Subjective 1: Chapter 8

What is outsourcing? What are the seven major outsourcing errors that should be
avoided?
Answer:
Outsourcing is purchasing from someone else a product or service that had been
previously provided internally. It is the reverse of vertical integration. Outsourcing is
becoming an increasingly important part of strategic decision making and an important
way to increase efficiency and often quality.
The most popular outsourcing activities are : Information technology , operations. Legal,
finance real estate facilities, Hr, Procurement and sales / marketing support.

Offshoring is the outsourcing of an activity or a function to a wholly owned company or

an independent provider in another country.global phenomenon that has been supported
by advances in information and communiocation technologies the development of stable ,
secure and high speed data transmission systems and logistical advances.

Some disadvantages of outsourcing are:

• Customer complaints
• Locked in to long-term contracts
• Lack of ability to learn new skills and develop new core competencies
• Lack of cost savings
• Poor product quality

The seven major outsourcing errors that should be avoided are as follows:
1. Companies failed to keep core activities in house.
2. Companies selected the wrong vendor - those that were not trustworthy or lacked
state-of-the-art processes.
3 Management lost control over the outsourced activity.
4. Companies overlooked the hidden costs of outsourcing
5. Companies failed to plan an exit strategy (such as reversibility clauses).

The key to outsourcing is to purchase from outside only those activities that are not key to
the company’s distinctive competencies.
Subjective 2: chapter 8
What are the strategies to avoid proposed by the authors?
Answer:
The strategies to avoid are as follows:
1. Follow the leader: Imitating a leading competitor's strategy might seem to be a
good idea, but it ignores a firm's particular strengths and weaknesses and the
possibility that the leader may be wrong.

2. Hit another home run: If a company is successful because it pioneered an

extremely successful product, it tends to search for another super product that will
ensure growth and prosperity.

3. Arms race: Entering into a spirited battle with another firm for increased market
share might increase sales revenue, but that increase will probably be more than
offset by increases in advertising, promotion, R&D, and manufacturing costs.

4. Do everything: When faced with several interesting opportunities, management

might tend to leap at all of them. At first, a corporation might have enough
resources to develop each idea into a project, but money, time, and energy are
soon exhausted as the many projects demand large infusions of resources.

5. Losing hand: A corporation might have invested so much in a particular strategy

that top management is unwilling to accept its failure. Believing that it has too
much invested to quit, the corporation continues to throw "good money after bad.
Subjective 3: chapter 8
The Process of Strategic Choice

Strategic choice is the evaluation of alternative strategies and selection of the

best alternative. Failure almost always stems from the actions of the decision
maker, not from bad luck or situational limitations.

There is mounting evidence that when an organization is facing a dynamic

environment, the best strategic decisions are not arrived through consensus when
everyone agrees on alternative.

Strategic managers’ use programmed conflict to raise different opinions.

Two techniques help strategic managers avoid consensus trap:

1. Devil’s advocate (who may be an individual or a group) is one who is assigned

to identify potential pitfalls and problems with a proposed alternative strategy in a
formal presentation. When applied to strategic decision making,

2. Dialectical inquiry: involves combining two conflicting views_ the thesis and
antithesis into a synthesis.
Requires that two proposals using different assumptions be generated for each
alternative strategy under consideration. After advocates of each position present
and debate the merits of their arguments before key decision makers, either one of
the alternatives or a new compromise alternative is selected as the strategy to be
implemented.

Regardless of the process used to generate strategic alternatives, each resulting

alternative must be rigorously evaluated in terms of its ability to meet four
criteria:

1. Mutual exclusivity: Doing any one alternative would preclude doing any
other.
2. Success: It must be feasible and have a good probability of success.
3. Completeness: It must take into account all the key strategic issues.
4. Internal consistency: It must make sense on its own as a strategic decision for
the entire firm and not contradict key goals, policies and strategies currently being
pursued by the firm or its units.