When might offshoring backfire?
A)If the cost of the function is reduced by at least 50%.
B)If the procedures followed in managing the outsourced function remain the same.
C)When all of the current suppliers to the outsourced function are retained.
D)If the overseas company uses the information to produce its own competitive product.

Question

Quizplus · Accepted Answer

Offshoring can backfire if the overseas company uses the information provided by the outsourcer to produce its own competitive product. This is a potential risk when outsourcing to countries with weak intellectual property protection laws, which can lead to the theft of trade secrets, intellectual property, and proprietary software. This can result in the loss of the competitive edge that the company had been enjoying or had hoped to enjoy through the outsourcer. While cost reduction, retaining existing suppliers, and following the same procedures are potential concerns, they are not necessarily indicative of a backfire, whereas the loss of competitive advantage can severely affect a company's bottom line.

When Might Offshoring Backfire