strategic-management

162 PART 2 • STRATEGY FORMULATION
business. 3M Corp. is outsourcing all of its manufacturing operations to Flextronics
International Ltd. of Singapore or Jabil Circuit in Florida. 3M is also outsourcing all
design and manufacturing of low-end standardized volume products by building a new
design center in Taiwan.
U.S. and European companies for more than a decade have been outsourcing their
manufacturing, tech support, and back-office work, but most insisted on keeping research
and development activities in-house. However, an ever-growing number of firms today are
outsourcing their product design to Asian developers. China and India are becoming
increasingly important suppliers of intellectual property. For companies that include
Hewlett-Packard, PalmOne, Dell, Sony, Apple, Kodak, Motorola, Nokia, Ericsson, Lucent,
Cisco, and Nortel, the design of personal computers and cameras is mostly outsourced to
China and India.
Companies pay about $68 billion in outsourcing operations to other firms, but the
details of what work to outsource, to whom, where, and for how much can challenge even
the biggest, most sophisticated companies. 39 And some outsourcing deals do not work out,
such as the J.P. Morgan Chase deal with IBM and Dow Chemical’s deal with Electronic
Data Systems. Both outsourcing deals were abandoned after several years. Lehman
Brothers Holdings and Dell Inc. both recently reversed decisions to move customer call
centers to India after a customer rebellion. India has become a booming place for outsourcing.
Sprint Nextel Corp. in 2009 outsourced management of its cellular network to
Swedish firm Telefon A.B. L.M. Ericsson, which transferred about 6,000 jobs from the
United States to Sweden. Based in Overland Park, Kansas, Sprint sees network outsourcing
as a way to free up resources to focus on areas like product development, marketing,
and strategic partnerships. Ericsson, as well as Alcatel-Lucent SA and Nokia-Siemens
Networks, have been aggressively courting service contracts to make up for declining
prices of telecom equipment.
Strategic Management in Nonprofit
and Governmental Organizations
The strategic-management process is being used effectively by countless nonprofit and
governmental organizations, such as the Girl Scouts, Boy Scouts, the Red Cross, chambers
of commerce, educational institutions, medical institutions, public utilities, libraries,
government agencies, and churches. The nonprofit sector, surprisingly, is by far America’s
largest employer. Many nonprofit and governmental organizations outperform private
firms and corporations on innovativeness, motivation, productivity, and strategic management.
For many nonprofit examples of strategic planning in practice, click on Strategic
Planning Links found at the www.strategyclub.com Web site.
Compared to for-profit firms, nonprofit and governmental organizations may be
totally dependent on outside financing. Especially for these organizations, strategic management
provides an excellent vehicle for developing and justifying requests for needed
financial support.
Educational Institutions
Educational institutions are more frequently using strategic-management techniques and
concepts. Richard Cyert, former president of Carnegie Mellon University, said, “I believe
we do a far better job of strategic management than any company I know.” Population shifts
nationally from the Northeast and Midwest to the Southeast and West are but one factor
causing trauma for educational institutions that have not planned for changing enrollments.
Ivy League schools in the Northeast are recruiting more heavily in the Southeast and West.
This trend represents a significant change in the competitive climate for attracting the best
high school graduates each year.
Online college degrees are becoming common and represent a threat to traditional
colleges and universities. “You can put the kids to bed and go to law school,” says Andrew
Rosen, chief operating officer of Kaplan Education Centers, a subsidiary of the
Washington Post Company.