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 TRUE with regard to the risks of global sourcing?
A) Inadequate legal systems, red tape, convoluted tax systems, and complex business regulations complicate local operations in many countries.
B) Firms that source from countries whose currencies are strengthening experience lower costs.
C) Global sourcing weakens competition leading to a considerably risk-free international business environment.
D) Environmental challenges exclude currency fluctuations, tariffs and other trade barriers, high energy and transportation costs.

Question

Quizplus · Accepted Answer

Global sourcing can indeed introduce complexities such as dealing with inadequate legal systems, red tape, convoluted tax systems, and complex business regulations in different countries, which can complicate operations.