offshoring_’ (distant land). Offshoring has three major component, ‘_nearshore__’_ which indicates the work is outsourced to a nearby country to the parent company as opposed to farshoring; whereas, ‘_captive centers__’_ are overseas subsidiaries set-up to serve the parent company {text:bibliography-mark} . The framework of outsourcing can be very complex and arriving at the decisions can cause a material change in the supply curve of a manufacturing firm as the process of...
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