During the last years international companies dealt with the question of optimal division of labour in cooperation with suppliers; especially in the automotive and supply industry. This question and its solutions decide of the competitive position of many companies in several industrial sectors. Major points in regard to division of labour are the areas of manufacturing-, quality-, logistics- and development functions. Such procedures create qualitative relationships between the parties involved. Another question concentrates on the maintenance or the change of company internal services e. g. cleaning, car pool, human resources, canteen and accounting. Although the core services of the companies remain the same, in these areas total cost reductions as well as flexible processes can be achieved. The process of optimal division of labour to be achieved by giving away internal functions to an external service provider, in economic literature is called outsourcing.
Generally, corporations use outsourcing to target on cost-, flexibility-, time- and quality aspects.
Table of Contents
- 1. Introduction
- 1.1 The problem
- 1.2 Goal
- 1.3 Structure of the analysis
- 2. New institutional economics
- 2.1 The transaction cost theory
- 2.1.1 Definition of transactions
- 2.1.2 Types of transaction costs
- 2.1.3 Measurement of transaction costs
- 2.2 The property rights theory
- 2.3 The principal agent theory
- 2.4 Critical comments
- 3. Outsourcing
- 3.1 Definition of outsourcing
- 3.2 Types of outsourcing
- 3.3 Outsourcing contracts
- 3.4 International aspects of outsourcing
- 3.5 Chances and risks of outsourcing
- 3.5.1 Chances
- 3.5.2 Risks
- 3.6 Critical comments
- 4. Outsourcing of a warehouse at the company Fichtel & Sachs AG
- 4.1 The organisation
- 4.2 Definition of outsourced warehouse
- 4.3 Cause and goal of the outsourcing process
- 4.4 Realisation of the process
- 4.5 Critics and results
- 4.6 Similarities and differences in theory and practise
- 5. Conclusion
Objectives and Key Themes
This paper aims to analyze the "make or buy" decision, specifically focusing on outsourcing as a cost-reduction method for international companies. It examines whether outsourcing is a successful strategy in this context. The analysis draws upon relevant theoretical frameworks to evaluate the practical application of outsourcing.
- Transaction Cost Theory
- Property Rights Theory
- Principal-Agent Theory
- Outsourcing Strategies in International Business
- Cost Reduction and Efficiency Gains
Chapter Summaries
1. Introduction: This introductory chapter sets the stage for the paper by defining the problem of cost reduction in international business processes and outlining the paper's objective. It establishes the scope of the analysis, focusing specifically on outsourcing as a potential solution and detailing the structure of the subsequent chapters. The chapter highlights the growing importance of efficient cost management in a globalized market and lays the groundwork for the in-depth examination of outsourcing in the following sections.
2. New institutional economics: This chapter provides the theoretical foundation for the analysis by exploring key concepts within new institutional economics. It delves into transaction cost theory, explaining the definition, types, and measurement of transaction costs, and how these influence the make-or-buy decision. Further, it discusses property rights theory and the principal-agent theory, outlining their relevance to outsourcing decisions. Finally, the chapter critically assesses the limitations and applicability of these theories in real-world business contexts. The integration of these theories establishes a robust framework for understanding the complexities of outsourcing.
3. Outsourcing: This chapter offers a comprehensive definition and typology of outsourcing, exploring various forms and structures of outsourced arrangements. It addresses the crucial aspects of outsourcing contracts, including their negotiation, implementation, and monitoring. A significant portion focuses on the international dimensions of outsourcing, acknowledging the complexities and challenges of managing cross-border operations. Finally, the chapter assesses the potential benefits and risks associated with outsourcing, providing a balanced perspective on its advantages and drawbacks. This section serves as a bridge between the theoretical framework and the case study.
4. Outsourcing of a warehouse at the company Fichtel & Sachs AG: This chapter presents a detailed case study of outsourcing a warehouse at Fichtel & Sachs AG. It describes the organizational structure before and after outsourcing, defining the scope and objectives of the outsourcing initiative. The chapter thoroughly analyzes the process of implementing the outsourcing, including critical decisions and the subsequent results. It contrasts the theoretical concepts discussed in earlier chapters with the practical realities of implementing an outsourcing strategy in a real-world setting. By comparing theory and practice, this chapter provides valuable insights into the challenges and successes of outsourcing.
Keywords
Make-or-buy decision, outsourcing, cost reduction, transaction cost theory, property rights theory, principal-agent theory, international business, supply chain management, efficiency, risk management, case study, Fichtel & Sachs AG.
Frequently Asked Questions: A Comprehensive Language Preview on Outsourcing
What is the main topic of this document?
This document provides a comprehensive analysis of outsourcing, particularly focusing on its role as a cost-reduction strategy for international companies. It uses the lens of new institutional economics to examine the theoretical underpinnings and practical implications of outsourcing decisions.
What theoretical frameworks are used in this analysis?
The analysis draws upon three primary theoretical frameworks from new institutional economics: Transaction Cost Theory, Property Rights Theory, and Principal-Agent Theory. These theories are used to understand the complexities involved in the "make or buy" decision and to evaluate the effectiveness of outsourcing.
What are the key themes explored in the document?
Key themes include the application of transaction cost theory, property rights theory, and principal-agent theory to outsourcing decisions; outsourcing strategies in international business; cost reduction and efficiency gains from outsourcing; and risk management associated with outsourcing.
What is the structure of the document?
The document is structured as follows: An introduction setting the context and objectives; a chapter on new institutional economics providing the theoretical background; a chapter dedicated to outsourcing, defining it, detailing its types, and analyzing its risks and benefits; a case study on the outsourcing of a warehouse at Fichtel & Sachs AG; and finally, a conclusion summarizing the findings.
What is the purpose of the case study on Fichtel & Sachs AG?
The case study of Fichtel & Sachs AG provides a real-world example of outsourcing, allowing for a comparison between the theoretical frameworks discussed and the practical implementation of an outsourcing strategy. It highlights the similarities and differences between theory and practice, offering valuable insights into the challenges and successes of outsourcing.
What are the key findings or conclusions of the analysis?
The document's conclusions would be found in the final chapter, summarizing the analysis of outsourcing in the context of cost reduction for international companies and assessing the success of outsourcing strategies based on the theoretical frameworks and the case study. Specific conclusions would need to be extracted from that final chapter.
What are the keywords associated with this document?
Keywords include: Make-or-buy decision, outsourcing, cost reduction, transaction cost theory, property rights theory, principal-agent theory, international business, supply chain management, efficiency, risk management, case study, Fichtel & Sachs AG.
What is the intended audience for this document?
The document is intended for an academic audience, likely students or researchers interested in the economics of outsourcing, international business, and supply chain management. The language and structure suggest a professional academic context.
- Citation du texte
- Alexander Merl (Auteur), Manfred Husa (Auteur), 2006, Make or Buy decision: Outsourcing - A successful method to reduce costs in business processes of international companies?, Munich, GRIN Verlag, https://www.grin.com/document/59666