Free Essay

Vertical Integration vs Outsourcing

In: Business and Management

Submitted By cdrmujib
Words 1736
Pages 7
Vertical Integration vs Outsourcing of Zara
Written by

Mohd Rahman
October 04, 2014

“The original business idea was very simple. Link customer demand to manufacturing, and link manufacturing to distribution. That is the idea we still live by” -- Jose Maria Castellano Rios, Inditex CEO.

1

Introduction to Zara
Zara is an icon in the fashion world and largest international fashion designing and manufacturing company. Zara is the flagship chain store of Inditex Group owned by Spanish tycoon Amancio Ortega, Inditex is one of the world's largest fashion retailers with eight brands and over 6,460 stores throughout the world (Ref-1). Headquarter of the group is in Coruña, Spain where the first store of Zara was launched in 1975. This paper will analyse the company and try to link its activities with supply chain strategy of vertical integration and outsourcing. Later will come to a conclusion that Zara is vertically integrated with justification and made recommendation for further improvement. Definition of Vertical Integration In strategic management, the term vertical integration describes a style of management control, when a company expands its business into areas at different points of the same production path. Vertically integrated companies in a supply chain are united through a common owner. Usually each member of the supply chain produces a different product or services, and the production combine to satisfy common need. In the following paragraph I will try to highlight the organization and decision-making process of ZARA in short

Brief Organization and Decision-Making Process of ZARA
The followings are the most critical factors of Zara’s operation: Decision Making: The decision making process is based on judgement of employee instead of relying on small set of decision makers; the majority of decisions are made by store managers and designers Target market: Zara’s target market is very broad because they do not define their target by segmenting ages and lifestyles as traditional retailers do. Zara’s

2

target market is a young, educated one that likes fashion and is sensitive to fashion Procurement : Establishing merchandise sources, policies and practices. Retail Environment: Zara’s managers and sales associates are in charge of transmitting the sales analysis, the product life cycles, and the store trends to the designers. This allows the designers in Spain to develop the right products within the season to meet consumer demand Speed & Decision Making: Zara responds quickly to demands. Store managers have more authority than other stores such as deciding the garment to be put on sale. ‘Commercials’ decide which garments to be produced & sold. Have great deal of autonomy as higher management doesn’t second guess their decisions Ordering & fulfillment: Manual inventory management based upon direct

observation & store manager judgment, Use of PDA’s, Infrared, dial-up modem for order management, Process is complicated & divided in various steps such as breaking order into segments and beaming these segments to concerned person who then filled up their part Design & manufacturing: Maximum time from conception to distribution centre is three weeks. Prices and services: Zara product price is affordable , provides prepurchase service, postpurchase service, ancilary service. Store atmosphere : Zara store’s are identical and designed by own team, stays update through the website. Marketing, merchandising & advertising: Zara is broadly and deeply assorted. Very low spending on marketing (Only .03%) while heavy spending on stores, No

3

‘classics’ clothes but clothes with very short lifespan forcing customers to buy it on the spot, visit stores often Location and distribution : Zara locates themselves in central business

districts with as many outlets as possibe. Zara has centralized distribution facility, It’s internally or externally produced merchandise goes to the distribution center. Centralized control helps to, avoid misunderstanding or conflicts, time scheduling, focused on one rather than managing several different time schedules. Online: 26 Online markets, own information technology team, presence in newsletter, face book, instagram, twitter, pinterest, YouTube, apps (Ref: www.zara.com) Human Resource: Zara has a well motivated team that work exclusively to achieve goal. Only one staff left the job in 10 years. Information Systems at La Coruna, Factories, and Stores & DC’s: Accelerated IT software to transfer spesific communication and design”. Main features are: • • • • • • • Several IT systems are used to prepare orders, distribute them over internets & collect them Factories had simple applications which provided information about order & due dates Distribution centre had largest automation with complete tracking of SKU’s Stores used PDA’s which communicate to La Coruna via modems PDA’s were upgraded constantly while POS terminals remained same for over decade! POS used DOS as operating system & its installation & maintenance was very simple No real time feedback from stores to Zara’s headquarters

