• Posted on January 23, 2024
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Assignment Sample on ASB-4413 International Strategic Management

Question 2

Business processes everywhere are expanding at an exponential rate all over the world. This makes it a necessity for firms to come up with that of a strategic plan that is going to be helpful for them in order to solve some of their major problems related to that of expansion. In this scenario organizations tend to have mainly two choices to manage their business processes.

Vertical Integration: This method is adopted by those firms who tend to maintain very strict quality standards. As per the opinion of Choi et al. (2018), expansion in business processes sometimes compels firms to purchase a huge number of raw materials or other products from that of other suppliers. In most cases it becomes difficult to come across a huge amount of these materials of reliable quality. Moreover, some kind of uncertainty is also associated if a supplier is willing to finalize a particular deal. In order to avoid this scenario firms, tend to expand upwards by allocating a certain section of their business to manufacture the required raw materials themselves.

Outsourcing: Outsourcing of various business processes is another important method that is adopted by various organizations to make handling of their various business processes in a much easier manner. In this method firms tend to allocate various routine tasks that are of relatively less importance to that of other companies at a much lower cost. As per the opinion of  Elhoushy et al. (2018), on the other hand various important functions that make an organization achieve an edge over that of other competitors are kept within the organizational control. This method is adopted by organizations who want to focus upon certain specific areas of manufacturing and quality standards.

Comparative transactional cost analysis between Vertical Integration and Outsourcing

Vertical Integration

Outsourcing

●      In implementing Vertical Integration there tends to be a requirement for some investment at the initial stage. Vertical integration trend to bring economies of scale at a later stage because cost control for another stage of business is ensured by this method (Espino-Rodríguez and Ramírez-Fierro, 2018). ●      In those scenarios where the focus is upon a long-term scenario, firms can adopt this method as it is next suited for a long-term scenario for that of manufacturing companies,

●      This method tends to be beneficial as some mundane and routine jobs of that of a particular organization is shifted to that other organizations mostly to that of a cheaper workforce of third world countries. ●      Outsourcing is beneficial from that of its initial stage of implementation and is cost effective as lower salaries and other such associated costs get lower.  However, this method cannot bring about long-term benefit as like that of economies of scale.

Table 1: Analysis of comparative transactional cost

(Source: Espino-Rodríguez and Ramírez-Fierro, 2018)

A manufacturing company has got to specifically integrate its various business processes in a proper way as compared to that of an organization that is engaged mainly with that of services. In a manufacturing organization this is important as the processes cannot move if one stage is not completed. Asset Specificity is extremely important as this helps firms in order to come into a proper conclusion regarding which method to adopt in this scenario. According to the opinion of Espino-Rodríguez, T.F. and Ramírez-Fierro et al. (2019), organizations who are flexible enough to convert their assets as well as that of various resources in a quick manner can go for outsourcing of certain business functions. Whereas those organizations that tend to have some sort of a reluctance in converting their business processes and allocating them to that of a third party can go towards a vertical integration approach. Business processes sometimes need to be kept on hold by firms when they are integrating their processes into a newer method. Manufacturing firms particularly need to integrate another method in a gradual manner rather than adopting a drastic step.

Advantages and Disadvantages

A manufacturing firm has got numerous functions that it needs to focus upon in order to function successfully. In these days of marketing publicity manufacturing organizations need to equally focus upon that of various services besides just manufacturing of their products. According to the opinion of Koch et al. (2019), there are certain services that are mainly associated with that of the Customer Support area that play a major role for a brand to maintain its brand image. A lot of staff has got to be recruited inn order to implement this method which creates a stress upon the finances of that of an organization. Besides separate office spaces have also got to be provided for this purpose whose costs are incurred by this organization. This becomes a huge stress for that of an organization that is still at the nascent stage and it tends to lose its focus from that of its primary area. Costs in this scenario can recur up in such a way that may make a new organization fall into a situation of debt trap as this kind of an organization generally lacks a proper market understanding.

Outsourcing in this scenario tends provide a great solution as in this case a deal can be done with that of another firm about a specific budget within which operations are to be done. The third-party firms tend to focus upon conducting customer support, taking up quality issues as well as that of other issues thereby leaving manufacturing firms to focus upon its main competencies. Major cost structure gets easily handled in this scenario.

In vertical integration a firm is actually expanding itself in its business processes. Only those forms that have a certain kind of financial stability within themselves can look forward to adopting this particular kind of method. As per the opinion of Montaseb et al.  (2018), shifting of the total supply champion bases within the organization means that huge amounts of strategic planning have to be made in the Operations sector. This means that in this stage a lot of men, materials as well as that of other resources are to be brought within the fold of this particular organization. This is not a very easy goal to achieve, but if achieved nothing cannot be better than this as it helps in diversification as well at later stages.

