Introduction International Business The Review of: The Innovative Organization: Creating Value through Outsourcing California Management Review, 50. 1, 2007 (p. 261-277). Tadelis, S. By Group 24 team 5 M. Mardhi (S2167727) R. Theofelea (S2178966) Tutorial Lecture : Ritsema, H A Date of Submission : December 1, 2011 Intoduction “The innovative organization: creating value through outsourcing” is the title of California Management Review 50. 1, p261-277, that was written by Steven Tradelis and was published in 2007.
This article is examining about the recent business trends that acquired attention from companies worldwide which are the practice of outsourcing and offshoring. Businesses applied these kinds of practices in order to procure efficiency. In fact, several examples of failed outsourcing and offshoring occurred over the life of it. By offering strategic frameworks of the activities, Tradelis believes that the people reading his article could wisely consider which strategy the company uses in order to give a success to managers while innovating the sourcing activity effectively and efficiently.
The main objection the author wanted to point out in this article is to encourage businesses to be more active in exploring the opportunities of the source in both inside and outside the company by referring to preceding occurrences and data. Body Analytical Summary Several interesting points are brought up in this California Management Review. The first thing, the author mentioned the backsourcing, which refers to business action of bringing outsourced components back in the house.
This activity happens because of the bad decision to outsource and the change of business environment but this action could build several problems that affect the business keys to gain profit. By suggesting the company to renegotiate and reorganize outsourcing contract rather than trying to backsource, we believe that these two actions also will prompt another cost to the company. Hence, it is important for companies to make a right decision in the first step between buying the function or buying and managing the input, moreover the company needs to manage the dynamic business environment by adapting to the external environmental changes.
Furthermore, the crucial role of the support system such as HRM, CRM, sales, and accounting is essential. Therefore, the executive of the company needs to recruit the qualified employees to bear out the support systems. It also describes the several distances of doing offshoring which are geographical distance, cultural distance, policy distance and legal distance that the multinational company should manage instead of eliminate them. Lastly, having a well-defined, clear and complete contract is crucial to avoid problems from arising between the parties.
Benefits of the article This California Management Review was very well written and contains several appropriate examples. In the beginning of the article, the author opened the review with a very good real case and fact about the object of the article and he closed the article with brief conclusion. The reader will be easy to catch the main idea of the article. The author also provided some figures that contain the conclusion of the specific paragraph to support his statement.
Moreover, this article may become one of managers’ perspectives in order to decide whether or not doing outsourcing and offshoring strategy. It is because the author mentioned several benefits and problems to be considered in doing these strategies so the manager could take a right decision. Furthermore, by giving some tips at the end of the article, it can support company’s executives in doing these strategies decision successfully. Weaknesses and limitation However, the author only analyzed the company that do the outsourcing and offshoring strategy.
He did not examine the advantages and disadvantage from the partner’s perspective. Another weakness is his analyses was too focused on one strategy of entry mode, he did not define the other way of doing the entry mode activity. It might give unclear information for the manager who read this article, especially the manager that will expand the company business through the business mode strategy. Lastly, this long article consisting of 18 pages might make readers less enthusiast. Relation with Introduction International Business
In relation to Introduction International Business subject, this article depicts about the outsourcing of production in order to increase efficiency. This is the true example of International Coordinator which is one out of four MNE archetypes. Another thing that we can relate is about ‘entry modes’ of the company while expanding to other countries. Outsourcing and Offshoring can be distinguished as one of the entry modes that Verbake made. Conclusion In conclusion, the article, made by Steven Tradelis, basically discusses about the approaches of the company dealing with its sources.
Either getting the functions from another company or getting and managing the inputs by the company itself, the company should consider it well unless it can fail in competing with other competitors or even face crisis stage of company. Questions to author: 1. Is there any less risk mode to entry the foreign market? 2. What type of contract (short term or long term) will you choose if you decided to outsource in steady environment but competitive? 3. How big is the effect of the unclear contract agreement between the parties? Reference Verbeke, A. 2009. International Business Strategy. UK: Cambridge University Press.