1.operations in global business strategy & global sourcing-36

8/2/2019 1.Operations in Global Business Strategy & Global Sourcing-36

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Operations in Global Business

Strategy & Outsourcing



Strategic changes required by

Globalisation

• Companies need to compete in several

dimensions

• More opportunities in multiple countries

• Adapt & Integrate their networks of

international operations to create greater

value.



Major Strategic actions in global operations & strategy

Actions-Multinational Actions-Global Sources of competitive

advantage

Improving performance in

response to competition

Stimulus for improvement

Sourcing sophisticated products

and services

Specialized knowledge and

local experience

Sourcing Commodities Sourcing Commodities Specialized natural and laborresources

Supply from many operations

local to customers

Supply from many operations

local to customers

Scope and proximity

Supply from concentrated

locations distant from

customer

Supply from concentrated

locations distant from customer

Scale and scope economies

N/w Supplying customers Synergies through network for

learning

International pricing and entry in

response to competition

Strategic response to

competition



Typical Configuration Patterns for IB:

Simple

global

exports

Single one country

International sourcing

Customers

Suppliers

Geographically

dispersed

Geographically

concentrated

Multinational

Geographically

concentrated

Geographically

dispersed



Configuration and coordination

HQ

LocalOperation

Customers

Flow and influence of

resources

Flow of knowledgeFlow of product



Global Sourcing

– It is the practice of sourcing from the global

market for goods and services across geopolitical

boundaries.

– It often aims to exploit global efficiencies in thedelivery of a product or service.

– These efficiencies include low cost skilled labor,

low cost raw material and other economic factors

like tax breaks and low trade tariffs.



Advantages & Disadvantages of Global Sourcing:

Advantages of global sourcing, beyond low cost, include:

• Learning how to do business in a potential market.

• Tapping into skills or resources unavailable domestically.

• Developing alternate supplier/vendor sources to stimulate competition,and increasing total supply capacity.

Disadvantages of global sourcing can include:

• Hidden costs associated with different cultures and time zones.

• Exposure to financial and political risks in countries with (often) emergingeconomies.

• Increased risk of the loss of intellectual property, and increasedmonitoring costs relative to domestic supply.

• For manufactured goods, some key disadvantages include long lead times,the risk of port shutdowns interrupting supply, and the difficulty of monitoring product quality.



New at Hyde Tools: global sourcing strategyhttp://www.homechannelnews.com/story.aspx?id=159091&menuid=267

• (Dec. 9) Southbridge, Mass.-based Hyde Tools said its pursuit of "right priced, quality, stainless

steel products" has led it to partnerships with product development firm Proteus Design and twoChinese manufacturers. The announcement came as Hyde Tools, which has in the past promoteditself as a "Made in the USA" leader of surface preparation tools, is introducing three new lines ofputty knives and scrapers: "Pro Stainless," "Pro Project" and "Value Series."

• "Everyone knows in order to supply these price points to meet the profit demands of our partners,we must product at the best costs available in the global marketplace," wrote Corey Talbot, VP ofmarketing and product development, in a letter

• Hyde has entered into two joint product development agreements and manufacturing contractswith two Chinese manufacturers. The company described each as having more than 20 yearsexperience in tool production. Proteus Design has worked in product development with clientsincluding 3M, Gillette and Kohler.

• Talbot described the move as part of a new chapter for Hyde, in which it will strive to be "TotalCategory Leader" -- which Hyde believes it has achieved to a large extent. The company's newbrochure for the its new lines of scrapers: "New tools, and better margins for our retail partners."

• The company also shared research on the putty knife and scraper market. It estimates the NorthAmerican market for this product category is about 28.8 million units sold per year. The company'sresearch also shows the vast majority (89%) of professional users are willing to pay more for astainless steel putty knife or scraper than for a standard carbon putty knife.

• According to a Hyde spokeswoman, the company continues to manufacturer a significant amountof products in the United States. For instance, their Black & Silver line of tools are made inSouthbridge, US. But, like most manufacturers, it has been sourcing globally for years. The

company hasn't promoted itself as exclusively "made in America" in about 10 years.

http://www.homechannelnews.com/story.aspx?id=159091&menuid=267

http://www.hydetools.com/




http://www.homechannelnews.com/story.aspx?id=159091&menuid=267



Global Delivery Model

•Global Delivery Model involves the deployment of resources

from different parts of the world to provide maximally efficient

service delivery.

•Global Delivery Model involves having the right volume of

skills and the right skills mix in the right place at the right time

and the right price point.

•Global Delivery Model gives the advantage of delivery centers

located around the globe as well as a team working close to the

business using consistent processes.

•Most businesses have now come to expect Global Delivery to be

an integral component of the solution offered by the service

provider.



Evolution of the Global Delivery Model

Simplification Standardization Shared

ServicesOutsourcing Offshore

<--------------Act Local-----------> <-------------Act Regional---------->

Maximum

L e v e l o f B e n e f i t

Minimum

GLOBAL

REGIONAL

LOCAL

What improvements

can be made by

implementing localbest practice?

