Corporate relations and strategic subcontracting

Abstract

Technological progress, such as that associated with robotics and computer-aided manufacturing, is increasingly delivering machines that operate at lower variable costs, but often with a different optimum degree of utilization. If we restrict our analysis to companies that use two different types of machines to manufacture a product, a change in the optimal degree of utilization of machines of one type resulting from technological developments may make it necessary to adapt the entire manufacturing process in order to fully exploit the cost advantage. If the cost advantages cannot be fully achieved by reconciling internal company structures, this may be achieved by adjusting inter-company structures. Such an adjustment can take various forms, depending on whether the enterprise in question offers unneeded capacity to other enterprises or complements insufficient internal production resources with available capacity from another enterprise. The aim of the article is to analyse important trends in the context of subcontracting. In order to keep the subject of the study easily comprehensible, the important empirical methods are used, which can discover new insights in the scientific sources. The resulting generalization is intended to show when the question of possible outsourcing should be placed on the negotiating table.