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Strategic changes required by Globalisation
• Companies need to compete in several dimensions • More opportunities in multiple countries • Adapt & Integrate their networks of international operations to create greater value.
Major Strategic actions in global operations & strategy
Improving performance in response to competition
Sourcing sophisticated products and services Sourcing Commodities Sourcing Commodities
Sources of competitive advantage
Stimulus for improvement
Specialized knowledge and local experience Specialized natural and labor resources Scope and proximity
Supply from many operations local to customers Supply from concentrated locations distant from customer
Supply from many operations local to customers Supply from concentrated locations distant from customer N/w Supplying customers International pricing and entry in response to competition
Scale and scope economies
Synergies through network for learning Strategic response to competition
Typical Configuration Patterns for IB: Geographically dispersed Customers Simple global exports Multinational Geographically concentrated Single one country International sourcing Geographically dispersed Geographically concentrated Suppliers .
Configuration and coordination HQ Flow of product Flow of knowledge Local Operation Flow and influence of resources Customers .
low cost raw material and other economic factors like tax breaks and low trade tariffs. – It often aims to exploit global efficiencies in the delivery of a product or service.Global Sourcing – It is the practice of sourcing from the global market for goods and services across geopolitical boundaries. . – These efficiencies include low cost skilled labor.
• Exposure to financial and political risks in countries with (often) emerging economies. . Disadvantages of global sourcing can include: • Hidden costs associated with different cultures and time zones. • Tapping into skills or resources unavailable domestically. beyond low cost. • For manufactured goods. the risk of port shutdowns interrupting supply. • Developing alternate supplier/vendor sources to stimulate competition. include: • Learning how to do business in a potential market. some key disadvantages include long lead times.Advantages & Disadvantages of Global Sourcing: Advantages of global sourcing. and the difficulty of monitoring product quality. • Increased risk of the loss of intellectual property. and increased monitoring costs relative to domestic supply. and increasing total supply capacity.
For instance. According to a Hyde spokeswoman. Talbot described the move as part of a new chapter for Hyde.New at Hyde Tools: global sourcing strategy http://www. it has been sourcing globally for years. is introducing three new lines of putty knives and scrapers: "Pro Stainless. 9) Southbridge. like most manufacturers." wrote Corey Talbot.homechannelnews. we must product at the best costs available in the global marketplace. . The company described each as having more than 20 years experience in tool production. US. It estimates the North American market for this product category is about 28.aspx?id=159091&menuid=267 • • • • • • (Dec.8 million units sold per year.-based Hyde Tools said its pursuit of "right priced.which Hyde believes it has achieved to a large extent. The company's new brochure for the its new lines of scrapers: "New tools." "Everyone knows in order to supply these price points to meet the profit demands of our partners. Proteus Design has worked in product development with clients including 3M. which has in the past promoted itself as a "Made in the USA" leader of surface preparation tools." The company also shared research on the putty knife and scraper market. and better margins for our retail partners.com/story. stainless steel products" has led it to partnerships with product development firm Proteus Design and two Chinese manufacturers. VP of marketing and product development. in which it will strive to be "Total Category Leader" -. The company's research also shows the vast majority (89%) of professional users are willing to pay more for a stainless steel putty knife or scraper than for a standard carbon putty knife. The company hasn't promoted itself as exclusively "made in America" in about 10 years. in a letter Hyde has entered into two joint product development agreements and manufacturing contracts with two Chinese manufacturers. But. the company continues to manufacturer a significant amount of products in the United States. Mass. quality. The announcement came as Hyde Tools." "Pro Project" and "Value Series. their Black & Silver line of tools are made in Southbridge. Gillette and Kohler.
. •Global Delivery Model gives the advantage of delivery centers located around the globe as well as a team working close to the business using consistent processes.Global Delivery Model •Global Delivery Model involves the deployment of resources from different parts of the world to provide maximally efficient service delivery. •Most businesses have now come to expect Global Delivery to be an integral component of the solution offered by the service provider. •Global Delivery Model involves having the right volume of skills and the right skills mix in the right place at the right time and the right price point.
