Is the corporate strategy of outsourcing as valuable a strategic choice as vertical extension?

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pohnpei397 eNotes educator| Certified Educator

There are arguments to be made both ways with regard to this issue.

Outsourcing can be a very valuable strategy for a big business.  By outsourcing, a company can focus on doing the things it is best at.  It can have other companies supply it with the parts and such that it needs while it focuses on the final product.  This can reduce costs and increase efficiency.

However, there are ways in which vertical integration can be good as well.  A firm that integrates vertically does not need to worry about issues with its suppliers.  It does not have to worry about things like coordinating with its suppliers to make sure it will get the things it needs when it needs them.  The firm that pursues vertical integration will be in greater control of its supply chain.