Audio Component Outsourcing (Scenario)
Echo Corp., a company based in Boston, manufactures high-quality audio components, such as speakers, amplifiers, and receivers for home entertainment systems. Echo has been losing market share in recent years due to the competitive pricing of other audio component manufacturers that engage in global sourcing. Echo managers are attempting to convince Nathan Douglas, the firm's founder and CEO, that global sourcing would enable the firm to be more competitive without sacrificing quality.
-Which of the following is a major challenge often faced by focal firms that engage in global sourcing?
A) no control over the quality of outputs
B) domestic management of local distribution
C) increased costs of business travel
D) lower-than-expected cost savings

Question

Quizplus · Accepted Answer

Lower-than-expected cost savings is a major challenge because while global sourcing can reduce costs, unexpected expenses such as tariffs, shipping, and quality control can diminish the anticipated savings.