Evolution of the Global Delivery Model Maximum <--------------Act Local-----------> <-------------Act Regional----------> <-------------Act Global----------> GLOBAL REGIONAL What improvements can be made by implementing local best practice? LOCAL Can benefits of standardization across businesses and geography be achieved? Can shared service economies of scale be captured? Source from offshore location(captive or vendor) Is outsourcing feasible. beneficial and outweighs additional risk? Source from multiple locations/vendors across the globe Minimum Level of Benefit Simplification Standardization Shared Services Outsourcing Offshore Global Delivery 11 .
increase flexibility. improve services/quality. access to high skilled labor. Guarantee and Accelerate Savings Transfer to Variable Cost Structure Improve Service/ Quality Increase Flexibility /Agility Access to HighSkilled Labor Access To Best of Breed Upgrade and Refocus Skills Fix Operational Service Problems Transfer Risk to Provider Access to High Talent Resource Needs Slide 12 . Manage Cost Capture.Drivers for Global Delivery Adoption of the Global Delivery Model creates competitive advantages that enables businesses to fundamentally manage cost. focus on core competencies and react quickly to market change.
Benefits of Global Service Delivery: • Reduced cost of ownership • Ready availability of resources & flexibility of deployment • Risk minimization for critical operations • Improved time to market • World class quality leveraged .
A Jamaica Philippines Mexico India Costa Rica China Brazil Argentina South Africa Established Emerging Shifting 14 .S.Global Delivery Vendor Landscape North American & European Vendors are expanding their near shore and offshore presence. while Asia based vendors are increasing their onshore and near shore presence Ireland Canada Eastern Europe U.
but not outsourcing.Offshoring • Offshoring is defined as the movement of a business process done at a company in one country to the same or another company in another. different country • A company moving an internal business unit from one country to another would be offshoring or physical restructuring. .
16 . making use of highly integrated processes. organization models and information systems.Outsourcing Services COMPANY OUTSOURCER Organization Level Agreement Service Level Agreement Outsourcing denotes the continuous procurement of services from a third party.
Why do outsourcing? • • • • • • • Access best in class business processes Harness leading technologies Increase efficiencies Enhance capabilities Expand service Free up management time Decrease operating costs Acquire new skill Acquire Better mgt Focus on Strategy Focus on core function Avoid major investments Assist a fast growth situation Handle overflow situation Improve flexibility Enhance credibility Jump on Bandwagon .
Objectives • Ensure highest level of productivity for the corporation • Bring greatest value to the end consumer 18 .
On the origins of Outsourcing • 1776 Adam Smith's Wealth of Nations propagates competitive advantage through outsourcing. • 18th and 19th centuries : floating factory ships. even forests to make rubber for car tyres! General Motors runs a 2000 people HR and travel desk to cater to its employee needs 19 . Term "outsourcing" itself was not in use. the concept of "offshore manufacturing gets a boost Early • 20th century Companies like Ford Motors own everything.
1940s ADP(Automatic Data Processing) Inc starts with handling payroll outside companies. 41000 employee payroll expert handles payrolls for one in six US workers and recently opened office in India. the largest call centre company started as a captive unit of Cincinnati Bell. 1960s Hundreds of call centers spring up in the US and UK. Convergys.On the origins of Outsourcing…. telemarketing. 20 . payroll and other functions. Hived off in the late 1990s. pharmacy firms to FMCG firms outsource customer care. 1970 s US companies from oil majors. Today the $8 billion. telecom operators.
American Express. focus on them and get out of everything else. The basic lessons of the theory .000 staff 1990-1999 C. Ireland particularly benefits as costs are lower and it offers multi language capability. Swissair. At their peak the over 100 call centers in Ireland employ over 300.identify your core competencies.On the origins of Outsourcing… 1980. K.1990 US and European companies start shifting work to Ireland. British Airways and General Electric(GE) start captive units in India. Prahalad's core competency theory expounded in a Harvard Business School paper. 21 . Israel and Canada.
and customer support began towards the end of the 1990s when MNCs established wholly owned subsidiaries. Some of them even set up operations outside. By 2005 end. over 300 open shop in India and beyond. 2000 Third Party players spring up in India. billing. Though outsourcing of business processes like data processing.On the origins of Outsourcing…. 22 . 1999 The New Telecom Policy of 1999 ended the state monopoly on international calling facilities. About 45 global destinations BPOs bandwagon and are now competing to get a slice of the annual $300 billion outsourcing pie.
Build.Types of Outsourcing Outsourcing models: BPO Business processes Administrative processes BPO: Business Process Outsourcing APO: Administrative Process Outsourcing ASP: Application Service Provider AMO Application Development and Maintenance IT-infrastructure DBRO: Design. & Maintenance ITO: IT Infrastructure & service hosting Outsourcing SDO 23 . Run & Operate ADM: Application Develop.
