Deck 13: Global Sourcing

Question 1

In recent years, focal firms have increasingly outsourced manufacturing, such as computer assembly and parts, to independent suppliers across the world.

Answer 1

True

Question 2

Global sourcing first began in the 1990s when numerous U.S. manufacturers took advantage of NAFTA and shifted their facilities to Mexico.

Answer 2

False

Question 3

Offshoring is particularly common for focal firm business functions, such as accounting, customer service, and legal service activities.

Answer 3

True

Question 4

Offshoring is a more robust form of outsourcing in that the firm moves an entire sector of its business overseas.

Question 5

The attractiveness of a nation for global sourcing relates to factors such as political environment, physical infrastructures, and the education level of its workforce.

Question 6

The primary rationale for global sourcing is to minimize domestic legal responsibilities such as environmental laws.

Question 7

Industries that benefit the most from global sourcing are characterized by work that requires technological knowledge and specific, precise skill sets.

Question 8

Focal firms use global sourcing as an opportunity to transfer employees, renegotiate business contracts, and expand training programs.

Question 9

The 2011 earthquake that struck Japan revealed what can happen when a major industry, automobiles, relies too exclusively on suppliers in one geographic location.

Question 10

The European Union facilitates supply chains by directly managing them in the member countries.

Question 11

Firms often establish their own sourcing operations abroad to maintain control of outsourced value-chain activities and technologies.

Question 12

Proponents of global sourcing admit that nations risk a drain on knowledge and valuable skills that keep an economy competitive.

Question 13

A company that procures the production of intermediate goods from an independent supplier is conducting which of the following?

A) outsourcing
B) franchising
C) offshoring
D) licensing

Question 14

Focal firms often configure value-adding activities in order to ________.

A) reduce marketing costs
B) take advantage of blocs
C) decrease delivery time
D) avoid exchange rate issues

Question 15

If a computer contains a microprocessor from Costa Rica and a hard disk drive from the Philippines, the computer manufacturer most likely uses which of the following entry strategies?

A) exporting
B) franchising
C) global sourcing
D) licensing

Question 16

Global procurement is characterized by which of the following?

A) a short-term agreement between a freight forwarder and foreign intermediaries
B) a contract between a focal firm and a foreign supplier for components or services
C) access to a variety of independent suppliers and firms within an economic bloc
D) subcontracting the assembly of products before importing them to the home country

Question 17

Which of the following is a key driver behind the increase of global procurement?

A) demand for technically skilled workers
B) increasing transportation costs
C) Internet communication and access
D) abundance of MNEs and born globals

Question 18

A focal firm that acquires supplies from its foreign subsidiary is participating in which of the following activities?

A) captive sourcing
B) configuration
C) business process outsourcing
D) externalization

Question 19

Contract manufacturing can best be defined as which of the following?

A) A foreign subsidiary produces supplies for a focal firm according to a well-defined contractual agreement.
B) A focal firm outsources the production of supplies to a third-party provider based in the home country.
C) A domestic subsidiary of the focal firm agrees to produce components for a focal firm according to contractual requirements.
D) A foreign-based independent supplier manufactures a product according to a focal firm's specifications.

Question 20

Which of the following value-chain activities would most likely be internalized by a focal firm that makes printers and copiers?

A) microelectronics
B) accounting
C) customer service
D) travel services

Question 21

A focal firm's relocation of its manufacturing facility to a foreign country is known by which of the following terms?

A) offshoring
B) captive sourcing
C) outsourcing
D) subsidizing

Question 22

Business activities that would most likely be offshored are characterized by which of the following?

A) technical functions that would be too difficult for domestic workers
B) services related to long-term research projects and product development
C) routine tasks that do not relate to the firm's primary service or product
D) functions related to the firm's core competencies and strategic assets

Question 23

Which of the following characterizes the types of industries that are most likely to offshore?

A) industries with standardized processes
B) industries requiring personal contact
C) industries with unique components
D) industries dependent on e-commerce

Question 24

Which of the following nations is an rising destination for offshoring?

A) Saudi Arabia
B) Bahamas
C) South Africa
D) Germany

Question 25

India is a leader in the global IT industry because of which of the following?

A) the large number of IT workers
B) steady currency exchange rate
C) U.S. computer firm relocations
D) low manufacturing expenses

Question 26

Vietnam as a destination for outsourced production can be attributed to _________.

A) creating more public works projects
B) abandoning communism
C) access with fewer trade restrictions on local sources
D) the end of the Vietnam War

Question 27

Which of the following is an example of a key player in global sourcing in Latin America?

A) Bluem
B) Luxoft
C) Xceed
D) Softek

Question 28

Focal firms most likely global source in India for which of the following reasons?

