Sourcing

or
Buying
 Basic Management Divisions

 Sourcing/Buying

 Marketing

 Sales
SOURCING
 DEFINITION AND HISTORY OF
SOURCING VS. COMPARABLE
STRATEGIES

 For centuries, sourcing has been founded

on concepts of trade within industries.
 Prominence among the British textile
industry during the 19th century.
 In the 70’s, it became prevalent in the
technological companies in US.
 payroll
 financial administration as a means
of streamlining activities
 DEFINITION AND HISTORY OF
SOURCING VS. COMPARABLE
STRATEGIES
 A firm engages in sourcing when it has
an outside entity perform a function (s)
for it.

 Off-shoring can be the same as sourcing

or not. It depends on who owns the
activity. When a firm moves part of its
domestic operations to another country,
it is termed an offshore activity.
Why need for Sourcing?
We can analyse the need of
sourcing on two Levels.

 Macro Level
 Micro Level
 Why need for Sourcing?
 Macro Level
 Shifting focus to strategic business
objectives.
 Transforming your business through
innovation
 Being agile and ready to respond to
market change (growth, diversities)
 Why need for Sourcing?
 Micro Level
 Reduction of cost
 Increasing accountability and improving
services.
 Access to world class capabilities.
 Shifting from relatively fixed to variable
costs.
 Why need for Sourcing?

 Micro Level
 Company does not have the capacity to
fulfill the demand of end user.
 Dont have the knowledge to produce the
product in house.
Sourcing
 Sourcing components have increased
progressively over the years
 Some industries have been sourcing for an
extended time
 Fashion Industry (Nike) (all manufacturing outsourced)
 Electronics Industry
 Cisco (major suppliers across the world)
 Apple (over 70% of components outsourced)
 A Framework for Make/Buy
Decisions
Product Dependency on Independent for Independent for
knowledge and knowledge, knowledge and
capacity dependent for capacity
capacity
Modular Sourcing is risky Sourcing is an Opportunity to
opportunity reduce cost
through sourcing
Integral Sourcing is very Sourcing is an Keep production
risky option internal
Hierarchical Model to Decide Whether
to source or Not

 Customer Importance
 How important is the component to the customer?
 What is the impact of the component on customer
experience?
 Does the component affect customer
choice?
How fast does Clockspeed
Component the component’s technology change
relative to other components in the system?
Hierarchical Model to Decide Whether
to source or Not
 Competitive Position
 Does the firm have a competitive advantage producing
this component?

 Capable Suppliers
 How many capable suppliers exist?

 Architecture
 How modular or integral is this element to the overall
architecture of the system?
 Benefits & Risks
 Economies of scale
 Aggregation of multiple orders reduces costs, both in
purchasing and in manufacturing
 Risk pooling
 Demand uncertainty transferred to the suppliers
 Suppliers reduce uncertainty through the risk-pooling
effect
 Reduce capital investment
 Capital investment transferred to suppliers.
 Suppliers’ higher investment shared between customers.
 Sourcing Benefits

 Focus on core competency

 Buyer can focus on its core strength
 Allows buyer to differentiate from its
competitors
The ability toflexibility
Increased better react to changes in customer demand
 The ability to use the supplier’s technical knowledge to
accelerate product development cycle time
 The ability to gain access to new technologies and
innovation.
 Critical in certain industries:
 High tech where technologies change very frequently
 Fashion where products have a short life cycle
 Sourcing Benefits
 Improved efficiency is one of the most important reasons
for which an organization would decide to outsource.
 Access to experts and specialists is another reason for
which firms choose to outsource some of their functions.
 Sourcing is a good way to achieve better control over
difficult or complex functions.
 Sourcing allows a company to improve its morale and
focus.
 Sourcing frees up the business to let the company focus on
its strengths.
 Sourcing Benefits
 Another great benefit that can be achieved through
outsourcing is the reduction of capital expenditures.
 Sourcing is also a good way to utilize resources that are not
available internally.
 Not only developed countries gain advantages from
outsourcing, but also developing countries do.
 Sourcing
Criticisms
 For just about every benefit of sourcing there is equal an
offsetting criticism. In fact, what can appear to be a benefit
can turn into a criticism, depending on the business case
and implementation process. This dichotomy can make it
difficult for businesses to make the correct decision whether
or not to outsource.
 First and foremost is a joint criticism of outsourcing, shared
by management and consumers, the concern that the quality
of performance of the outsourced service will not meet the
level of expectations that the company performed and the
customers grew accustomed to.
 Sourcing Risks
Loss of Competitive Knowledge

 Sourcing critical components to suppliers may

open up opportunities for competitors

 Sourcing implies that companies lose their ability

to introduce new designs based on their own
agenda rather than the supplier’s agenda

 Sourcing the manufacturing of various

components to different suppliers may prevent
the development of new insights, innovations,
and solutions that typically require cross-
functional teamwork
 Sourcing Risks
Conflicting Objectives
 Demand Issues
 In a good economy
 Demand is high
 Conflict can be addressed by buyers who are willing to
make long-term commitments to purchase minimum
quantities specified by a contract
 In a slow economy
 Significant decline in demand
 Long-term commitments entail huge financial risks for
the buyers
 Sourcing Risks
Conflicting Objectives
 Product design issues
 Buyers insist on flexibility
 would like to solve design problems as fast as
possible
 Suppliers focus on cost reduction
 implies slow responsiveness to design changes.
Sourcing Risk
Political implications
 The biggest concerns about sourcing always seem to be
about jobs and competitiveness.

