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 is most likely a potential benefit for Echo if it outsources some of its manufacturing activities?
A) heightened communications awareness
B) increased activity in e-commerce sales
C) strong intellectual property protection
D) eliminating the exposure of assets to political risk

Question

Quizplus · Accepted Answer

Outsourcing can help Echo Corporation to eliminate the exposure of assets to political risk, which might have been causing them to lose market share due to increased pricing. By outsourcing, Echo Corporation can transfer the risks associated with manufacturing and sourcing of components to its outsourcing partners, thereby reducing its exposure to political risk. Heightened communication awareness, increased activity in e-commerce sales, and strong intellectual property protection are not directly related to outsourcing manufacturing activities.