A characteristic of outsourcing is
A) completely unrelated to vertical integration
B) likely to be profitable exactly when vertical integration is unprofitable
C) it prevents a firm from focusing on its core competencies
D) it prevents the exploitation of differing degrees of economies of scale at different points in the supply chain

Question

Quizplus · Accepted Answer

Outsourcing is often utilized as a strategy when vertical integration (where a company expands its operations into different steps of the supply chain) is not profitable. By outsourcing certain aspects of production or services, a company can cut costs and focus on its core competencies. Additionally, outsourcing can allow different companies to specialize in different parts of the supply chain, potentially leading to greater exploitation of economies of scale. A is incorrect as outsourcing can certainly be related to vertical integration. C is incorrect because outsourcing allows a firm to better focus on its core competencies. D is incorrect because outsourcing can actually lead to greater exploitation of economies of scale, as mentioned above.

A Characteristic of Outsourcing Is