4

• •

Transmission required copying into floppy disc & then sending it using internet which happened at the end of the day No dialogue between PDA & POS inside store or between two stores

ZARA Business Model VS H&M: H&M, a Swedish clothing firm does everything through outsourcing. H&M doesn’t own any factories; instead H&M buys clothes and other items through an abundance of detached suppliers. On the other hand the business model of Zara is vertically integrated. Zara controls every step of the value chain; only clothes with a longer shelf/fashion life time are outsourced. Answer for Questioners - 1 It is not easy to find “only the best way” in this changing world. From the definition of vertical integration, I am sure that Zara has adopted itself vertically to a high degree. To govern the company Zara used its capabilities and resources through a carefully chosen strategic control and risk management techniques with effective coordination in all level. Because Vertical Integration worked as the main driving force behind the above success story of Zara. Answer for Questioners - 2 Decision making structure of Zara is flat. Decision making is decentralized which allow Zara to respond quickly to the changing market change and meet the customers’ needs. Low level decisions are also integrated to make higher level of decisions in Zara. The decision making process is based on judgement of employee instead of relying on small set of decision makers; the majority of decisions are made by store managers. Fast Fashion and production is the critical success factor for Zara. This indicates that Zara’s situation completely supports their supply chain strategy. Answer for Questioners – 3 Before answering the question of this section I did a supply chain process mapping and SWOT Analysis of ZARA as follows:

5

6

SWOT Analysis of ZARA. Strength: Vertical integration , high brand image and value, strong distribution channel, spot emerging trend and react quickly, inexpensive but fashionable, customers ‘comments and feedbacks, effective communications , product development, business efficiency, own information technology team, 26 online markets, presence in newsletter, facebook, instagram, twitter, pinterest, youtube, apps ( Ref: www.zara.com)

Weakness: Does not advertise, weak online presence, centralized distribution system, low outsourcing Opportunities: Online market, expansion plan, outsourcing, growing apparel market in Asia
Threats: Euro centric production, threat of new entrants, economic recession, global and local competitors, no advertising campaign, market entry barriers by governments

Recommendation: On the basic of SWOT and supply chain process mapping analysis it can be easily understood that Zara is properly organized to vertical integration. However following change and strategies are recommended: a. Zara has started online market from 2010. Till September 2014 it has open 26 markets online. Zara should consider availing the opportunities, drive away weaknesses and reduce the threats as mentioned above. b. Vertically integrated supply chain ensured constant introduction of new items with short lead times. Based upon commercial’s guess this need not be accurate c. Although the existing system is working fine, Zara has been recommended to upgrade its POS system in order to cope with future changes. d. Introduce modern information systems to maintain the flaws prevailing in current Supply Chain, Customer Relations and Resources Planning. It has also been suggested to implement other Information Systems to make its performance more effective and efficient.

7

e. New style can appear very quickly and Zara needs to respond quickly to the demands of their fashion conscious customers. f. Designers needs to more and more creative so that it can maintain its competitive advantage to be “the fast fashion”. g. Should use robotic technology in the production line instead of keep using the old ones. h. Should make more distribution centres in the strategically located points so they will enable Zara to be more faster, effective, and efficient in distributing their products to the retailers. i. Shouls increase at least 5% of the revenue for advertising to counter its competitors as they are becoming more competitive and demands are declining.

