Answer to Question 1
Managers must decide between internalization and externalizationwhet her each value-adding activity should be conducted in-house or by an external, independent supplier. Firms usually internalize those value-chain activities that they consider part of their core competencies, or which require the use of proprietary knowledge and trade secrets that they want to control. By contrast, firms will usually source from external suppliers when they can obtain noncore products or services at lower cost or from suppliers specialized in providing them.
Answer to Question 2
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Answer to Question 3
First, technological advances in communications, especially the Internet and international telephony, have made global sourcing a feasible activity for focal firms. Access to vast online information means focal firms can quickly find suppliers that meet specific needs anywhere in the world. Second, falling costs of international business, including efficient communication and transportation systems, have made international procurement cost effective and accessible to any firm. Third, entrepreneurship and rapid economic transformation in emerging markets such as China and India has made many foreign nations viable locations for outsourcing.
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