LJ 2-5c

How does the identification of outsourcing opportunities relate to core competencies and competitive advantages? Can this relationship also be connected to the organizational structure? Explain and provide an example.

Identifying outsourcing opportunities allows a company to disperse non-core and distracting activities. This allows the company to focus more resources on core competencies and competitive advantages. Without outsourcing, the company would have to hire new talent in and train these new hires. Also using valuable resources for non-core and distracting activities lead to companies missing strategic opportunities or missing the prime time for acting on opportunities. This can result in a competitor seizing the opportunity before you or you not being able to capitalize on the full potential.

These outsourcing opportunities can be used strategically, so they form external competitive advantages. Outsourcing can be a portion of activities and not the entire department or role within the company. The role within the company is kept as a core competency and further exploited to strengthen the competitive advantage. The outsourced activities are what the supplier does best and can result in more of a strategic alliance than pure outsourcing.

The best example I can think of is Wal-Mart and their supply chain management. They outsource many activities and turn that into an incredible competitive advantage. They develop these suppliers into efficient productive companies through Wal-Mart's mandates. Wal-Mart uses these relationship as an extension of themselves and push their agendas through their suppliers. Recently Wal-Mart is pushing waste reduction through packaging of goods that they purchase. Suppliers are to reduce "throw away" packaging by a percentage and also ensure that the more of the packaging can be recycled.