OUTSOURCING STRATEGY: is purchasing from someone else a product or service that had been previously provided internally. It is becoming an increasingly important part of strategic decision making and an important way to increase efficiency and often quickly. Firms competing in global industries must in particular search worldwide for the most appropriate suppliers.

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Eg: Daimler Chrysler outsourced its designing of car accessory to Plexion Technologies in Bangalore. Toyota has outsourced its transmission components designing to BFL.

The key to outsourcing is to purchase from outside only those activities that are not key to the company’s distinctive competencies. Otherwise, the company may give up the very capabilities that made it successful in the first place – thus providing itself on the road to eventual decline. In determining functional strategy, the strategist must.

  • Identify the company’s or business unit’s core competencies
  • Ensure that the competencies are continually being strengthened and
  • Manage the competencies in such a way that best preserves the competitive advantage they create.
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