Can benefits of

standardization

acrossbusinesses and

geography be

achieved?

Can shared service

economies

of scale becaptured?

Is outsourcing

feasible,

beneficial and

outweighs

additional risk?

Source from

offshore

location-

(captive or

vendor)

Global Delivery

Source from

multiple

locations/vendors

across the globe

<-------------Act Global---------->

11



Drivers for Global DeliveryAdoption of the Global Delivery Model creates competitive advantages that enables businesses to

fundamentally manage cost, improve services/quality, increase flexibility, access to high skilled

labor, focus on core competencies and react quickly to market change.

Manage

Cost

Improve

Service/

Quality

Increase

Flexibility

/Agility

Capture, Guarantee and Accelerate Savings

Transfer to Variable Cost Structure

Upgrade and Refocus Skills

Access to High Talent Resource Needs

Fix Operational Service ProblemsTransfer Risk to Provider

Access To Best of Breed

Access to

High-

Skilled

Labor

Slide 12



Benefits of Global Service Delivery:

• Reduced cost of ownership

• Ready availability of resources & flexibility of

deployment

• Risk minimization for critical operations

• Improved time to market

•

World class quality leveraged



Global Delivery Vendor Landscape North American & European Vendors are expanding their near shore and offshore presence, while Asia based

vendors are increasing their onshore and near shore presence

Established

Emerging

Shifting

Mexico

Ireland

India

Philippines

China

Jamaica

Brazil

Costa Rica

South Africa

Eastern Europe

Canada

Argentina

U.S.A

14



Offshoring

• Offshoring is defined as the movement of a

business process done at a company in one

country to the same or another company in

another, different country

• A company moving an internal business unit

from one country to another would be

offshoring or physical restructuring, but not

outsourcing.



Outsourcing

16

Outsourcing denotes the continuous

procurement of services from a third party,making use of highly integrated processes,

organization models and information systems.

OUTSOURCERCOMPANYServices

Organization

Level

Agreement

Service

Level

Agreement



Why do outsourcing?

• Access best in class

business processes

• Harness leading

technologies

• Increase efficiencies• Enhance capabilities

• Expand service

• Free up management time

• Decrease operating costs

Acquire new skill Acquire Better mgt

Focus on Strategy

Focus on core function

Avoid major investments

Assist a fast growth situation

Handle overflow situation

Improve flexibility

Enhance credibility

Jump on Bandwagon



Objectives

18

• Ensure highest level of productivity for

the corporation

•Bring greatest value to the end consumer



On the origins of Outsourcing

19

• 1776 Adam Smith's Wealth of Nations propagatescompetitive advantage through outsourcing.Term "outsourcing" itself was not in use.

•

18th and 19th centuries : floating factory ships,the concept of "offshore manufacturing gets aboost Early

• 20th century Companies like Ford Motors own

everything, even forests to make rubber for cartyres! General Motors runs a 2000 people HR andtravel desk to cater to its employee needs



On the origins of Outsourcing….

20

1940s ADP(Automatic Data Processing) Inc starts withhandling payroll outside companies. Today the $8billion, 41000 employee payroll expert handles payrollsfor one in six US workers and recently opened office in

India. 1960s Hundreds of call centers spring up in the US and

UK. Convergys, the largest call centre company startedas a captive unit of Cincinnati Bell. Hived off in the late1990s.

1970 s US companies from oil majors, telecomoperators, pharmacy firms to FMCG firms outsourcecustomer care, telemarketing, payroll and otherfunctions.



On the origins of Outsourcing…

21

1980- 1990 US and European companies startshifting work to Ireland, Israel and Canada. Irelandparticularly benefits as costs are lower and it offersmulti language capability. At their peak the over 100

call centers in Ireland employ over 300,000 staff 1990-1999 C. K. Prahalad's core competency theory

expounded in a Harvard Business School paper. Thebasic lessons of the theory - identify your corecompetencies, focus on them and get out of

everything else. American Express, Swissair, BritishAirways and General Electric(GE) start captive unitsin India.



On the origins of Outsourcing….

22

1999 The New Telecom Policy of 1999 ended the statemonopoly on international calling facilities. Thoughoutsourcing of business processes like data processing,billing, and customer support began towards the end of

the 1990s when MNCs established wholly ownedsubsidiaries.

2000 Third Party players spring up in India. By 2005end, over 300 open shop in India and beyond. Some of

them even set up operations outside. About 45 globaldestinations BPOs bandwagon and are now competingto get a slice of the annual $300 billion outsourcing pie.



Types of Outsourcing

23

Business

processes

Application Development

and Maintenance

IT-infrastructure

BPO: Business Process Outsourcing

ASP: Application Service Provider

DBRO: Design, Build, Run & Operate

ADM: Application Develop. & Maintenance

ITO: IT Infrastructure & service

hosting Outsourcing

Administrative

processesAPO: Administrative Process Outsourcing

Outsourcing models:

BPO

AMO

SDO



24

Business Process Outsourcing (BPO)

The delegation of a significant portion of a company’s back office and technology-enabled operations. BPO is often an updated, re-

incarnation of business process reengineering.

