Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Global Business
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly
Outsourcing the purchase of components or "hard goods" is not a new phenomenon: it is known as the "buy" portion of a company's common make-or-buy decisions. In the current service-oriented economy, however, make-or-buy decisions are now often do-or-buy decisions that reflect the strategic question of whether outside entities should be hired to perform significant support service activities. Support functions such as information technology and customer service can be outsourced to provide many organizational benefits. Companies frequently point to the cost savings for labor and training, but also cite the benefits of releasing corporate resources for alternative uses and allowing the business to focus on its core competencies. Outsourcing support functions is not simple, though, and companies must manage the related strategic, quantitative, and qualitative risk factors. This article discusses some of the potential risks that must be faced when a company outsources internal support functions, and describes how the Committee of Sponsoring Organizations of the Treadway Commission's Enterprise Risk Management (ERM) model can assist in managing and controlling these risks.
Authors :: Cecily A. Raiborn, Janet B. Butler, Marc F. Massoud
Swot Analysis of "Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly" written by Cecily A. Raiborn, Janet B. Butler, Marc F. Massoud includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Functions Buy facing as an external strategic factors. Some of the topics covered in Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly case study are - Strategic Management Strategies, Manufacturing, Supply chain and Global Business.
Some of the macro environment factors that can be used to understand the Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly casestudy better are - – technology disruption, increasing government debt because of Covid-19 spendings, central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, supply chains are disrupted by pandemic , competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions,
there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, etc
Introduction to SWOT Analysis of Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Functions Buy, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Functions Buy operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly can be done for the following purposes –
1. Strategic planning using facts provided in Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly case study
2. Improving business portfolio management of Functions Buy
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Functions Buy
Strengths Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Functions Buy in Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly Harvard Business Review case study are -
Innovation driven organization
– Functions Buy is one of the most innovative firm in sector. Manager in Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to lead change in Global Business field
– Functions Buy is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Functions Buy in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– Functions Buy has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Functions Buy has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Ability to recruit top talent
– Functions Buy is one of the leading recruiters in the industry. Managers in the Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Training and development
– Functions Buy has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Diverse revenue streams
– Functions Buy is present in almost all the verticals within the industry. This has provided firm in Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Functions Buy digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Functions Buy has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Effective Research and Development (R&D)
– Functions Buy has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– Functions Buy has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Functions Buy is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Functions Buy is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Sustainable margins compare to other players in Global Business industry
– Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly firm has clearly differentiated products in the market place. This has enabled Functions Buy to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Functions Buy to invest into research and development (R&D) and innovation.
Organizational Resilience of Functions Buy
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Functions Buy does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly are -
Low market penetration in new markets
– Outside its home market of Functions Buy, firm in the HBR case study Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Functions Buy supply chain. Even after few cautionary changes mentioned in the HBR case study - Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Functions Buy vulnerable to further global disruptions in South East Asia.
Lack of clear differentiation of Functions Buy products
– To increase the profitability and margins on the products, Functions Buy needs to provide more differentiated products than what it is currently offering in the marketplace.
Need for greater diversity
– Functions Buy has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly, is just above the industry average. Functions Buy needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Functions Buy is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Skills based hiring
– The stress on hiring functional specialists at Functions Buy has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
High bargaining power of channel partners
– Because of the regulatory requirements, Cecily A. Raiborn, Janet B. Butler, Marc F. Massoud suggests that, Functions Buy is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Interest costs
– Compare to the competition, Functions Buy has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Aligning sales with marketing
– It come across in the case study Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly can leverage the sales team experience to cultivate customer relationships as Functions Buy is planning to shift buying processes online.
Increasing silos among functional specialists
– The organizational structure of Functions Buy is dominated by functional specialists. It is not different from other players in the Global Business segment. Functions Buy needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Functions Buy to focus more on services rather than just following the product oriented approach.
Opportunities Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly are -
Using analytics as competitive advantage
– Functions Buy has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Functions Buy to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Functions Buy in the consumer business. Now Functions Buy can target international markets with far fewer capital restrictions requirements than the existing system.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Functions Buy to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Functions Buy to hire the very best people irrespective of their geographical location.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Functions Buy can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Developing new processes and practices
– Functions Buy can develop new processes and procedures in Global Business industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Functions Buy can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Functions Buy in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Global Business segment, and it will provide faster access to the consumers.
Better consumer reach
– The expansion of the 5G network will help Functions Buy to increase its market reach. Functions Buy will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Functions Buy can use these opportunities to build new business models that can help the communities that Functions Buy operates in. Secondly it can use opportunities from government spending in Global Business sector.
Creating value in data economy
– The success of analytics program of Functions Buy has opened avenues for new revenue streams for the organization in the industry. This can help Functions Buy to build a more holistic ecosystem as suggested in the Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly case study. Functions Buy can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Learning at scale
– Online learning technologies has now opened space for Functions Buy to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Functions Buy is facing challenges because of the dominance of functional experts in the organization. Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Functions Buy can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly are -
Increasing wage structure of Functions Buy
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Functions Buy.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly, Functions Buy may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Global Business .
Technology acceleration in Forth Industrial Revolution
– Functions Buy has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Functions Buy needs to keep up with the evolution of technology in the Global Business sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Functions Buy can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Functions Buy with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Functions Buy business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Functions Buy needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Global Business industry regulations.
High dependence on third party suppliers
– Functions Buy high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Consumer confidence and its impact on Functions Buy demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Functions Buy will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Stagnating economy with rate increase
– Functions Buy can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Weighted SWOT Analysis of Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Outsourcing Support Functions: Identifying and Managing the Good, the Bad, and the Ugly is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Functions Buy needs to make to build a sustainable competitive advantage.
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