A) access to Internet broadband
B) relatively strong intellectual property laws
C) configuration of value-chain activities
D) internal sourcing of opportunities

Question 29

Which of the following statements is most likely true regarding the R&D activities of a firm?

A) R&D activities are of moderate importance to the firm as a strategic asset.
B) R&D activities can be sourced abroad at a considerable savings off baseline costs.
C) R&D activities have a low likelihood of being internalized.
D) R&D activities have a high likelihood of being outsourced.

Question 30

Which of the following is the traditional rationale for sourcing abroad?

A) technological advances
B) managerial talent
C) cost efficiency
D) higher wages

Question 31

Which of the following is an advantage of global sourcing for focal firms?

A) foreign technological infrastructures
B) flexible work and holiday schedules
C) international pool of qualified employees
D) competitive pay schedules and benefits

Question 32

A firm that sources abroad is most likely to experience which of the following?

A) increased profitability
B) reduced speed to market
C) strong legal environment
D) increased morale among home-country employees

Question 33

Transformational outsourcing can best be described as which of the following?

A) outsourcing expensive business activities to expedite internationalization
B) the use of global sourcing to enable a firm to achieve strategic goals
C) sourcing the production of component parts to reduce manufacturing
D) global sourcing intended to eliminate redundancy and protect assets

Question 34

A company that planned to outsource IT development would be most likely to save in salary costs by hiring professionals from which of the following countries?

A) Hong Kong
B) Philippines
C) Singapore
D) Germany

Question 35

Which of the following is a challenge often faced by focal firms that global source?

A) lack of influence over corporate growth
B) domestic management of local distribution
C) cost of traveling both domestically and abroad
D) lower-than-expected cost savings

Question 36

If a U.S. firm outsources to a Japanese company, and the Japanese yen increases in value against the dollar, which of the following is most likely to occur?

A) The Japanese outsourcing services will become more expensive for Japanese companies to utilize.
B) The U.S. company will experience additional cost savings in using the Japanese company.
C) The Japanese outsourcing services will become less expensive for other foreign companies to utilize.
D) The U.S. company will experience higher costs in using the Japanese company.

Question 37

Which of the following is an environmental risk associated with establishing a foreign outsourcing facility?

A) slow turnaround time due to weak laws
B) low morale from domestic employees
C) high costs due to inadequate infrastructures
D) high foreign employee retention rate

Question 38

A focal firm's heavy reliance on foreign suppliers may lead to which of the following?

A) a firm's lack of control over value-chain tasks
B) a competitive advantage for the focal firm
C) an excessive burden on home-country suppliers
D) improved relations with home-country workers

Question 39

In order to maximize returns, firms should outsource tasks which ________.

A) are strategically important to the firm's value-chain
B) can be efficiently accomplished by foreign suppliers
C) will impact the foreign supplier's distribution area
D) are critical to the focal firm's annual profit margin

Question 40

Which of the following represents the best reason for companies to go offshore?

A) strategic motives
B) cost cutting
C) organizational restructuring
D) managerial improvement

Question 41

Managers can minimize the risk of creating employee tension when outsourcing by ________.

A) paying domestic employees the same wages as foreign suppliers
B) requiring foreign employees to work four-day work weeks
C) sending domestic managers to foreign countries for training
D) seeking the opinion of labor groups when choosing foreign partners

Question 42

The main purpose of a global supply-chain network is to ________.

A) eliminate the need for distribution intermediaries
B) consolidate the number of freight forwarders
C) maximize a firm's competitive advantage
D) re-organize a firm's corporate structure

Question 43

All of the following are typical activities performed by suppliers as part of a global supply-chain network except ________.

A) generate sales
B) maintain inventory
C) transport goods
D) process orders

Question 44

Which of the following is a major concern for opponents of global sourcing?

A) employment losses
B) environmental harm
C) minimum wage laws
D) government support

Question 45

The Austrian economist Joseph Scumpeter called offshoring a process of ________.

A) destructive opportunity
B) offshore economics
C) brain drain
D) creative destruction

Question 46

Fun Play Global Sourcing
The Fun Play Toy Company has decided to outsource some of its value-chain activities. However, the firm has no experience with global sourcing and has hired a consulting firm to assist Fun Play managers. The consulting firm has been assigned the task of determining which activities should be outsourced and where the activities should be located.

-Which of the following questions would be more important for the consultants to evaluate when determining if the clothing for Fun Play dolls should be outsourced?

A) Is doll clothing part of Fun Play's core competencies?
B) What kind of fabric is needed for Fun Play doll clothing?
C) Do Fun Play competitors outsource accounting activities?
D) Can Fun Play's business process outsourcing be subsidized?

