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Outsourcing
‘80% of the marketing department will soon be farmed out to third-party
suppliers’ Simms Marketing 6/3/2003
Motives for outsourcing
• Labour flexibility
• Unleash market forces
• Concentrate on core competences
• Transformational outsourcing
Core and peripheral labour-force
Atkinson 1984
Market forces• Competition for contracts encourages
– cost efficiencies– quality control– creative approaches
• breaks down restrictive practices• privatisation and ‘quasi-markets’ in the
public sector (Johnson and Scholes)
Strategic outsourcing(Johnson and Scholes)
• Value-chain decisions ‘make or buy’
• Identify core competences leading to competitive advantages
• Non-core functions can be farmed out to specialists who do them more cheaply or better
• But what is a really core competence?– Customer service? Processing? Marketing?
Transformational outsourcingMazzawi (2002) Business Strategy Review 13, 3
• Traditional o-s aimed at reducing cost
• Transformational aimed at improving performance and agility
• introducing a new business model or management approach
• contracting for competitive advantage
Dangers in outsourcingBarthemeley (2003) Academy of Mgt Excellence 17, 2
• Outsourcing the wrong activities
• Poor selection of contractors
• Poor contract terms
• Personnel issues
• Loss of control
• Hidden costs
• Lack of exit strategy
Outsourcing in MarketingSimms Marketing 6/3/03 pp22
• 1980s Advertising and Research outsourced to full service agencies
• 1990s FSAs compete with specialists – market competition forcing down costs– balance of power shifts to client
• More staff needed in-house to manage these relationships (IMC approach)
• Growth of direct marketing and customer relationship management
• expansion of in-house staff in these areas
What is core?
• Marketing strategy – you should not outsource the marketing brain
• Marketing services– arguably the most inefficient process in modern
business– long slow expensive chain of decision-making
New models
• Co-sourcing– marketing services activities pass to an agency
• In-sourcing– marketers recruited for short-term projects
• Surrogate marketing departments– for SMEs – define and implement strategy
Considerations in agency selectionHudson and Jackson in Pickton & Broderick Ch 16
• Viewpoint - objectivity
• Media solutions - bias/neutrality
• Expertise
• Management and Control
• Confidentiality
• Speed/Timing
• Cost
Implications• Emphasis changes from managing staff to
managing contracts/relationships
• Problems of training and development– people are dropped into operational roles earlier
• Concern that a smaller dept means less influence in the business
• Impact on creativity?
• Simms Marketing 6/3/2003• Hudson and Jackson in Pickton & Broderick Integrated Marketing Communications Ch 16• Barthemeley (2003) Academy of Mgt Excellence 17, 2
• Atkinson (1984) Flexible Modes of Organisational Structure
• Barthemeley (2003) Academy of Mgt Excellence 17, 2
• Mazzawi (2002) Business Strategy Review 13, 3
• Johnson and Scholes