Application Development & Maintenance Outsourcing (ADM) The delegation of a significant portion of a company’s Application Development and Maintenance work Information Technology Outsourcing (ITO) The delegation of a significant portion of a company’s IT operations 24 . reincarnation of business process reengineering. BPO is often an updated.Business Process Outsourcing (BPO) The delegation of a significant portion of a company’s back office and technology-enabled operations.
BPO –Levels Customized Industrialized One-to-one One-to-many low medium high Degree of industrialization Custom designed services leveraging know-how but little else. Navitaire Single service delivered to multiple clients simultaneouslypayments processors such as First Data.traditional outsourcers such as IBM Similar services delivered to multiple clients -payroll providers such as ADP and Paychex. 25 .
AMO 26 .
• Starting with a standard approach. carefully considering their size and complexity. Our flexibility is demonstrated by the fact that we manage hundreds of arrangements that involve less than 100 people…and many with more than 1. . Over the course of time. 2: Breadth of Applications Outsourcing arrangements can specify a single critical application. Oracle.000 people. PeopleSoft and Siebel. or an entire portfolio of software applications. Accenture will adjust service levels to meet the client’s changing business needs. Accenture will manage custom or packaged software. including enterprise solutions such as SAP. we build on the basics and structure our projects to achieve specific business results for our clients. a group of related applications.• Accenture provides a flexible spectrum of services and arrangements…from simple to complete end-to-end IT responsibility…and from immediate to well into the future. • the extent of our collaboration through two dimensions: 1: Scope of Services Companies can select basic application management services (such as break/fix support) or broaden the responsibility to include application enhancements. • Accenture’s Application Outsourcing services are tailored to our client’s needs. upgrades or comprehensive application development.
Managing data and voice networks Desktop Management and Mobility .Remote and on-site managed server hosting . qualifying.End-to-end security services including firewall management. & Mobility Supplier Mgmt. distributed • Sales Support and Mobilization Hosting Technical Support Services Network Management Security Operations Desktop Management & Mobility Messaging & Collaboration • • • • Supplier Management . identity management and security policy Data Centers .SDO – Service Delivery Outsourcing Client Operations Management Delivery capabilities Security Data Centers Technical Support Network Desktop Services Mgmt. intrusion detection. • Security . desk-side and self-service support . laptop. hand-held.Data centers Technical Support .Global hubs Network Services .Help desk.PC.Identifying. contracting and managing strategic suppliers 28 .
Sourcing of Outsourcing • Off-Site –Local service providers • Near Shore –Proximity cross-border service providers • Off-Shore – Remote Cross-border service providers 29 .
OLAs. coordination and integration • Optimize global resources • Encourage collaborative working • Leverage technology to enable business strategy NEAR-SHORE OFF-SHORE Client Outsourcing company Skill Pool Technical Support +… • Establishes a single point of responsibility for entire relationship. • Forum for engaging multiple sources in the key processes of communication.RUNNING OUTSOURCING Framework Key Principles Common Objectives & Goals Delivery Model is based on several key components • Common objectives & goals • End-to-End governance structure Governance Methods. 30 . Standards. and Tools Projects Reporting & Status Tracking • Multi-level team organisation Common Processes LOCAL • Leveraged core competencies and skills Contract • Formalised SLAs.
Verticals in India 31 .
relieve burden of staffing – The prime focus is constructing the “Right Contract” with the vendor or service provider. talent crunch. inadequate internal managerial competencies. 32 . desire to reduce headcount – Done for corporate restructuring – Benefits: Generate immediate cost savings. realize cash infusion from sale of assets. Strategic & Transformational Tactical Outsourcing: – Specific problem of firm – Troubles like : lack of finances.Levels of Outsourcing: Tactical. eliminate need for future investments.
Strategic Outsourcing • • • • Building long term values Get the job done in a strategic model Managerial mindset matured for relationships From buyer & supplier to business partners 33 .
• Its real power lies in the innovations that outside specialist bring to customer ‘s business 34 .Transformational outsourcing • 3rd generation outsourcing • This 3rd Stage uses outsourcing for redefining the business • To survive economically today. Organizations must transform themselves and their markets to redefine the business world before it redefines them.
Transformational vs Traditional • • • • • Business focus Centered on creating value Assist in managing uncertainty Harmonize with strategic goal Based on fashioning a network of partnership in the connected global economy • Business cost and reengineering facilitate perpetual value creation • • • • Operational focus Centered on cutting cost Assist in establishing control Aligns with basically unchanged business process • Based on external specialists realizing higher performance for the client than internal non specialist resource • Remove noncore functions from the business to provide a one time discharge of capital 35 .
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