Reference:
1. Inditex Group http://www.inditex.com/en/our_group 2. http://en.wikipedia.org/wiki/Zara_(retailer) 3. www.zara.com 4. http://www.zara.com/ba/en/newsletter-c11110.html 5. Zara Online http://www.inditex.com/en/media/news_article?articleId=154008 6. Annual report 2013

http://www.inditex.com/en/investors/investors_relations/annual_report

Exhibits:

1. Beside study material provided by course other documents, websites, annual reports were studied and main parts are attached in the following pages below:

8

9

10

Evolution of main indicators http://static.inditex.com/annual_report_2013/en/year-review/evolution-of-main-indicators.php Turnover Sales (in billions of euros)

2013 16.724

2012 15.946

2011 13.793

2010 12.527

2009 11.048

Financial structure Net assets attributable to the parent company Net financial position (in billions of euros)

2013 9.246 4.055

2012 8.446 4.097

2011 7.415 3.465

2010 6.386 3.427

2009 5.329 2.380

Financial and management ratios ROE (Return On Equity) ROCE (Return On Capital Employed)

2013 27% 35%

2012 30% 39%

2011 28% 37%

2010 30% 39%

2009 26% 34%

Results Operating profit (EBITDA) Operating profit (EBIT) Net profit Net profit attributable to the parent company (in billions of euros)

2013 3.926 3.071 2.382 2.377

2012 3.913 3.117 2.367 2.361

2011 3.258 2.522 1.946 1.932

2010 2.966 2.290 1.741 1.732

2009 2.374 1.729 1.322 1.314

11

Other relevant information Number of stores Net openings Number of markets with commercial presence Number of employees

2013 6 340 331 87

2012 6 009 482 86

2011 5 527 483 82

2010 5 044 437 77

2009 4 607 343 74

128 313 120 314 109 512 100 138 92 301

12

Similar Documents

Free Essay

Economics

...ECONOMICS OF INDUSTRY Companies of firms in the same industry are bound to fall along the same vertical chain, this is the chain wherein some bit of value is being added to the product at each step. Vertical integration means the firm has complete control over its inputs, production and outputs along the value chain. The different firms only differ in terms as in how many links are present in their vertical chain. Adopting vertical integration for a firms means reduction of transportation costs as common ownership means closer geographical areas, the supply chain is more coordinated, barriers to entry are there making it hard for new firms to enter the market, core competency is expanded and access to uneasy distribution channels is gained. I think it can be in a firms interest to outsource its components from competitors rather than producing in-house because (Make Vs Buy Decision) this way the firms can gain economies of scale which is a good amount of saving in costs gained by the increased level of production (the firm being a supplier) whereas in-house production doesn’t gain much economies of scale as the demand would be little. The firm becomes obedient and efficient as they must follow the rules and efficiency as is in the entire market. Buying from the market improves flexibility but some disadvantages of the buy decision are the search costs, incomplete contracting which is transaction costs- under the contracts between parties only certain remedies are......

Words: 1150 - Pages: 5

Premium Essay

Inventec

...Assignment #2 Adam Ohanesian Email: Adam.Ohanesian@nichols.edu Table of Contents I. Why Inventec is not very profitable a. Industry competition b. New entrants c. Bargaining power II. Drivers of average profitability of the Original Design and Manufacturing industry d. Process of manufacturing products costs e. Low cost distribution III. Key factors Inventec needs to manage to earn above-average profits f. Comply with product standards and quality assurance g. Lower operating costs h. Differentiation IV. Profits of Indian software industry vs. Chinese ODM industry i. Growth rate j. Higher bargaining power k. Global outsourcing l. Competition V. Strategic advice for Inventec to improve profitability m. Change sectors to software development n. Vertical integration 1. Despite its growth and size, why is Inventec not very profitable? Inventec is not very profitable for a few reasons, first being the industry competition. There are many large competitors such as Asustek, Compal, and Quanta who all have larger sales revenues. Also, as OEMs usually outsource some of their technology, EMSs and ODMs are competing for the same clients more and more. The second reason Inventec is not very profitable is the threat of new entrants. Taiwan has a high rate of new entrants for instance. A business that wants to start in the ODM industry can just step right in......

