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Strategy And Decision Making Model For Outsourcing In Manufacturing Industry

Posted on:2006-07-25Degree:MasterType:Thesis
Country:ChinaCandidate:S LiFull Text:PDF
GTID:2166360155953910Subject:Management Science and Engineering
Abstract/Summary:PDF Full Text Request
Nowadays with global market becoming very popular, more and more enterprises regard outsourcing as the way to rebuild their firms. They jump out the vertical mode that combined in the past and create the more flexible firms.They rely on outsourcing to strengthen the core business and improve customer's relation. Outsourcing is just that the firms carry out their responsibilities to the other person continuously according to service agreement. In order to making strategic outsourcing successfully, a firm must make valid decision for outsourcing first. Therefore when the administrators choose outsourcing or self-producing, the economic costs of the manager's consideration should include the scale economy, the marginal benefit and transaction cost which influence the production costs . This study investigate s outsourcing strategy and analyse how the businessmen make decision on outsourcing through setting up a three-stage model of games. We must analyse the outsourcing goal first. Primary work is to confirm the basic motive on outsourcing and define the service ranges of outsourcing clearly. Outsourcing will make the enterprises great changes ,so their whole decision procedure need tight considerations. It is important to compare the goal of outsourcing to the strategic goal of enterprise. Then we should analyse the current situation and background of the enterprises and their present state. This analysis should accede to real cost of employees and establish their financial value which they contribute to the enterprises wholly. The part of choosing outsourcing strategy is explaining the whole actions that the firms can choose in detail and appraise for the various types of service quality. It must define each suitable standard of choice and estimate the potential financial affairs that they might bring to. The appraisal way to use is to grade the relevant importance of the benefits and estimate the proportions. The key analyse of commercial sensitiveness project is to distinguish potential risk , possible reason and corresponding management and arrangement method. Finally we should turn in a report which can table a proposal .Outsourcing scheme should demonstrate the whole course according with the simple and logic ways. For confirming which business need outsourcing and making corresponding outsourcing strategy, we need assay and evaluate outsourcing cost , profit and firms'expectation. The paper develops a basic duopoly model where each firm can alter its production cost by outsourcing the production of a key component first. Then we analyze firms'incentives to outsource assuming exogenously given prices of outsourced components and assuming a monopoly market structure in the component-producing industry. Thirdly we analyze incentives to outsource under an oligopolistic component-producing industry and analyze the game in a reversed order where final good producers make price offers to a potential subcontractor(s). Finally we demonstrate the inefficiency of horizontal subcontracting in the presence of brand differentiation. This study has offered an analysis of firms competing with their design of organizational production mode as a strategic instrument. The study has identified the strategic incentives of Bertrand competitors in differentiated industries to outsource production of key components. A central contribution of this analysis has been to demonstrate that introducing competition into the component-or input-producing industry does not reduce efficiency even if the production of essential components exhibit increasing returns to scale at all production levels. There are two reasons for that. First, price competition ensures that average...
Keywords/Search Tags:Strategic outsourcing, Games, Decision making model, Manufacturing industry
PDF Full Text Request
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