Deck 17: Global Sourcing

Question 1

All business activities and processes lend themselves to global sourcing.

Answer 1

False

Question 2

Global sourcing has gained momentum in the current phase of globalization.

Answer 2

True

Question 3

The likelihood of a firm internalizing research and development instead of outsourcing it is low.

Answer 3

False

Question 4

Captive sourcing is an arrangement in which the focal firm contracts with an independent supplier to manufacture products according to well-defined specifications.

Question 5

Front-office activities typically include internal, upstream business functions.

Question 6

As a strategic asset, manufacturing of products is of high importance to a firm.

Question 7

The likelihood of a firm internalizing marketing and branding instead of outsourcing it is high.

Question 8

Industries that benefit the most from global sourcing are characterized by low labor intensity in product and service production.

Question 9

Global sourcing hinders firms from freeing expensive analysts, engineers, and managers from routine tasks.

Question 10

Transformational outsourcing suggests that just as the firm achieves gains in efficiency, productivity, quality, and revenues by leveraging offshore talent, it also obtains the means to turn around failing businesses, speed up innovation, restructure operations, and fund otherwise-unaffordable development projects.

Question 11

Typically, firms tend to concentrate research and development activities abroad rather than in their home countries.

Question 12

Firms usually internalize those value-chain activities they consider part of their core competencies.

Question 13

Offshoring is common in the service sector, including banking, software code writing, legal services, and customer-service activities.

Question 14

As a strategic asset, research and development is of low importance to a firm.

Question 15

Back-office activities consist of downstream, customer-related services.

Question 16

In advanced economies, firms generally do not outsource value-chain activities because they fear the loss of proprietary knowledge and trade secrets.

Question 17

Global sourcing improves agility by shedding unnecessary overhead.

Question 18

Given the complexities of international business, manufacturing is generally the only value-chain activity that firms outsource abroad.

Question 19

The recent economic turndown is expected to pressure advanced-economy firms to seek further ways to reduce costs.

Question 20

Front-office activities cannot be classified under BPO.

Question 21

If a computer contains a microprocessor from Costa Rica and a hard disk drive from the Philippines, the computer manufacturer, who is based in Texas and operates across Europe and West Asia, most likely uses ________ as an entry strategy.

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

Question 22

Global sourcing eliminates the possibility of new rivals being created in a country.

Question 23

Environmental challenges of global sourcing include currency fluctuations, tariffs and other trade barriers, and adverse macroeconomic events.

Question 24

Fun Play Global Sourcing (Scenario)
Fun Play Inc., a company manufacturing toys for children, 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 its managers. The consulting firm has been assigned the task of determining which activities should be outsourced and where the outsourced activities should be located.
Which of the following would most likely be considered by the consultants while deciding whether to keep each value-adding activity in the home country or locate it in a foreign country?

A) Who will be responsible for training suppliers in foreign locations?
B) Can different value-adding activities be effectively configured across the world?
C) Would the HR department of Fun Play be able to ensure smooth repatriation for managers after they complete their assignments abroad?
D) What is the odds in favor of Fun Play's dominating the children's toy segment in its home country?

Question 25

Providing after-sales service is typically the activity of a supplier.

Question 26

If Fun Play decides to source from its own wholly owned subsidiary, it would be engaging in ________.

A) offshoring
B) contract manufacturing
C) cause marketing
D) captive sourcing

Question 27

The more diverse the firm's global supply chain, the lesser the cost of logistics.

Question 28

Focal firms typically source from external suppliers for all of the following reasons EXCEPT ________.

A) the product or service obtained is non-core
B) the product can be purchased inexpensively
C) the supplier specializes in providing the product or service
D) the supplier offers the same product to competing firms

Question 29

Value chain is the collection of logistics specialists and activities that provides inputs to manufacturers or retailers.

Question 30

A global supply chain is the compilation of business activities intended to create, produce, advertise, deliver, and support a focal firm's product or service.

Question 31

Fun Play Global Sourcing (Scenario)
Fun Play Inc., a company manufacturing toys for children, 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 its managers. The consulting firm has been assigned the task of determining which activities should be outsourced and where the outsourced activities should be located.
Which of the following is most likely to be the consultants' utmost concern while deciding if clothing for Fun Play dolls needs to be outsourced?

