Value chain activities to carry out internally and outsource

Question

How is value chain activities decided to carry out internally and to outsource?

Answer 1

1. In any business, a few activities in the value chain are always extra critical to strategic achievement and competitive benefit than others.

2. As a universal rule, strategy-critical activities require to be executed internally so that management can directly control their performance. Less valuable and some support functions may be powerful candidates for outsourcing.

3. A number of companies have found ways to effectively rely on outside elements suppliers, allocation channels, product designers, advertising agencies, and financial services firms to execute strategically important value chain activities. So while executing strategy-critical activities in-house builds fine intelligence, there can be times when outsourcing some of them works to fine benefit.

KEY CONCEPT:

Outsourcing has many strategy-executing benefits –less internal bureaucracy, lower costs, swiftness decision-making, and heightened strategic focus.