Question 4

Based on the case study it has been noted that company X is dealing with the Cement industry which operates its business activity in the global market. In this situation, it is quite necessary for the company to opt for an effective CSR strategy that increases the sustainability of business and the environment.  Moreover, as CSR activity of the business is a prime factor through business and organization can be able to boost financial performance of a business. In the current era of the market, CSR is a leading factor through which various stakeholders and investors can be attracted. Moreover, better stakeholder engagement can be possible through the implication of an effective CSR strategy business (Forbes.com, 2021). Being a multinational company, company X needs to add various CSR activities through which sustainability of the environment can be enhanced. Other than this, as this company deals with manufacturing cement its operational activity affects the environment to a great extent. Company X needs to support CSR strategy for various reasons such as brand differentiation, customer and employee engagement.

Brand differentiation: The brand value of a business product is a significant factor through which business productivity and profitability can increase. In the current era of the market, customers prefer this product and services which have a good brand image in the market. In this station, company X needs to opt for a strategy through which brand value of a product can be differentiated from other existing products CSR in this scenario emerged as leading factor through which Company X is supposed to differentiate its product (Igwe et al. 2018). Opting CSR strategy such as promotion of conservation of natural resources, reading carbon footprint and promotion of green environment increases brand value in the market.

Stakeholder engagement: Stakeholder engagement is quite necessary for the company through which sustainability in business for growth and development can be possible. Various external stakeholders such as creditors, customers, investors and shareholders are attracted through opting for an effective CSR strategy for business operation. Apart from this, the implication of CSR strategy in Company X increases internal stakeholder engagement such as employee, manager and owner.

Based on this it has been noted that company X needs to support CSR initiative as it enhances overall performance in the world market.  The effective implication of CSR initiatives varies on various aspects of business such as company strategy, vision, and organizational goal. In this situation, it is quite necessary for the decision-making body of company X to considered these factors while implicating the CSR strategy and its initiative. However, companies faced various issues for opting for an effective CSR strategy such as lack of resources, strategic vision, high regulatory standard and lack of measurement system may create constraints while supporting CSR initiatives in the business model (Turner et al. 2019). Apart from this, these initiatives sometimes affect business productivity as well as profitability which are not suitable for the financial health of a business. These issues create barriers to the proper implication of CSR initiatives and the business operational activity.

Corporate Social Responsibility (CSR) is that particular area that is getting huge importance across various industries of that of the business world. Corporate Social Responsibility is a way through which a firm can expand itself beyond just its gown profiteering motives. This phenomenon is getting so much importance in that current perspective that organizations that are not able to participate in CSR tend to develop a bad image cv for themselves. According to the opinion of  Munjal et al. (2019), every business organization is a part of this society so they also have to follow certain kinds of tasks for this society as well. Business processes that bring profits to that of any organization tend to come from that of this society. So, it is essential that these organizations try to give back something in return from what they have received from that of their society.

This is specifically true for those organizations that are operating in that cement industry or that of other similar kinds of sectors. Cement companies are an integral part of development that is going on in different parts of the world. Theory is like some of the torchbearers for development. So, it becomes specifically essential from their part to participate more in that of various developmental processes. This world is hugely divided into a wide demarcation between the rich and the poor. There are some sections of the population who live their lives wrapped in luxury where there are other people who find it quite difficult to arrange even two square meals a day. In this context various organizations associated with that of developmental sectors like that of the cement industry can contribute something more to reduce this gap from their part as much as it is possible from their part.

Figure 1: Factors of CSR

(Source: Pereira et al. 2019)

A major problem that tends to affect various people of different backward and underdeveloped areas of the world tend to be a general lack of housing and sanitation facilities. According to the opinion of Pereira et al. (2019), cement industries can play a key role in this scenario in terms of arranging for proper housing as well as such other basic necessities. Company X can suffer some initial difficulty in finding out those proper channels through which they can take up their humanitarian work. Some people may take undue advantage of this situation and take help of the various resources of this organization. In this kind of a situation people who are actually in need of help tend to suffer as they do not get what they need., Moreover money and resources are spent up by this kind of organization yet it does not tend to get counted under that of Corporate Social responsibility. It is extremely essential for various organizations like that of Company X to chalk out the scenario in which it is going to undertake its business operations in order to come up with that of a conducive plan.