 Research and statistics have indicated startling numbers that

3.3 million U.S. jobs are expected to be lost overseas by
2015, according to a recent report by Forrester Research.
 Sourcing Risk
Political implications
 Similarly, according to Deloitte consulting, 2 million jobs
will move from the United States and Europe to cheaper
locations in the financial services business alone.

 Frontline World reported that over half of the fortune 500

companies have moved jobs offshore, including famous
names such as Oracle, Dell, HBSC, Delta Airlines,
Novartis, J.P. Morgan Chase, Hewlett Packard, American
Express, and more are expected to follow.
 Outsourcing Risks
Political implications

 Projected numbers of U.S. jobs to move overseas by

2015 in various fields are as follows:
 Management 288,281
 Business 348,028
 Computer 472,632
 Architecture 184,347
 Life Sciences 36,770
 Legal 76,642
 Art, design 29,564
 Sales 226,564
 Office 1,659,310
 *Source: Forest Research Inc.
 NEGOTIATION
 We negotiate all the time at home,
with friends at office and in public
 These negotiations can be about
anything
 Always start from asking a lot and
wind up settling for something in the
middle.
 NEGOTIATION
 Its the discussion between the
people/companies to reach an
agreement
 Negotiation is getting what you want
from the other person but with
consensus
 Interpersonal Skills
 Avoider: dislikes conflict
 Compromiser: fair-minded people
interested in maintaining relationships
 Accommodator: resolve interpersonal
conflicts by resolving the other person’s
problem
 Competitor: winning is the main thing
 Problem-Solver: seeks to find the
underlying problem, use brainstorming
to solve
 Interpersonal Skills
 Negotiation is not all about power
Interpersonal Style

Driver Analytical
(Action) (Process)

Expressive Amiable
(Idea) (People)
 Negotiator’s Rating

Thinking General
Planning Under
skills Practical
Stress Sense

Verbal
Integrity clarity
 Negotiator’s Rating

Ability to Ability to
gain exploit
Open
respect power mind

Team
Leadership Tact
skills
Negotiator’s Rating
Professional standards

Product Knowledge

Self Confidence

Persistence

Insight
 Negotiation Tactics
 Be strategic and deliberate with
words.
 Silence is the key when other person
is talktive to learn more from
him/her.
 Higher authority: Analyse before start
of negotiation that who possess the
higher authority and make your
points accordingly.
 Negotiation Tactics
 Facts and Figures: Always use some
statistical facts to make strong
influence but never give wrong
statistics, you will loose the
credibility.
 Counter: You can question the
validity of the person’s figures if you
are certain that its wrong.
 Negotiation Tactics
 Policy: Use to convince the person
that its standard policy of the
company.
 Put in writing: Contract has no value
untill it has been written and mutually
signed, so whatever you negotiate
put in writing.
 Negotiation Tactics
 Be patient in listening
 Emails: negotiation via email is not
recommended which lacks the
physical and vocal cues.
 Negotiation Barriers
 Poor communication skills
 Overreacting & emotional responses
 Misunderstandings
 Conditioned or learned responses
 Relationship dynamics
Negotiation Barriers
Negotiation Barriers
Negotiation Barriers
 Negotiation Winners
 Have game plan
 Focus on your goals
 Identify the issues
 Have powerful justifications
 Evaluate, Evaluate, Evaluate
 Pay attention to closure
MARKETING
 Background

The term Marketing is derived from Market

which is the place to sell and buy goods.

Market is also a place to exhibit goods

which was the basic tool of Marketing in
ancient times
 Definitions

The activity or business of promoting and

selling products or services, including market
research and advertising
Marketing Evolution
 Importance of Marketing

Product awareness
 Importance of Marketing

Increase Product Sales

 Importance of Marketing

Enhance Company’s reputation

 Marketing Segmentation

Process to divide customer into

groups.
 Target Market

Targeting is to determine which

segments are most likely to become
customer.
Target Market
 Marketing Mix

4 Ps & 4 Cs
• Product • Consumer Solution
• Price • Cost
• Promotion • Communication
• Place • Convenience
Product
Promotion
Place
Price
 Marketing Plan

The Marketing plan describes how the Marketing Mix to be used to achieve
objectives in competitive envoirnment.
Marketing Plan
 Marketing Plan

Adjusting the plan

• After first sales activity, need to adjust marketing plan

as per the results.
• Each action will generate new market data and
marketing plan will be reshaped accordingly.
 What do Marketer Do

• Identify needs and wants

• Choose which/whose needs to focus on
• Create and manage products
• Communicate about products
• Price products
• Distribute products
• Follow up
 Why Startup Fails
TOP 20 REASONS STARTUPS FAIL[1]
Note: You may notice that the percentages in this equal far greater than
100%. This is because there are often multiple reasons a startup failed.
1. No Market Need (42%) 11. Lose Focus (13%)
2. Ran Out of Cash (29%) 12. Disharmony on Team/Investors (13%)
3. Not the Right Team (23%) 13. Pivot gone bad (10%)
4. Get Outcompeted (19%) 14. Lack Passion (9%)
5. Pricing/Cost Issues (18%) 15. Bad Location (9%)
6. Poor Product (17%) 16. No Financing/Investor Interest (8%)
7. Need/Lack Business Model (17%) 17. Legal Challenges (8%)
8. Poor Marketing (14%) 18. Don’t Use Network/Advisors (8%)
9. Ignore Customers (14%) 19. Burn Out (8%)
10. Product Mis-Timed (13%) 20. Failure to Pivot (7%)