Lego Final
Answer 1. Companies outsource production of their products for the following reasons: Lack of technical expertise, or expert labor in certain operations; reduce manufacturing costs due to the availability of cheap labor; make less investments in expensive equipment, staff and IT systems; optimize resource utilization and free up management time from outsourced routine supporting activities to focus on its core competencies; and when domestic manufacturing capacity is reached.
Outsourcing is a good strategy for the following situations: Tasks that require specific manufacturing equipment and technical expertise can be outsourced to vendors who specialize in these fields to produce goods faster and of better quality. Outsourcing the supporting processes enables the firm to concentrate on its core business processes. Outsourcing also helps in risk sharing since the outsourced vendor is a specialist who can mitigate risks better. Outsourcing also helps a firm to decrease its operating risk by not completely relying on domestic suppliers; and reduces lead times in case of domestic supply shortage. Sometimes government in the foreign country provides incentives for foreign investment. Companies can sometimes access restricted market to sell their goods only if they purchase certain goods or services from the foreign country. Outsourcing helps a firm to increase its ability to operate 24 hours per day. A firm that sources from abroad may be able to exploit local competitive advantages such as cheap labor, skilled personnel, and technical experts. Outsourcing also enables firms to tap in to a knowledge base for better innovation. Outsourcing enables companies to generate better revenue recognition and provides them an added competitive differentiator.
Outsourcing is not a good strategy in the following situations: The risk to expose confidential data is high such as outsourcing HR, payroll and recruitment services. Risk of exposing intellectual property increases which
Outsourcing is a good strategy for the following situations: Tasks that require specific manufacturing equipment and technical expertise can be outsourced to vendors who specialize in these fields to produce goods faster and of better quality. Outsourcing the supporting processes enables the firm to concentrate on its core business processes. Outsourcing also helps in risk sharing since the outsourced vendor is a specialist who can mitigate risks better. Outsourcing also helps a firm to decrease its operating risk by not completely relying on domestic suppliers; and reduces lead times in case of domestic supply shortage. Sometimes government in the foreign country provides incentives for foreign investment. Companies can sometimes access restricted market to sell their goods only if they purchase certain goods or services from the foreign country. Outsourcing helps a firm to increase its ability to operate 24 hours per day. A firm that sources from abroad may be able to exploit local competitive advantages such as cheap labor, skilled personnel, and technical experts. Outsourcing also enables firms to tap in to a knowledge base for better innovation. Outsourcing enables companies to generate better revenue recognition and provides them an added competitive differentiator.
Outsourcing is not a good strategy in the following situations: The risk to expose confidential data is high such as outsourcing HR, payroll and recruitment services. Risk of exposing intellectual property increases which