Words: 938 - Pages: 4

Premium Essay

Strategic Management

...contract was the last major step of the restructuring of the groups supply chain, which has been implemented in 2004 (www.lego.com). It is evident, that cost savings have been the driving force for the outsourcing agreement with Flextronics. At the beginning of the arrangement it was a win-win-situation. LEGO had a professional partner and Flextronics was able to diversify its products and get knowledge about plastics for further market diversification. Given the size and complexity of the assignment, preliminary experiences with this arrangement were fairly positive. However, they also clearly demonstrated the challenges that face a company moving from vertical integration to a network constellation (Pedersen, 2012). Nonetheless LEGO had to experience, that the outsourcing to Flextronics included some challenges. It was difficult to transfer production knowledge from LEGO to Flextronics. Whereas LEGO’s workers knew that 60% of the production took place in the second half of the year, Flextronics was used to a more stable and predictable environment. Therefore, it was difficult to conduct the process effectively, document the production and utilize capacities. Furthermore, trust and misconceptions lead to problems. It was problematic for LEGO to coordinate and control the outsourcing partner. Though there had been various forecasts the collaboration did not fulfil the initial expectations (Pedersen, 2010). What Lego Expected 1. Minimized production cost fluctuation......

Words: 637 - Pages: 3

Premium Essay

Implementing Global Strategy

...Multidivisional Structure • • • • Enhanced corporate financial control Enhanced strategic control Growth Stronger pursuit of internal efficiency 13 - 4 Problems in Implementing a Multidivisional Structure • Establishing the divisional-corporate authority relationship • Distortion of information • Competition for resources • Transfer pricing • Short-term R&D focus • Duplication of functional resources 13 - 5 Structure, Control, Culture, and Corporate-Level Strategy • Unrelated diversification – Easiest and cheapest strategy to manage – Allows corporate managers to evaluate divisional performance easily and accurately – Divisions have considerable autonomy – No integration among divisions is necessary 13 - 6 Structure, Control, Culture, and Corporate-Level Strategy (cont’d) • Vertical integration – More expensive than unrelated diversification – Multidivisional structure provides necessary controls to achieve benefits from the control of resource transfers – Must strike balance between centralized and decentralized control – Divisions must have input regarding resource transfer – Managed through a combination of corporate and divisional controls Copyright © Houghton Mifflin Company. All rights reserved. 13 - 7 Structure, Control, Culture, and Corporate-Level Strategy (cont’d) • Related diversification – Multidivisional...

Words: 783 - Pages: 4

Premium Essay

Ford Motor Company Supply Chain Strategy Case Report

...supply chain strategy of Virtual Integration and strategies from companies like Dell. Although there are several key differences between the companies, Dell’s virtual integration strategy can be applied to Ford’s supply chain operation. A modification of the virtual integration system currently used by Dell could be applied to Ford’s dependent supplier base, distribution system, dealerships and divisions. Special care will need to be taken to address the unique dependency of our custom Tier 1 supplier. The management of lower tier suppliers of general or generic components would be more effectively suited by the standard procedures used by Dell. If we at Ford could find a solution to the obstacles of virtual integration, it could make our supply chain run smoothly with less bottlenecking, inventory, and better overall performance. Managers could overcome the complex and error-prone manual process of forecasting and procuring parts which would result in reduced OTD lessen costs and enhance customer satisfaction. ISSUE IDENTIFICATION Senior Executives have asked how Ford should use the emerging information technologies and ideas from new high-tech industries to change the way we interact with Suppliers. We must find ways to improve the Supply Chain management and to increase shareholder value and Supply Chain responsiveness. Specifically we are looking at how Dell manages their Supply Chain and incorporates the virtual integration strategy. A decision is required...

Words: 3202 - Pages: 13

Premium Essay

Project Finance

...a critical analysis of the contribution of the existing body of empirical literature is conducted. In recent years, researchers have continued to develop and extend TCE. Williamson (1991b) introduces the shift parameter framework which investigates how the optimal choice of governance changes in response to dynamics in the institutional environment. Nickerson (1997) develops the positioning-economizing perspective arguing that decisions regarding market position, resource investments, and governance mode are interdependent and determined simultaneously. A number of authors came up with an increasing interest in relational institutional arrangements arguing that TCE may overstate the desirability of complex long-term contracts and vertical integration in exchange settings where a substantial hold-up potential is present. JEL Codes: Keywords: D23, L22 Transaction cost economics, discriminative alignment, theories of the firm, shift parameter framework, positioning-economizing perspective, structural form model, empirical literature Dresden University of Technology, Department of Business and Economics, Chair of Energy Economics and Public Sector Management, D-01062 Dresden. The usual disclaimer applies. Corresponding author: contact@sophia-ruester.de, URL: http://www.sophia-ruester.de. 1 1 Electronic copy available at:...

