Vci Case Vci/Ellison Case Questions and Analysis

VCI Case

VCI/Ellison Case Questions and Analysis

Case Questions

Global sourcing, simply put, is engaging in the procurement of goods and/or services without allowing geopolitical boundaries to limit such procurement (though there are of course effects of these boundaries on the advisability of certain trade relationships). Different levels of global sourcing exist, from using international suppliers when convenient to developing procurement strategies that take full advantage of global systems.

There are not major cultural differences noted between VCI and Ellison that will adversely affect this merger, however there are some notable differences that need consideration. Teamwork and supplier loyalty are more engrained in Ellison, and VCI will need to incorporate better teamwork while Ellison becomes more aggressive.

3)

Global sourcing has the potential to create much greater cost effectiveness and efficiency for VCI/Ellison, and this is the primary reason for pursuing this strategy. The global sourcing plan is fairly straightforward, consisting of identifying suppliers, receiving proposals, testing and finalizing international contracts and shipments.

4)

Negotiation is key to the global souring plan at VCI/Ellison, and teams are expected to be prepared to negotiate effectively through their extensive research and proposal comparisons, leaving sure footing for what can be achieved.

5)

According to the case description, VCI/Ellison has already been able to generate substantial savings through its global sourcing efforts, though these effects and confidence for future gains from continued commitment to the program as it is currently defined appear to be on the wane.

Case Analysis

This case appears complex given an initial cursory examination, with the merger between two companies engaged in an unfamiliar industry providing many complications on its own, and with the additional elements of strategy changes and adjustments further complicating the case. Once the individual issues in the case are probed, however, it becomes clear that the problems and the solutions identified in both companies -- and the merged single company -- are relatively simple and straightforward. Though the case ends by highlighting certain problems that will be faced in the coming years, there are clear and strong rationales for the actions taken by VCI/Ellison in its global sourcing strategy development and implementation program, and suggestions for the company's future after initial implementation.

The practicalities of global sourcing are clear regardless of the specifics of the company engaging -- or considering engaging -- in such activities, assuming the business is of a certain scale. Opening the field of potential suppliers to include the most offers possible is the only way to ensure that the best deal for supplies is secured; this is a basic feature of a standard economic market. For a company like VCI/Ellison, with the cost of supplies at seventy percent of total expenditures for operations, the potential for savings by increasing the number of suppliers and more effectively negotiating with them is quite high indeed. Regardless of any differences in the two merging companies or the regionalism of the suppliers in the industry, global sourcing as a general practice makes good sense of most businesses.