Scenario: Audio Component Outsourcing
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 outsourcing. Echo managers are attempting to convince Nathan Douglas, the firm's founder and CEO, that outsourcing 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 manufacturing activities?
A) Echo managers could reduce the wages of U.S. based employees and sub-contractors.
B) Echo could save money by reducing the costs incurred in manufacturing the component parts.
C) Echo managers could implement a marketing campaign for foreign markets that is identical to the outsourced firm's marketing campaign.
D) Echo could merge with one of its U.S.-based competitors to gain a larger market share.

Question

Quizplus · Accepted Answer

The argument of the Echo managers is that outsourcing would enable the firm to be more competitive without sacrificing quality. Option B supports this argument, as it suggests that Echo could save money by reducing the costs incurred in manufacturing the component parts. By outsourcing, Echo can benefit from the lower cost of production in other countries and reduce its own costs, which would help the company to become more competitive. Options A, C, and D are not directly related to the argument of Echo managers to outsource.