Words: 20511 - Pages: 83

Premium Essay

It and the Changing Social Division of Labor

...IT and the Changing Social Division of Labor: The Case of Electronics Contract Manufacturing[1]GLOBAL PRODUCTION AND THE INTERNATIONAL DIVISION OF LABOR IN THE AGE OF THE INTERNET Boy Lüthje Institute of Social Research University of Frankfurt Senckenberganlage 26 D-60325 Frankfurt/M Germany Telephone: 069/756183-30, -43 Fax: 069/747709 E-Mail: luethje@soz.uni-frankfurt.de Draft paper for conference Transforming Enterprise Department of Commerce Auditorium Washington, D.C., January 27-28, 2003 Draft! Comments and suggestions welcome, but please do not quote! The impact of information technology on business, economy and society cannot be examined without an analysis of the profound changes in the productive structure of global capitalism. In the electronics industry, a new model of outsourced manufacturing has emerged as the centrepiece of globalized production networks: Contract Manufacturing (CM) or Electronics Manufacturing Services (EMS). This form of network-based mass production is closely linked to the disintegration of the value chain and the emergence of the “Wintelist” (Borrus and Zysman 1997) model of competition and the rise of “fabless” product design companies in key sectors of the IT industry. In contrast to the general perception of the “informational economy” (Carnoy et al 1993, Castells 1996) as service- or science-based, the rise of the CM-model demonstrates that manufacturing still matters in the "new economy" (Cohen and Zysman......

Words: 7914 - Pages: 32

Premium Essay

Strategic Management Poster

...BarCharts, Inc.® WORLD’S #1 QUICK REFERENCE GUIDE DEFINITIONS Strategic Management is a process for conducting the entrepreneurial activities of a firm for organizational renewal, growth, and transformation. The major tasks are: (1) set a mission and goals, (2) assess the environment, (3) appraise company capabilities, (4) craft the strategy, (5) implement the strategy, and (6) evaluate and control the strategy. Business Policy is a set of prescribed and discretionary statements, limiting actions of individuals in the firm, as set forth in directives and guides. Mission is the reason for which the firm exists, and what it will do. Basically, it describes the products/services to be supplied, the markets to be served, and the technology applied (if important). Vision Statement answers the question, What do we want to become? Goals express the aspirations of the firm, general ends that cannot be measured. Ex. “In unrelenting pursuit of perfection.” Objectives are specific targets to be accomplished by a specified time. Ex. “Profits will grow at the rate of 5% annually for the next five years.” Long-term objectives (5 years or more) are strategic objectives and define the desired character of the company, at the specified time. Strategy is simply the means or general actions to be taken to achieve long-term objectives. Strategic management is the work of the General Manager. General Manager is a person who is responsible for a profit center, as opposed to a functional......

Words: 3711 - Pages: 15

Premium Essay

Coca Cola Company

...Royce Echarry Assignment 3 The Coca Cola Company is a global business that operates on a local scale, in every community where the company do business. There able to create a global reach with local focus because of the strength of Coca Cola System which comprises company and more than 250 bottling partners. The Coca Cola is not a single entity from legal or managerial perspective and the company does not own or control all of our bottling partners, while many view the company as simply Coca Cola the system operates through multiple local channels. The company manufactures and sells concentrates beverages bases and syrups to bottling operations, owns the brands and it’s responsible for consumers brand marketing initiative. A transnational corporation is any enterprise that undertakes foreign direct investment owns or controls income gathering assets in more than one country, produces goods or services outside its country of origin or engages in international production. For example Coca-Cola Company is a transnational corporation because they have proven successful in their international operations and are one of the most recognized brands in the world. Coca-Cola has used each of the six strategies. Coca-Cola Company was very successful in implementing strategies regardless of the country. The company has 6 keys of strategies necessary for firms to be successful when expanding globally. Differentiation strategy is defined as a marketing technique used by a manufacturer......