Question 47

Fun Play Global Sourcing
The Fun Play Toy Company has decided to outsource some of its value-chain activities. However, the firm has no experience with global sourcing and has hired a consulting firm to assist Fun Play managers. The consulting firm has been assigned the task of determining which activities should be outsourced and where the activities should be located.

-Which of the following questions should most likely be considered by the consultants before they recommend locations for outsourcing?

A) Who will be responsible for training suppliers in foreign locations?
B) Can different value-adding activities be concentrated in one location?
C) Will Fun Play have the ability to test toy materials for potential toxins?
D) What is the proximity to airports and hotels for visiting Fun Play managers?

Question 48

Fun Play Global Sourcing
The Fun Play Toy Company has decided to outsource some of its value-chain activities. However, the firm has no experience with global sourcing and has hired a consulting firm to assist Fun Play managers. The consulting firm has been assigned the task of determining which activities should be outsourced and where the activities should be located.

-The consulting firm might suggest which of the following if Fun Play managers express an interest in outsourcing doll eye production to Kongha Toy Parts, Ltd., which it owns in part?

A) offshoring
B) contract manufacturing
C) component manufacturing
D) captive sourcing

Question 49

Audio Component Outsourcing
The Echo Corporation 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 most likely supports the argument of Echo managers to outsource some of the firm's value-chain activities?

A) Echo managers could reduce the wages of U.S.-based employees and sub-contractors.
B) Echo could save money by offshoring data processing and accounting activities.
C) Echo managers could implement a new marketing campaign for foreign markets.
D) Echo could partner with a U.S.-based competitor and share common foreign suppliers.

Question 50

Audio Component Outsourcing
The Echo Corporation 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 should most likely be considered in making the decision to outsource Echo value-chain activities?

A) What are the long-term strategic goals and objectives of Echo?
B) Would Echo engineers be willing to relocate to a foreign nation?
C) How many of Echo's competitors outsource business activities?
D) Can Echo find employees for a customer service center in the U.S.?

Question 51

Audio Component Outsourcing
The Echo Corporation 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 most likely a potential benefit of Echo globally sourcing some of its value-chain functions?

A) heightened communications awareness
B) increased activity in e-commerce sales
C) strong intellectual property protection
D) improved manufacturing productivity

Question 52

Global Sourcing Debate
Professor Agrawal's international business class has been studying the controversies related to global sourcing. Today, Professor Agrawal divides the class in half and assigns Group A the task of defending global sourcing. Group B is to argue against global sourcing.

-Which of the following arguments would most likely be presented by Group B?

A) Global sourcing decreases a nation's ability to be competitive.
B) Global sourcing improves the efficiency of manufacturing firms.
C) Global sourcing empowers labor unions and instigates strikes.
D) Global sourcing lowers the legal minimum wage in foreign nations.

Question 53

Global Sourcing Debate
Professor Agrawal's international business class has been studying the controversies related to global sourcing. Today, Professor Agrawal divides the class in half and assigns Group A the task of defending global sourcing. Group B is to argue against global sourcing.

-Group A uses the concept of creative destruction to most likely support which of the following statements?

A) Firms that engage in offshoring require government oversight.
B) Offshoring forces unskilled workers to seek additional education.
C) Global sourcing creates opportunities and stimulates innovation.
D) Outsourcing technical jobs leads to the creation of competitive firms.

Question 54

In a short essay, describe three nations and the specific attributes that make them popular for focal firms.

Question 55

In a short essay, discuss benefits experienced by focal firms which participate in global sourcing. Use examples where possible.

Question 56

In a short essay, describe three challenges faced by firms that engage in global sourcing and are not directly related to suppliers.

Question 57

In a short essay, describe three risks in global sourcing related to the use of foreign suppliers.

Question 58

In a short essay, explain the risk of creating competitors through the process of global sourcing and give an example. Describe how safeguarding interests works to minimize this risk.

Question 59

In a short essay, discuss five methods managers can employ to protect the interests of the focal firm in relationships with foreign suppliers.

Question 60

What are the logistics involved in global sourcing? In a short essay, discuss how logistics relates to cost. Provide one or more examples of risks that can disrupt logistics.

Question 61

In a short essay, discuss the three key factors that managers must consider when determining the most appropriate transportation mode. Compare two and discuss their advantages and trade-offs.

Question 62

Discuss two ways in which labor can be a risk factor for a focal firm sourcing abroad: the potentially devastating effect of job losses in the home nation, and the risk of inadequate workers in the source nation. Provide an example of each risk in your answer.