External buying decisions, Strategic Management

Assignment Help:

The group consolidated financial results would normally be effected, if an internal buyer uses their autonomy and makes a decision to buy outside the group, rather than buy internally from another division.  To calculate how worse off the group will be, you would need to compare the relevant cost of the internal seller making the product, to the external market price the external supplier will charge the buyer.  For example if an internal seller currently supplies a product to an internal buyer, the cost is normally the variable (marginal) cost of each unit  produced along with  any  other avoidable  'specific' fixed overhead  incurred when making the product e.g. avoidable fixed overhead incurred because the product is made and  avoidable if  the seller discontinues production.  The internal relevant cost would be compared with the external market price the alternative supplier would charge. The difference between this internal and external relevant cost will measure how worse off or better of group financial results would be. 

As far as the internal buyer is concerned the decision about using an external supplier is often one of financial reason, therefore external buying decisions will normally improve a buyer's internal financial results.   From the internal sellers perspective their financial results would normally deteriorate due to the loss of internal business.


Related Discussions:- External buying decisions

Bus 475, i need immediate help with an assignment, can anybody help.

i need immediate help with an assignment, can anybody help.

Develop a strategy for an organisation, Design a comprehensive Change Manag...

Design a comprehensive Change Management Strategy for your organisation/division/unit and with that (strategy) make sure that organisational diagnosis/analysis are addressed and cr

Jidoka - quality at source, Jidoka - Quality At Source Jidoka was firs...

Jidoka - Quality At Source Jidoka was first introduced by Dr Taichi Ohno into the Toyota Motor Company in the early 1960s. In the process of producing an efficient material fl

Describe packaging or labelling features, 1. Describe the brand you will es...

1. Describe the brand you will establish across as many dimensions as you think are relevant 2. What will your brand association be?  i.e.  what is the one thing, above al

The strategies of the functional areas of an organisation, Discuss the ways...

Discuss the ways in which the strategies of the functional areas of an organisation should support the other levels of strategy. In describing how the functional strategies sup

Week 2 Question 1, Due Date: 24 Oct 12 by 10 a.m. Prepare an analysis of a ...

Due Date: 24 Oct 12 by 10 a.m. Prepare an analysis of a Fortune 500 company that you find interesting using the 2011 list at CNNMoney, You">http://money.cnn.com/magazines/fortune/

Weakness in swot analysis , Weakness: Though Arpanaa has the best amenitie...

Weakness: Though Arpanaa has the best amenities in tow which are not offered by the hotels that are located in and around the town, it runs short of few features such as non veget

Discuss the pertinence and relevance of the ansoff matrix, Question 1: ...

Question 1: (i) Why should stategic issues involve all stakeholders for a product or/and service? (ii) What are the objectives of strategic formulation and implementation

Successful business teams, 1 Explain the characteristics of successful busi...

1 Explain the characteristics of successful business teams 2 Explain the importance of team roles in successful business teams 3 Examine the value of using theoretical models whe

Feed-forward control - prevention rather than cure, Q. Feed-forward control...

Q. Feed-forward control - prevention rather than cure? Feed-forward control would be a system that in a pre-emptive way, reacts to changes in its environment, normally to maint

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd