There are numerous business companies that rely on outsourced services. This paper considers a case where Kraft Foods Inc. and Apple Inc. are compared and contrasted in terms of their competitive advantages earned for their outsourcing practices. It is vital to note that outsourcing usually occurs when a company buys services from an external supplier, instead of doing the same work using its facilities and premises (Denicolai, Strange & Zucchella, 2015). The main reason that drives business companies into the outsourcing practice is the need to cut down on the costs of doing business. This decision is usually a very critical one because it entails analyzing its outcomes in terms of loss over the control of the service and the potential operational cost savings. To get the highest competitive advantages from outsourcing, a company must ensure it identifies the right areas where it can outsource without incurring huge losses (Nagurney & Li, 2016). Companies get more success from outsourcing business strategy than others because of the different choices and approaches used.
Mondelez International vs. Apple
Mondelez International is a confectionery, food and beverage company that is based in Illinois, but has business operations across the whole world. it must be noted that Mondelez International is a large multinational corporation, which employs 107,000 people. It is a giant in the production of snack foods globally, like Trident gum, Ritz crackers and Oreos cookies. This company outsources its services from other firms. For instance its information technology services are outsourced from the Electronic Data Exchange (EDS). Procurement work at this company is outsourced from Capgemini. Back office functions are outsourced from IBM. IBM provides the company with the various functional needs and manages its growth strategy. In a bid to further cut down overhead costs, this company engages in massive job outsourcing in regions away from the United States.
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Apple Inc. is a giant consumer electronics company that is based in the United States of America, but has business operations across the whole world. Apple Inc. has an effective outsourcing strategy for its products. After identification of its real key competencies, Apple Inc. decided to outsource its key production processes to the Asian market. The company has its factory plant set in Asia, while the main office in the United States simply concentrates on the issues of research and development. The high focus on its key competencies like research and development has enabled Apple to innovate some of the most effective electronic products in the market.
Both Apple and Mondelez outsource key processes to foreign countries where it is cheaper than within the United States of America. Moreover, both Mondelez and Apple have achieved significant cost savings from their outsourcing business practice. However, the benefits of outsourcing have accrued to Apple Inc. and given a sharp competitive edge more than the case for Mondelez. Therefore, the outsourcing business strategy has been successful for Apple when it comes to gaining competitive advantage more than Mondelez. The reason for this contrast in the outcomes of outsourcing in these two companies is the different approaches used in executing it as a business strategy. While Apple Inc. perfectly studies and identified its key competencies and areas of weakness before setting out to implement outsourcing, Mondelez seems to have just chosen to outsource virtually all functions without due diligence. Choosing key competencies have seen Apple remain with the critical functions like research and development, which it concentrates on and uses to innovate quality products in to the market. For Mondelez, it has outsourced virtually all key functions to different companies and there is no key competence it focuses on as a business organization. It is vital to, thus, note that outsourcing must be used strategically.
Denicolai, S., Strange, R., & Zucchella, A. (2015). The dynamics of the outsourcing relationship. In The Future Of Global Organizing (pp. 341-364). Somerville, MA: Emerald Group Publishing Limited.
Nagurney, A., & Li, D. (2016). Outsourcing Under Price and Quality Competition: Single Firm Case. In Competing on Supply Chain Quality (pp. 175-200). New York, NY: Springer International Publishing.