Global Sourcing & Blue Ocean Strategies

According to PWC’s report Why global sourcing? Why now? “ As organizations embark on developing global sourcing strategies, it makes sense to leverage leading practices and lessons learned from the firms that have gone before. The approach to determining which activities should be sourced is significantly more robust and mature than it was even a few years ago.

According to Chan Kim and Mauborgne, the Six Paths Framework allows managers to address the search risk many companies struggle with. It enables them to successfully identify out of the haystack of possibilities that exist, commercially compelling blue ocean by reconstructing market boundaries. The idea is that you don’t only develop and enhance your offering to win markets, but you can redefine it by introducing aspects of elimination and reduction. In this context the Global sourcing is about creating new networks and technology offerings for global markets.

Value creation is about the people and businesses we want to transform into potential consumers or clients of our services. The company innovation value proposition with regards to services is to offer a sustainable differentiation and engage prospects so that they may be the innovators of our services. The goal is to co-create value by developing services that represent what the future will look like in the mind of the customer.
​
Workforce development and innovation are key elements of competitiveness, participation in GVCs, and within GVC upgrading. Under the international pressure of competitors, countries need to increase the skill content of their activities or develop competencies in niche market segments (Humphrey and Schmitz, 2002). The knowledge and skill intensity significantly varies across sectors and activities: moving up the value chain will require the availability of new skills and knowledge.

Strategy Canvas Analysis
Running a small or medium-sized enterprise (SME) obligates one to consider carefully cash flow. First, cash is like the gasoline in an automobile. When there is lack of gasoline, the engine stops and the consequence is a crash. New companies in the hi-tech business and service management industries, talk of a “burn rate”: the higher the overheads, the bigger the risks of failing.
The global sourcing aspect is a vertical business from innovative developers to the U.S. to boost the relevance of innovation centers and vice-versa, innovative or established services from the U.S. to emerging markets. In the fourth quarter of 2000, PeopleSoft’s operations in the Europe, Middle East and Africa region delivered a significant contribution to the company`s overall performance. The region showed a 108% license revenue increase over the previous quarter (PeopleSoft).

Noncustomer Analysis
“The Four Actions Framework is used to reconstruct buyer value elements in crafting a new value curve.” Kim and Mauborgne (2005). Having satisfied customers is no guarantee of improved business results. Indeed, satisfaction is a passive state: a willingness to stay until something better comes along. Unlike satisfaction, loyalty is a long-term commitment to the organization and is linked to share-of-wallet and retention. Customer-centric organizations consistently achieve significantly higher profitability than non-customer-centric organizations. The issue is the nature of the customer focus. Customer loyalty and profitability management recognizes that improved business results occur as a result of understanding both drivers of revenue and drivers of true cost that create economic profit.

Your strategy is to establish a position based change. For example, when commercial agreements are signed, there should be included vocational scholarships for the local youth or a minimal investment in human development; clean water filters, power generators, assistance to the disabled … Jeb Brugmann and C. K. Prahalad consolidate this analysis when they declare that: “When companies and NGOs innovate together, the commercial nature of the relationship and their roles can vary, but the outcome is often a breakthrough. In fact, this quiet dialogue, away from public debates, has spawned key principles that will underlie governance structures in the future.” The content and marketing tools you need to use to communicate with all parties should relate a message that goes beyond profit making.

Turning on the Lights Global - We link innovation-focused companies with potential partners in the Americas and allow rapid diffusion of ideas through a structured channel across geographic regions. Creating meaningful cross-cultural experiences & building internationalization processes for success.​

References:

Brugmann, J. & Prahalad, C. K. (2007). Co-creating business’s new social compact. Harvard Business Review. 

Humphrey, J. and Schmitz, H. (2002), “How does insertion in global value chains affect upgrading in industrial clusters?”

Kim, W. C. & Mauborgne, R. (2005). Value innovation: A leap into the blue ocean. The Journal of Business Strategy. 

PriceWaterhouseCoopers LLP. (2010). Why global sourcing? Why now? Creating competitive advantage in today’s volatile marketplace.