One of the most important decisions is which tasks to keep in-house and which activities to outsource. Its impact on an organization’s financial performance could prove significant in the long run since the latter choice can reduce overheads, free up time for other vital tasks, and bring expertise to the business. However, outsourcing comes with its risks too since the company could lose control of its proprietary information. The outsourcing decision matrix helps solve the conundrum by considering two important factors: the task’s strategic importance, and the contribution of the task to operational performance (Schniederjans et al., 2015). The resultant matrix is divided into quadrants which are as follows: forming a strategic alliance, retaining tasks, outsourcing, and eliminating the task.
Case studies are important when studying strategic concepts in business. This is particularly important in the case of outsourcing in today’s globalised environment. In the case of paper, the companies that will form the basis of discussion are Phillips and First Telecom. The former is known for its electronics, and it was the market leader in Brazil for producing LCD televisions. The production of LCD panels is a tricky affair that involves other players with Samsung producing virtually all required components. Phillips’ supply chain decision was to outsource its production to a joint venture with LG. The result of this move was that Phillips lost its competitiveness within a 4-year period with regards to both sales volume and value (Di Serio et al., 2011). This could be attributed to the company’s reduced control of the production of an important resource. Therefore, Phillips could not guarantee volume. An alternative strategy, with regards to the outsourcing matrix, would be to retain the production of LCD panels by verticalizing with a view to controlling the whole value chain. Keeping the maximum level of control of such a task is the only chance for success. In the case of First Telecom, outsourcing was common practice with software development, in-life service management, and solution pricing all being outsourced. However, the quality of output from solution pricing was leading to numerous complaints leading to massive losses on the company’s part (Singhania " Gupta, 2014). For a task that contributes highly to operational performance and is of high strategic importance, outsourcing is never appropriate. Instead, First Telecom could have retained solution pricing in-house to ensure maximum control of the output.
References
Di Serio, L.C., Bento, D.R., Martins, G.S., " Duarte, A.L. (2011). Strategic Outsourcing? The Phillips Case in the LCD TV Market. Journal of Technology Management " Innovation, 6(2): 219- 228.
Schniederjans, M. J., Schniederjans, A. M., " Schniederjans, D. G. (2015). Outsourcing and insourcing in an international context. Routledge.
Singhania, M., " Gupta, P. (2014). First Telecom: Insourcing vs. Outsourcing. Emerald Emerging Markets Case Studies, 4(5): 1- 7.
