Outsourcing is the process of delegating the control of some of the business activities to a third party. It is a case whereby some of the job functions are done outside the company instead of having employees or department do them within the business. In my pharmaceuticals industry, outsourcing of drug discovery and manufacturing is expected to expand more in the next five years and to be embraced by more companies.
Outsourcing is expected to grow in future because of the increased growth of the economy and globalization. In this industry, there are limitations in outsourcing and there are many new trends observed in the industry since the 1990s (David, Wolfender, & Dias, 2015). It is likely to grow as more companies open operations in other countries like the developing economies.
It is important for a business to study and understand its internal organization because it makes it easier to understand the strengths and weaknesses it has. A firm that knows its internal organization can use the existing resources to grow its performance and can increase its profits using the capabilities it has.
Tangible assets are the ones that have a physical value and can be touched. For example, vehicles and plant are tangible and have a physical form. The intangible assets are the ones that cannot be touched and they include patents, trademarks, and copyrights. Decision-makers should know the differences to aid them when using these assets as collaterals and when deciding on how to maintain them.
The intangible resources are more valuable for creating capabilities as opposed to the tangible resources. For example, in a processing plant, the technologies that create overtime are intangible. The processes necessary to use the tangible assets are usually intangible and this means that the intangible resources create more capabilities.
Value chain analysis is a tool used in companies to analyze the business activities internally to determine how the company can increase its competitiveness (Gereffi & Fernandez-Stark, 2016). A business that uses this tool gains a competitive advantage over others because it can create differentiation, increase customer satisfaction, and reduce costs.
The core competencies of a business can become the core rigidities because of the changes in the external environment. It means that the things that a company uses as its strengths can become its major challenges. For example, companies that were experts in analog operations suffered when digital technology developed.
Companies like Amazon and Walmart respond to competition differently and this is mostly seen in clothing and footwear (Cavallo, 2018). The factors that affect the likelihood of a company initiating competitive responses to competitors actions include the type of action taken by the competitor, the possible impacts of the actions and the impact that the action has on the market. The factors affect Amazon and other companies in the industry.
David, B., Wolfender, J. L., & Dias, D. A. (2015). The pharmaceutical industry and natural products: historical status and new trends. Phytochemistry Reviews, 14(2), 299-315.
Gereffi, G., & Fernandez-Stark, K. (2016). Global value chain analysis: a primer.
Cavallo, A. (2018). More amazon effects: Online competition and pricing behaviors (No. w25138). National Bureau of Economic Research.
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