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

Strategic managerial communications, The objective of the term project is t...

The objective of the term project is to demonstrate your understanding and ability to apply the body of knowledge covered in this course. The goal will be on identifying communicat

Strategic management in a global environment, 1. Read "The Global Branding ...

1. Read "The Global Branding of Stella Artois" in page 244 to 258, and answer the following questions: a) Develop a 5-forces analysis of the beer industry, noting whether the force

How market has influenced the forms and content of the media, 1. The develo...

1. The development of the mass media has been shaped in fundamental ways by the fact that they have often been profit-driven. The commercial or capitalist context of media is evide

Impact on the organizational and personal levels, Question Sarah and ...

Question Sarah and John are both working for a software development company. The manager of the new product division was originally the leader of the project team for whi

Sm0492 - strategy and change in the global environment, 1. Using Macro & M...

1. Using Macro & Micro frameworks analyse and evaluate the external environment of your organisation from the perspective of the external context within which it operates. Summar

Define strategic planning, QUESTION Firms often compete with each other...

QUESTION Firms often compete with each other to gain their customers' attention and business. While doing so, each firm tries to chalk out its unique strategy or gameplan. Stra

Free cash flows, Free cash flows can be arrived at by using the following c...

Free cash flows can be arrived at by using the following calculation Operating profit before interest and tax (PBIT) +                                              Depreciati

Concept of clan - cultural control, Q. Concept of clan - cultural control? ...

Q. Concept of clan - cultural control? Clan control requires a common understanding of norms and standards amongst an organisations diverse membership e.g. staff and team membe

Advantages and disadvantages of process, Advantages and disadvantages 1...

Advantages and disadvantages 1. Advantages There are some benefits that Aldi can get from short term objectives such as allow development or small format supermarkets in edg

Discuss the rationale for tfx company, TFX is a multinational company which...

TFX is a multinational company which manufactures and retails branded designer clothing with business units in a number of different countries globally. Up unless now, each of the

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