Words: 1619 - Pages: 7

Premium Essay

Management Accounting

...Topic 1: Analysing the external environment Strategy – direction and scope of an organisation over a long term, which achieves the advantage of changing environment through its configuration of resources and competencies with the aim of fulfilling stakeholder expectations. Direction – Mission, vision, and course Scope – broad or narrow strategy Long term – 5-10years Environment – General environment & industry environment Resources – tangible and intangible Capabilities – capacity of organisation to integrate and deploy resources to achieve an obj. Stakeholders – society, suppliers, creditors, shareholders, employees, customers Levels of strategy * Corporate * Business General environment (Macro) – broad collection of factors that directly or indirectly have the potential to influence every firm in ever industry within the economy PESTDG framework * Identify trends * Explain trends * State if opportunity or threat * Explain why is it an opportunity or threat Segment | Trends | Political / Legal | Changes to workplace relations, carbon tax law | Economical | Rising interest rates, GFC, inflation rate, unemployment rate | Socio-cultural | Climate change, increase in casual workers, greater concern for health | Technological | Wireless communications, cloud computing, growth in hand held devices | Demographical | Aging population, growing disparity in income level | Global | Growth in Chinese and Indian economy,......

Words: 3237 - Pages: 13

Premium Essay

Huawei Boundaries - Tce Approach

...approach History The history of Transactional Cost of Economics (TCE) has its roots somewhere during the second world’s war, when Coase (1937) was trying to find some practical explanations related to the economic theory existing at that time. The differences between the perception of a firm or company and its correspondence in the real world have been assessed, making an empirical analysis of possible attributes that can influence their development in close relation to its internal factors and, and the market interactions as well. Following Coase’s study “The Nature of The Firm”, many other economic papers and theories have emerged in the next decades, leading to the development of different concepts like TCE, vertical boundaries of a company, interactions between company and market and optimal decision for the “make or buy” dilemma as it is mentioned also by (Lafontaine and Slade 2007). Contributions of Coase and Williamson The basics for TCE development have been defined by Coase (1937), making an argumentation in favor of lower possible cost of assessing some activities within a company rather than acquiring them from the market by a set of more costly transaction. Also, he has argued that preferential treatments a firm can get from external environments (like governments), combined with the possibility of reducing the market exchange transaction costs (by directing some resources through a defined organization) can be seen as the main reason...

Words: 1971 - Pages: 8

Premium Essay

Network Management Summary

...Network: any interconnected group or system, it comprises nodes and links. Networks are long-term, relationships between interdependent economic actors which are seeking for competitive advantage by forming the cooperation. More complex than alliances; bilateral relationship doesn’t qualify as network. From left to right: Market: “buy”. Network: jv, licensing, outsourcing, equity share, contractual cooperation, joint R&D. Hierarchy: “make” From left to right: Market: “buy”. Network: jv, licensing, outsourcing, equity share, contractual cooperation, joint R&D. Hierarchy: “make” Types of Networks: X & Y: X: Alliances between partners with complementary skills/strengths “closing the gap”. Y: Alliances between partners with mutually reinforcing resources/skills/competences “critical mass alliance”; by joining forces you reach a critical mass. Horizontal, vertical & lateral cooperation: Horizontal: Companies within the same position of the value chain cooperate (e.g. alliance between airlines) Vertical: companies from different positions within the value chain cooperate (eg. Buyer supplier relationships along the supply chain) Lateral: across industries, different players from different industries. Stable & Dinamic: Stable: platform for cooperation. Dinamic: project-based. Virtual factory: dynamic, order processing. Competition: Networks compete to each other; network is the compeititive ...

Words: 4712 - Pages: 19

Premium Essay

Hcl Technologies

...buy with a price target of `587 i.e (15x FY13e Adj. EPS of `36.62 + value of investments per share of ` 37.5). KEY HIGHLIGHTS ■ HCLT grew faster than Industry: Indian IT exports grew at a 5-year CAGR of 23% from $18bn in FY2005 to $50bn in FY2010. HCLT revenues grew at a 5-year CAGR of 29% from $764mn in FY2005 to $2705mn in FY2010. ■ Axon acquisition adds value: Prior to the acquisition of Axon in 2008, about 11% of HCLT’s revenue came from EAS. With the acquisition of Axon, HCLT’s revenues from enterprise solutions increased to more than 20%. ■ Gaining market share in ADM & IMS space: HCLT’s performance has been particularly strong in deals with bundled ADM and IMS. With the rising traction in restructure/renewal of global outsourcing deals in ADM and IMS, we expect the company’s deal flow to remain strong giving boost to overall revenue. ■ Multiple levers for margin expansion: Falling profitability has been a concern for HCLT for past few quarters. Going forward, we believe that the margins will pick up due to SG&A leverage, improving utilisation and better profitability of BPO business. Also, the management...

Words: 3896 - Pages: 16

Premium Essay

Vertical Integration

...1.  Discuss the concept of vertical relations between firms and present a case study to illustrate it.  This paper will be looking at vertical relations between companies, putting an emphasis on supply relations, vertical integration and hybrids, illustrating the theory with multiple examples in order to better explain the concepts. Vertical relations refer to a logical and natural association between two or more entities as well as their relevance to one another and the linkages in between. This concept can be easily transposed into the business world, as the interdependence amongst companies is a state of fact in the vast majority of cases. As a matter of fact, it is a general truth that companies only achieve self-sufficiency after integrating all links of the supply chain. Even so, there are still operations that need to be outsourced due to a wide variety of reasons (lack of certain competences/”know-how”, geographical restraints, financial feasibility, time concerns, etc.). More precisely, vertical relations refer to the rapport between two companies in the sequence along the value chain, where there can be one (or multiple) upstream company and multiple (or one) downstream companies. Although the typical characterization of the rapport between a company and the market is a direct one (where the firm sells directly to the end consumer), it is generally not the case. In the most familiar scenarios it is considered that the producer would......

Words: 5083 - Pages: 21

Premium Essay

Management Stratergy

...Contents Preface Acknowledgments ix xiii PART ONE OVERVIEW OF STRATEGIC MANAGEMENT 1. Strategic Management The Nature and Value of Strategic Management Dimensions of Strategic Decisions 4 Formality in Strategic Management 9 Benefits of Strategic Management 11 Risks of Strategic Management 11 The Strategic Management Process 11 Strategic Management as a Process 16 Summary 18 Key Terms 19 Questions for Discussion 19 2 3 PART TWO STRATEGY FORMULATION 2. SM_Prelims.indd 17 Company Mission What is a Company Mission? 23 The Need for an Explicit Mission 24 Formulating a Mission 24 Basic Product or Service; Primary Market; Principal Technology Company Goals: Survival; Growth; Profitability 26 Company Philosophy 28 Public Image 29 Company Self-Concept 33 Newest Trends in Mission Components 33 An Exemplary Mission Statement 35 Boards of Directors 37 Agency Theory 38 22 25 2/8/2012 10:17:09 AM Contents How Agency Problems Occur 39 Problems That Can Result from Agency 39 Solutions to the Agency Problem 40 Summary 41 Key Terms 41 Questions for Discussion 41 Appendix A: Company Vision 43 Appendix B: BB&T Vision, Mission, and Purpose 3. 4. SM_Prelims.indd 18 44 Corporate Social Responsibility and Business Ethics The Stakeholder Approach to Social Responsibility 52 The Dynamics of Social Responsibility 54 Types of Social Responsibility 57 Corporate Social Responsibility and Profitability......

Words: 1799 - Pages: 8