To effectively formulate a strategy for a business, managers need to consider several emerging trends that are becoming increasingly popular worldwide.
1. Outsourcing:
Outsourcing involves businesses contracting specialized external organizations to perform non-core tasks that do not generate revenue. This approach is primarily used to reduce costs and may address issues such as a lack of skilled personnel or the need for a streamlined operation. When done appropriately, outsourcing can cut costs, allowing the company to refocus on its core business. However, it comes with challenges such as unforeseen costs, loss of operational control, or engaging in inappropriate activities. Oversight on cost-saving measures is crucial to prevent compromising the business.
2. Offshoring Production:
Offshoring refers to relocating part or all of the manufacturing or business processes to another country, often to reduce costs. Similar to outsourcing, offshoring allows companies to retain control over operations abroad rather than completely outsourcing to external entities. The globalization trend has led to an increase in outsourcing, offshoring, and other impacts that are not easily discernible. While it can lower wages for low-skilled workers, some argue that outsourcing and offshoring can positively impact wages and economic development in wealthier nations. However, these practices can be complex, especially when companies engage in sensitive political or safety-related tasks.
3. Commoditization Perspective:
The commodities perspective addresses the growing difficulty businesses face in differentiating their products and services from competitors. Rapid technological advancements provide numerous opportunities for businesses to diversify their offerings, but this can overwhelm consumers with too many choices. To simplify decision-making, consumers tend to view products as commodities, focusing on key factors such as product features, reliability, and convenience. The commodities perspective can pose significant challenges for businesses, leading to additional expenses to enhance product features while meeting consumer price expectations.
4. Mass Customization:
Mass customization refers to the ability to provide products and services that meet the specific needs of individual consumers while still achieving economies of scale in production. This trend is crucial as it allows businesses to personalize products for customers while maintaining cost-effectiveness with increased production. In theory, mass customization is inversely related to economies of scale. However, in practice, businesses can achieve both mass customization and economies of scale through technological advancements and innovation.
It’s important to note that the commodities perspective and mass customization are somewhat interconnected. For instance, technology facilitating mass customization can help businesses overcome the challenges posed by the commodities perspective.
Cre: fastercapital
