Strategic Outsourcing? The Philips Case in the LCD TV Market

Luiz Carlos Di Serio, Robson Dantas Bento, Guilherme Martins, André Luis de Moura Castro Duarte

Abstract


This work seeks to assess the outsourcing process adopted by Philips for producing LCD televisions. The authors used the Resource-based Theory and the Transaction Cost Theory for analyzing the case. Based on industry data and interviews with ten of the company’s senior executives, this study sought to understand how the decision making process was carried out and how it affected the company's activities in the field of LCD televisions. Philips has lost its competitiveness in the Brazilian market – it went from being the leader in 2006 to fourth place in 2009, both as far as regards its sales volume and value. The executives pointed out that the LCD panel is an important resource and that its supply by third parties represented a high transaction cost. The results illustrate the complementarity that exists between the RBT and TCT theories in a competitive environment that has few players.

Keywords


Outsourcing; Resource-based Theory; Transaction Cost Theory; Case study.

Full Text:

PDF [en]

References


AMIT, R; SCHOEMAKER, P (1993). "Strategic assets and organizational rent". Strategic Management Journal, v. 14,n. 1, p. 33-46.

BARDHAN, I.S.; MITHAS, S.; LIN (2007). "Performance impacts of strategy, information technology applications, and business process outsourcing in U.S. manufacturing plants". Production and Operations Management, v.16, n.6, p. 747-762.

BARNEY, J (1991). "Firm resources and sustained competitive advantage". Journal of Management, v. 17, p. 99-120.

BARNEY, J (1997). Gaining and Sustaining Competitive Advantage. Addison-Wesley: Reading, MA.

BARNEY, J (1999). "How a firm's capabilities affect boundary decisions". Sloan Management Review, v. 40, n. 3, p. 137-145.

BORGES, A (2010). "Philips vai produzir LCD no Brasil". Valor Económico, Rio de Janeiro-RJ, 01/07/2010.

CANEZ, L.E.. PROBERT, D.; PLATTZ, K (2000). "Developing a framework for make-or-buy decisions". International Journal of Operations and Productions Management. Bradford: v. 20, n. 11, p. 1313.

CHANG, S. J. (2008). Sony vs. Samsung, the inside story of the electronics giants' battle for global supremacy. 1st edition. Singapore: Wiley & Sons.

CHESBROUGH, H. W.; TEECE, D. J. (1996). When is virtual virtuous? Organizing for innovation. Harvard Business Review, January-February, pg.65-73.

COASE, R. (1937). "The nature of the firm". Economica, v. 4, p. 386-405.

DISPLAY SEARCH (2009). TV: Market and Panel Development. Available at http://www.displaysearch.com/ files/2008_January_TV_Market_and_Panel_Develop-ment_Trends.pdf (accessed 15 august 2009).

DOIG, S.; RITTER, R.C.; SPECKHALS, K.; WOOLSON, D (2001). "Has outsourcing gone too far?" McKinsey Q, n. 4, p.24-37.

DRTINA, R. E. (1994). "The outsourcing decision". Management Accounting. v. 75, p.56-62.

EISENHARDT, K.M.; MARTIN, J.A. (2000). "Dynamic capabilities: what are they?" Strategic Management Journal, Special Issue, v. 21, p. 1105-1121.

FINE, C.; WHITNEY, D. (1996) "Is the make-buy decision a core competence?" Working Paper, MIT Center for Technology, Policy and Industrial Development.

GFK - Growth from Knowledge. GVK Group online. Available at www.gfk.com (accessed 15 august 2009).

GHOSHAL, S.; MORAN, P. (1996). "Bad for practice: a critique of transaction cost theory". Academy of Management Journal, v. 21, p. 481-510.

GRAY, J.V.; ROTH, A.V, TOMLIN, B. (2008). "The influence of cost and quality priorities on the propensity to outsource production". Working paper, Fisher College of Business, Ohio State University, 2008.

