Which of the following is true of outsourcing?
A) It involves significantly less transaction costs.
B) It is a way to meet market demand with a long-term capital commitment.
C) It is a great way for a company to develop in-house manufacturing capabilities.
D) It carries a risk of proprietary technology being expropriated by the contract manufacturer.

Question

Quizplus · Accepted Answer

Outsourcing involves entrusting the manufacturing or service provision responsibilities to a third-party. This third-party, or contract manufacturer, may have access to proprietary information and technology, which increases the risk of it being expropriated by them. Therefore, option D is the only true statement about outsourcing from the given choices. Options A, B, and C are incorrect as outsourcing may involve significant transaction costs, it is a way to meet short-term market demand without long-term capital commitment, and it involves letting go of in-house capabilities rather than developing them.

Which of the Following Is True of Outsourcing