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Profits and perils
Keywords: Outsourcing, Corporate strategy, Risk assessment
An old saying warns us that getting something done properly usually means doing it ourselves. There'll no doubt be plenty who have learned from painful experience how sound that particular piece of advice can be. In business, though, the growing popularity of outsourcing is testimony to the fact that relying on others does not always result in disaster.
Outsourcing has come a long way from its origins. No longer seen as purely a means of cutting or containing costs, it is now also recognized as playing a key supporting role within many other business strategies. Indeed, an organization aware of the opportunities outsourcing can help bring has the real possibility of stealing a march on its rivals. It must, however, also be equally aware of the potential risks involved.
Nike: outsourcing and focus
Wouldn't it be good if we could simply ignore the humdrum things in life and just concentrate on what we do best and often enjoy most? In Nike's case, that particular dream has become real. The sportswear giant outsources a large part of its production and sales and distribution so that it can concentrate energies and resources on activities that impact most directly on the customer. Sure sounds easy, doesn't it? But identifying where exactly to place this focus is the key. Some organizations' capabilities lie in customer relations while others will be best served by specializing in operational excellence. For Nike, it is product design as its status as brand leader surely testifies. And what an impact this strategy has had. The logic of focusing on activities that bring a definite advantage and outsourcing much of the rest saw Nike's early years of struggle transformed into phenomenal growth during its second decade. The company has not looked back since.
Nike's emergence as a major player also highlights another potential benefit of outsourcing....