Application Development & Maintenance Outsourcing (ADM)The delegation of a significant portion of a company’s Application

Development and Maintenance work

Information Technology Outsourcing (ITO)The delegation of a significant portion of a company’s IT operations



BPO –Levels

25

Degree of industrialization

medium highlow

Customized Industrialized

Single service deliveredto multiple clients

simultaneously-

payments processors

such as First Data.

Similar servicesdelivered to multiple

clients -payroll

providers such as ADP

and Paychex; Navitaire

Custom designedservices leveraging

know-how but little

else- traditional

outsourcers such as

IBM

One-to-one One-to-many



AMO

26



• Accenture provides a flexible spectrum of services and arrangements…fromsimple to complete end-to-end IT responsibility…and from immediate to well intothe future.

• Starting with a standard approach, we build on the basics and structure our

projects to achieve specific business results for our clients, carefully consideringtheir size and complexity.

• the extent of our collaboration through two dimensions:

1: Scope of Services

Companies can select basic application management services (such as break/fixsupport) or broaden the responsibility to include application enhancements,

upgrades or comprehensive application development. Over the course of time,Accenture will adjust service levels to meet the client’s changing business needs.

2: Breadth of Applications

Outsourcing arrangements can specify a single critical application, a group of relatedapplications, or an entire portfolio of software applications. Accenture willmanage custom or packaged software, including enterprise solutions such as SAP,Oracle, PeopleSoft and Siebel.

• Accenture’s Application Outsourcing services are tailored to our client’s needs.Our flexibility is demonstrated by the fact that we manage hundreds of arrangements that involve less than 100 people…and many with more than 1,000people.



SDO – Service Delivery Outsourcing

28

• Security- End-to-end security services including

firewall management, intrusiondetection, identity management andsecurity policy

• Data Centers- Remote and on-site managed server

hosting- Data centers

• Technical Support- Help desk, desk-side and self-service

support- Global hubs

• Network Services- Managing data and voice networks

• Desktop Management and Mobility- PC, laptop, hand-held, distributed

• Supplier Management- Identifying, qualifying, contracting and

managing strategic suppliers

Services

Data

Centers

Desktop

Mgmt.

&

Mobility

Technical

Support

Network

Services

Security Supplier

Mgmt.

Client Operations Management

Messaging & Collaboration

Technical Support

Desktop Management & Mobility

Network Management

Hosting

Sales Support and Mobilization

Security Operations

Delivery

capabilities



Sourcing of Outsourcing

29

• Off-Site –Local service providers

•

Near Shore –Proximity cross-border serviceproviders

• Off-Shore – Remote Cross-border service

providers



RUNNING OUTSOURCING Framework

30

Delivery Model is based on several key

components

• Common objectives & goals

• End-to-End governance structure

• Multi-level team organisation

• Leveraged core competencies and

skills

• Formalised SLAs, OLAs,

• Forum for engaging multiple sources

in the key processes of

communication, coordination and

integration

• Optimize global resources

• Encourage collaborative working

• Leverage technology to enable

business strategy

• Establishes a single point of

responsibility for entire relationship.

Key Principles

ClientOutsourcing

companySkill Pool Technical Support + …

OFF-SHORE

NEAR-SHORE

LOCAL

P r o j e c t s R e p o r t i n g & S t a t u s T r a c k i n g

Common Objectives & Goals

M e t h o d s , S t

a n d a r d s , a n d T o o l s

C o m m o n P r o c e s s e s

C o n t r a c t

Governance



Verticals in India

31



Levels of Outsourcing:

Tactical, Strategic & Transformational

32

Tactical Outsourcing:

– Specific problem of firm

– Troubles like : lack of finances, inadequate internalmanagerial competencies, talent crunch, desire toreduce headcount

– Done for corporate restructuring

– Benefits: Generate immediate cost savings, eliminateneed for future investments, realize cash infusionfrom sale of assets, relieve burden of staffing

– The prime focus is constructing the “Right Contract”with the vendor or service provider.



Strategic Outsourcing

33

• Building long term values

• Get the job done in a strategic model

• Managerial mindset matured for relationships

• From buyer & supplier to business partners



Transformational outsourcing

34

• 3rd generation outsourcing

• This 3rd Stage uses outsourcing for redefining the

business

• To survive economically today, Organizations

must transform themselves and their markets to

redefine the business world before it redefines

them.• Its real power lies in the innovations that outside

specialist bring to customer ‘s business



Transformational vs Traditional

35

• Business focus• Centered on creating value

• Assist in managing uncertainty

• Harmonize with strategic goal

• Based on fashioning a network

of partnership in the

connected global economy

• Business cost and

reengineering facilitate

perpetual value creation

• Operational focus• Centered on cutting cost

• Assist in establishing control

• Aligns with basically

unchanged business process

• Based on external specialists

realizing higher performance

for the client than internal non

specialist resource

• Remove noncore functions

from the business to provide a

one time discharge of capital

1.operations in global business strategy & global sourcing-36

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