Discussion:
1 Outsourcing work can be good and bad it just matters on the company. Some companies don't need to reinvent the wheel. The fact that other companies are better and can produce the product better due to their technology and investment they are ready have completed. Their current time, Machining, and ability to sell product at lower cost due to the investment that they have. Having others produce the product that they have causes them to lower space and have more room for their current project or more investments in the future. An example is the screen on an iPhone is produced by Samsung. The current technology has caused Apple to not invest in a new program. Samsung was able to produce a screen that would cause them to meet Apples needs and make sure that it fit current needs. With out buying the equipment they are able to pay workers more money due to the fact that they don't have to invest more in the equipment for the future.
The decision to make-or-buy is very important for a company. This is a decision between the company manufacturing an item or product versus purchasing the product from an outside supplier. "The make-or-buy decision compares the costs and benefits associated with producing a necessary good or service internally to the costs and benefits involved in hiring an outside supplier for the resources in question" (Investopedia, n.d.). As with any choice, there are both pros and cons to both decisions that a company must weigh before making a final choice.
Some pros to manufacturing an item in house would be that the company can maintain better control over the quality of items being produced. Also, by producing an item in-house, the company can avoid other fees such as shipping or import fees, sales tax, etc. Some of the cons to in-house production would if the company lacked the necessary equipment to produce the items, purchasing them may too big an expense. Other reasons to not manufacture in-house may be a lack of expertise and small volume requirements making it not monetarily worthwhile (Investopedia, n.d.).
Acquiring the company that supplies monitoring devices for cardiac care units can be a beneficial for a better bottom line since it would give access to another industry as well as more revenue. This has to be managed carefully since both industries are complete opposites. Prior to acquiring the company, reviewing all of the potential risks is important. I know from experience that merging companies within the same industry is difficult. When the organization I work in merged with two other hospitals we could not agree on anything. There was a lot of back and forth between management and senior operations and it took over three years for us all to finally be on the same page. I would expect merging two different companies from separate industries would be just as difficult if not even more.
If I did end up acquiring the medical supply company I would continue with the practice of providing donations to needy patients. If I discontinue this program that would potentially hurt the company's reputation and people may perceive the CEO as greedy and only concerned with making a profit. Since the companies will be joined together this can also help boost the reputation for the auto parts industry (Golden, 2014).
2 After much research, the CEO has decided to utilize a diversification strategy on a potential acquisition with an unrelated product and market than compared to the current business model. The current business is products for the automotive industry, but the acquisition is for cardiac care monitoring devices which would be the healthcare industry.
The benefits of this strategy would be that there would be a higher potential for increase in profits because of the cyclical nature. When the automotive industry sales are low that does not indicate that the healthcare industry sales will be low because there is no correlation between the two products. It is also possible that these products may be related somehow to help create new and improved products which would give the company a competitive advantage over their competitors.
Potential risk of the diversification strategy would be that these products are from two separate industries, so if the company that is acquired does not share the same business outlook or culture there could be issues. Another potential risk is the CEO may not know too much information on the medical device's industry. The markets are totally different, the costs, the sales, and every little thing is different, so learning how to manage two markets and industries may be a challenge.
I believe the company should continue keeping the devices on a donation basis. If there is a major loss in revenue then the CEO should reevaluate this process because then the acquisition would not have been worth it. If the devices are kept on a donation basis it would definitely be qualified for a great social responsibility. This acquisition will also give this company a better reputation and credit for CSR.