Pre-Block task 4

1).Should a firm outsource value-chain activities?

A). A firm should outsource the value-chain activities due to the following
reasons:
Lower Costs
Savings may result from lower inherent, structural, systemic, or realized costs. A
detailed analysis of each of these cost categories can identify the potential
sources of advantage. For example, larger suppliers may capture greater scale
benefits than the internal organization. The risk is that efficiency gains lead to
lower quality or reliability. Offshoring typically offers significant infrastructure and
labour cost advantages over traditional outsourcing. In addition, many offshoring
providers have established very large-scale operations that are not economically
possible for domestic providers.
Greater Flexibility
Using an outside supplier can sometimes add flexibility to a company such that it
can rapidly adjust the scale and scope of production at low cost. As we have
learned from the Japanese keiretsu and Korean chaebol conglomerates, networks
of organizations can often adjust to demand more easily than fully integrated
organizations.
Enhanced Expertise
Some suppliers may have proprietary access to technology or other intellectual
property advantages that a firm cannot access by itself. This technology may
improve operational reliability, productivity, efficiency, or long-term total costs
and production. The significant scale of todays offshore manufacturers, in
particular, allows them to invest in technology that may be cost prohibitive for
domestic providers.
Greater Discipline
Separation of purchasers and providers can assist with transparency and
accountability in identifying true costs and benefits of certain activities. This can
enable transactions under market-based contracts where the focus is on output
rather than input. At the same time, competition among suppliers creates choice
for purchasers and encourages the adoption of innovative work practices.
Focus on Core Activities
The ability to focus frees up resources internally to concentrate on those
activities at which the company has distinctive capability and scale, experience,
or differentiation to yield economic benefits. In other words, focus allows a
company to concentrate on creating relative advantage to maximize total value
and allows others to produce supportive goods and services.
2).What are a firms resources?
A.). A firms resources are as follows:
Financial Resources

Financial resources concern the ability of the business to "finance" its chosen
strategy. For example, a strategy that requires significant investment in new
products, distribution channels, production capacity and working capital will
place great strain on the business finances. Such a strategy needs to be very
carefully managed from a finance point-of-view. An audit of financial resources
would include assessment of the following factors:
Existing finance funds
- Cash balances
- Bank overdraft
- Bank and other loans
- Shareholders' capital
- Working capital (e.g. stocks, debtors) already invested in the business
- Creditors (suppliers, government)
Ability to raise new funds
- Strength and reputation of the management team and the overall business
- Strength of relationships with existing investors and lenders- Attractiveness of
the market in which the business operates (i.e. is it a market that is attracting
investment generally?)
- Listing on a quoted Stock Exchange? If not, is this a realistic possibility?
Human Resources
The heart of the issue with Human Resources is the skills-base of the business.
What skills does the business already possess? Are they sufficient to meet the
needs of the chosen strategy? Could the skills-base be flexed / stretched to meet
the new requirements? An audit of human resources would include assessment
of the following factors:
Existing staffing resources
- Numbers of staff by function, location, grade, experience, qualification,
remuneration
- Existing rate of staff loss ("natural wastage")
- Overall standard of training and specific training standards in key roles
- Assessment of key "intangibles" - e.g. morale, business culture
Changes required to resources
- What changes to the organisation of the business are included in the strategy
(e.g. change of location, new locations, new products)?
- What incremental human resources are required?
- How should they be sourced? (alternatives include employment, outsourcing,
joint ventures etc.)

Physical Resources
The category of physical resources covers wide range of operational resources
concerned with the physical capability to deliver a strategy. These include:
Production facilities
- Location of existing production facilities; capacity; investment and maintenance
requirements
- Current production processes - quality; method & organisation
- Extent to which production requirements of the strategy can be delivered by
existing facilities
Marketing facilities
- Marketing management process
- Distribution channels
Information technology
- IT systems- Integration with customers and suppliers