Outsourcing

• the purchase of a value-creating activity or a support function activity from an external supplier

  outsourcing
• 'Not for profit' agencies as well as 'for profit' organizations actively engage in

  outsourcing.
• Firms engaging in effective outsourcing increase their flexibility, mitigate risks, and reduce their capital investments.
• In multiple global industries, the trend toward outsourcing continues at a rapid pace.
• Outsourcing can be effective because few, if any, organizations possess the resources and capabilities required to achieve competitive superiority in each value chain activity and support function.
• Two significant concerns in outsourcing:

  • the potential loss in a firm’s ability to innovate
  • the loss of jobs within the focal firm
• Deciding to outsource to a foreign supplier is commonly called offshoring.
• the ability of a core competence to be a permanent competitive advantage can’t be assumed because all core competencies have the potential to become core rigidities
• events occurring in the firm’s external environment create conditions through which core competencies can become core rigidities, generate inertia, and stifle innovation