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Hello Ken,
Question 1:
I do not understand why “legal advice” cannot be of high strategic importance to the company. If the company fails to get the correct legal advice and breaches the law when carrying out its haulage activities, wouldn’t it then affect the company’s future contracts with customers? In addition, it was mentioned that the customers chose the company over other competitors because of its compliance with the law.Question Extract:
Chemical Transport (CT) is a specialist haulage company providing transport services for several chemical wholesalers. Despite these wholesalers being in competition with each other, many of them have outsourced their distribution to CT, recognising the company’s expertise in this area and its compliance with stringent and emerging legislation. This legislation is at both national and international level and concerns the transportation and handling of chemicals, as well as the maintenance of trucks and trailers and the health, competencies, safety and driving hours of drivers. There are also chemical wholesalers in the country who either organise their own distribution or outsource to one of CT’s competitors.The complex and changing nature of legislation has led to CT engaging a specialist legal consultancy to provide it with advice. They have found this advice to be both useful and proactive. The consultancy has identified the potential effect of employment, tax and health and safety legislation in advance and has notified CT of its likely implications. CT has benefited from this advice but it is concerned that it is expensive and it is considering employing a full-time legal expert, instead of using the legal consultancy.
The answer says that legal advice is not strategically important, because it does not relate to the core business function.
Question 2:
In the context of the Harmon process strategic matrix, can I choose to outsource something that is strategically important if I can justify it?Hoping for your help on this, thank you 🙂
I agree with you. Any fool can transport chemicals, but this company’s unique selling proposition is doing it safely and in compliance with complex laws and regulations. That will allow it to charge premium prices and its legal expertise is a strategic resource.
What would be important in the exam is how you justify the categorisation of this function rather than where it ends up.
For your second question, classic Harmon says don’t outsource strategically important activities, but you might be able to justify it. Like all models, Harmon will not guarantee a correct answer, but it helps to organise and formulate thoughts. But, no model will perfectly fit all circumstances.
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