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References

Journals

Barnett, M.L., Henriques, I. and Husted, B.W., 2020. Beyond good intentions: Designing CSR initiatives for greater social impact. Journal of Management, 46(6), pp.937-964. Available at: https://journals.sagepub.com/doi/abs/10.1177/0149206319900539

Choi, J.J., Ju, M., Kotabe, M., Trigeorgis, L. and Zhang, X.T., 2018. Flexibility as firm value driver: Evidence from offshore outsourcing. Global Strategy Journal, 8(2), pp.351-376. Available at: https://onlinelibrary.wiley.com/doi/abs/10.1002/gsj.1181

Elhoushy, S., Salem, I.E. and Agag, G., 2020. The impact of perceived benefits and risks on current and desired levels of outsourcing: Hotel managers’ perspective. International Journal of Hospitality Management, 91, p.102419. Available at: https://www.sciencedirect.com/science/article/pii/S0278431918311411

Espino-Rodríguez, T.F. and Ramírez-Fierro, J.C., 2018. Outsourcing performance in hotels: Evaluating partnership quality. Sustainability, 10(8), p.2766. Available at: https://www.mdpi.com/324104

Igwe, P.A., Icha-Ituma, A. and Madichie, N.O., 2018. The evaluation of CSR and social value practices among the UK commercial and social enterprises. Entrepreneurial Business and Economics Review, 6(1), pp.37-52. Available at:http://researchonline.ljmu.ac.uk/id/eprint/9799/1/326-2173-1-PB.pdf

Ishizaka, A., Bhattacharya, A., Gunasekaran, A., Dekkers, R. and Pereira, V., 2019. Outsourcing and offshoring decision making. International Journal of Production Research, 57(13), pp.4187-4193. Available at: https://www.tandfonline.com/doi/abs/10.1080/00207543.2019.1603698

Koch, C., Bekmeier-Feuerhahn, S., Bögel, P.M. and Adam, U., 2019. Employees’ perceived benefits from participating in CSR activities and implications for increasing employees engagement in CSR. Corporate Communications: An International Journal. Available at: https://www.emerald.com/insight/content/doi/10.1108/CCIJ-12-2017-0123/full/html

Montaseb, M.M., Ragheb, M.A., Ragab, A.A. and Elsamadicy, A.M., 2018. The Affect factors of SMEs’ outsourcing decision making. The Business & Management Review, 9(3), pp.271-278. Available at: https://cberuk.com/cdn/conference_proceedings/2019-07-14-10-08-27-AM.pdf

Munjal, S., Requejo, I. and Kundu, S.K., 2019. Offshore outsourcing and firm performance: Moderating effects of size, growth and slack resources. Journal of Business Research, 103, pp.484-494. Available at: https://www.sciencedirect.com/science/article/pii/S0148296318300146

Pereira, V., Munjal, S. and Ishizaka, A., 2019. Outsourcing and offshoring decision making and its implications for businesses-A synthesis of research pursuing five pertinent questions. Journal of Business Research, 103, pp.348-355. Available at: https://eprints.whiterose.ac.uk/149842/3/Outsourcing%20and%20Offshoring%20Decision%20Making%20and%20its%20Implications%20for%20Businesses.pdf

Shrestha, P., 2020. Outsourcing Practices: Benefits and Pitfalls as Perceived by Professionals and Managers. Pravaha, 26(1), pp.135-140. Available at: https://www.nepjol.info/index.php/pravaha/article/view/41868

Timbate, L. and Park, C.K., 2018. CSR performance, financial reporting, and investors’ perception on financial reporting. Sustainability, 10(2), p.522. Available at: https://www.mdpi.com/264040

Turner, M.R., McIntosh, T., Reid, S.W. and Buckley, M.R., 2019. Corporate implementation of socially controversial CSR initiatives: Implications for human resource management. Human Resource Management Review, 29(1), pp.125-136.Available at: https://e-tarjome.com/storage/panel/fileuploads/2019-05-28/1559039887_E11191-e-tarjome.pdf

Yadav, R.S., Dash, S.S., Chakraborty, S. and Kumar, M., 2018. Perceived CSR and corporate reputation: the mediating role of employee trust. Vikalpa, 43(3), pp.139-151. Available at: https://journals.sagepub.com/doi/abs/10.1177/0256090918794823

Website

Forbes.com, 2021 reason for initiating CSR Available at: https://www.forbes.com/sites/csr/2012/02/21/six-reasons-companies-should-embrace-csr/ [Accessed on 14 January 2022]

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