- Business and Employment
OUTSOURCING AND BUNDLING STRATEGIES: ARMORS FOR SATURATED MARKET
Why companies bother to bundle and outsource? Are these moves necessary?
Bundling is a necessity when the market you want to penetrate is already saturated and your resources are limited. In order for the company to stay in the market and compete with available resources bundling strategy is one of the answers. Below are few reasons why companies need to bundle?
It is another way to differentiate your product or services.
Offering a bundle product like Microsoft Suite/Office is another way of differentiation. Why it is differentiated? Because you offer a product that is unique or distinct, Microsoft Office offers not only Word but Excel, Powerpoint, Access, Publisher, Share point and the alike. More products bundle into one program.
A disguised for price-premium or mark up.
When one of your products is not sellable and offers a low profit margin then bundling it will help. Bundling it with an item that is hot on the market and set a premium price or mark up for that product. Consumers will never question the price because they will look at it as “A price for two in one”- An enticement for customers to buy your product without any question in mind.
As we all know that inventory is costly. It is directly proportional to the volume of your product and the storing time of your products in the warehouse, which means the bigger the volume of your products and the longer were stored in the warehouse, the higher your inventory expenditures. Inventory is inversely symmetrical to the sales of the product. If the sale and demand are low, then inventory is bigger. Bundling the not marketable product with a sellable item could lessen the inventory and at the same time generating sales to the "not hot" item.
Outsourcing can be either good or bad for companies because there are some implications the company needs to endure such as loss of control of management, hidden costs, threat to security and confidentiality and quality problems. Moreover, the company is tied to the financial well-being of another company. So when is the right time the company will outsource? The answer varies. It is dependent on what your company needs most. If you want to focus on core activities and cost reduction, then outsourcing is the best option. The business entity should select the right company's activity that will be outsourced because once the quality of your products, for example, will be hampered, and it could cause loss in sales subsequently outsourcing is not advisable. If it can’t be avoided that the company needs to outsource because of lack of manpower, then outsourcing is a must. The company should hire another party, which will oversee and monitor these third party activities to ensure that the quality of the finished products will reach to its end consumer in good conditions and quality.
Finally, outsourcing is a case to case basis. It is dependent on the company's situation, needs and overall analysis.
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