HOLCOMB, T. R.; HITT, M. A. (2007). "Toward a model of strategic outsourcing". Journal of Operations Management, v. 25, n. 2, p. 464-481.

KLEIN, B.; CRAWFORD, R.A.; ALCHIAN A.A. (1978). "Vertical integration, appropriable rents, and the competitive contracting process". Journal of Law and Economics, v. 21, p. 297-326.

LANGLOIS, R.N.; ROBERTSON, P.L. (1995). Firms, Markets and Economic Change: A Dynamic Theory of Business Institutions, Routledge, London.

LEI, D.; HITT, M.A.; BETTIS, R. (1996). Dynamic core competences through meta-learning and strategic context. Journal of Management, v. 22, p. 549-596.

MCIVOR, R. (2008). "How the transaction cost and resource-based theories of the firm inform outsourcing evaluation". Journal of Operations Management, v. 27, p. 45-63.

NOVAK, S.; STERN, S. (2008). "How does outsourcing affect performance dynamics? Evidence from the automobile industry". Management. Science, v. 54, v.12, p. 1963-1979.

PENROSE, E. (1959). The Theory of Growth of the Firm. Basil Blackwell: London.

PETERAF, M. (1993). "The cornerstones of competitive advantage: a resource-based view". Strategic Management Journal, v. 14, n. 3, p. 179-191.

PORTER, M.E. (1980). Competitive Strategy, Free Press,New York.

QUINN, B. J. E HILMER, F. G. (1994). "Strategic Outsourcing", Sloan Management Review, Summer, pg. 43-55.

SNS SECURITIES RESEARCH. A New Bleeder in the Portfolio, available at https://www.snssecurities.nl/scripts/com-pany/index.aspx?section=Research&fc=phα=P&displa y=publications&filename=54746 (accessed 15 April 2009).

STUCKEY; J.; WHITE, D. (1993). "When and when not to vertically integrate". Sloan Management Review, v. 34, n. 3.

TEECE, D.; PISANO, G.; SHUEN, A. (1997) "Dynamic capabilities and strategic management". Strategic Management Journal, v. 18, n. 7, p. 509-533.

WERNERFELT, B. (1984). "A resource-based view of the firm". Strategic Management Journal, v. 5, n. 2, p. 171-180.

WILLIAMSON, O. (1975). Markets and Hierarchies, Analysis and Antitrust Implications: A Study in the Economics of Internal Organization. Free Press: New York.

WILLIAMSON, O. (1983). "Organizational innovation: the transaction cost approach". In: RONEN, J. (org.) Entrepre-neurship. Lexington Books: Lexington, MA, p. 101-133.

WILLIAMSON, O (1979). "Transaction cost economics: the governance of contractual relations". Journal of Law and Economics, v. 22, p. 233-261, 1979.

WITSVIEW - LCD Research Institution (2009). Panel Availability. Available at http://www.witsview.com/ProductIn-fo/PanelAvailability.aspx (accessed 03 September 2009).

WOOLLACOTT, E. (1998). "Cost-cutting still main goal of outsourcing, survey finds". Computerworld, Availiable at http://computerworld.co.nz/news.nsf/mgmt/1B6F41DD0F99B7DBCC2571450010B1C3 (April 3 2006).

WRIGHT, P.; KROLL, M. J. e PARNELL, J. (1998). Strategic Management: concepts and cases. NJ: Prentice-Hall.

ZAJAC E.J.; OLSEN, C.P. (1993). "From transaction cost to transactional value analysis: implications for the study of interorganizational strategies". Journal of Management Studies, v. 30, p. 131-145.




DOI: http://dx.doi.org/10.4067/S0718-27242011000200015



Copyright (c)



2017 © Universidad Alberto Hurtado - Facultad de Economía y Negocios. 
Erasmo Escala 1835 - Santiago, Chile.
Economic Analysis Review | Observatorio Económico | Gestión y Tendencias