A) Is doll clothing part of Fun Play's core competencies?
B) What kind of fabric is used for clothing Fun Play dolls?
C) Do the competitors of Fun Play outsource accounting activities abroad?
D) Does Fun Play intend to follow a strategy of product diversification in the near future?

Question 32

International logistics usually make use of a single transportation mode.

Question 33

Countries with weak legal environments can erode key strategic assets of firms.

Question 34

Most companies cite cost cutting as the main reason for global sourcing.

Question 35

Offshoring is a process of creative destruction; according to this view, firms' innovative activities tend to make mature products obsolete over time.

Question 36

The procurement of selected value-adding activities, including production of intermediate goods or finished products, from independent suppliers is known as ________.

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

Question 37

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

Question 38

Which of the following is the best example of a back-office BPO activity?

A) customer service
B) billing
C) marketing
D) technical support

Question 39

Close collaboration with suppliers in codevelopment and codesign activities enables the focal firm to continuously tap ideas for new products, processes, technologies, and improvements.

Question 40

Which of the following is true with regard to global sourcing?

A) Global sourcing has declined significantly in the current phase of globalization.
B) Global sourcing is a low-control strategy in which the focal firm sources from independent suppliers through contractual agreements.
C) Global sourcing refers to the relocation of a business process or entire manufacturing facility to a foreign country.
D) Global sourcing does not represent the firm's initial involvement in international business.

Question 41

The strategic view of global sourcing suggests that ________.

A) just as firms achieve gains in efficiency, productivity, quality, and revenues by leveraging offshore talent, they also obtain the means to turn around failing businesses, speed up innovation, restructure operations, and fund otherwise-unaffordable development projects
B) firms that procure supplies from foreign subsidiaries are more likely than not to lose ground to competitors who primarily bank on their own resources
C) a strong legal environment is not the prerequisite for increasing efficiencies by relocating strategic operations abroad
D) the firms' innovative activities tend to make mature products obsolete over time

Question 42

The growth of global sourcing has been driven by ________.

A) the declining demand for highly skilled workers
B) the rapidly aging population in advanced economies
C) technological advances in communications
D) the rising costs of international business

Question 43

The relocation of a business process or entire manufacturing facility to a foreign country is known as ________.

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

Question 44

Which of the following is true with regard to offshoring?

A) Offshoring is common in the service sector, including banking, software code writing, legal services, and customer-service activities.
B) Russia is the current leader in the processing of advanced economies' relocated business services.
C) Offshoring substantially reduces the overall efficiency of MNEs.
D) With rapid globalization and internationalization of businesses, offshoring is a visibly declining trend.

Question 45

As a strategic asset, ________ is of the lowest importance to a firm.

A) customer service
B) R&D, design
C) manufacturing of parts
D) marketing and branding

Question 46

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 a benefit of global sourcing?

A) bridging of the rich-poor divide
B) minimal reliance on suppliers
C) access to qualified personnel abroad
D) elimination of competitors

Question 47

Which of the following activities is highly important to firms as a strategic asset?

A) manufacturing of parts
B) customer service
C) sales and distribution
D) marketing and branding

Question 48

________ refers to sourcing from the firm's own production facilities.

A) Captive sourcing
B) Crowdsourcing
C) Business process outsourcing
D) Externalization

Question 49

________ is a key player in global sourcing in South Asia.

A) Mongolia
B) North Korea
C) the Philippines
D) Pakistan

Question 50

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 would be most important to determine in deciding whether to outsource some of Echo's value-chain activities?

A) What are the long-term strategic goals and objectives of Echo?
B) Do engineers working in Echo have the ability to speak one or more European languages?
C) Are Echo employees generally afforded a high degree of workplace freedom?
D) Does Echo intend to increase its annual budget for innovation?

Question 51

________ is the primary rationale for sourcing abroad.

A) Superior quality control
B) Centralized management of work teams
C) Cost efficiency
D) Uninterrupted innovation

Question 52

The pattern or geographic arrangement of locations where the firm carries out value-chain activities is known as ________.

A) configuration of value-adding activity
B) internalization
C) visual merchandising
D) disintermediation

Question 53

Which of the following nations is a popular base for technical and user-support services for English-, French-, and German-speaking customers throughout Europe?

A) Saudi Arabia
B) the United States of America
C) South Africa
D) Germany

Question 54

Contract manufacturing can best be defined as ________.

A) the outsourcing to independent suppliers of business service functions such as accounting, payroll, human resource functions, travel services, IT services, customer service, or technical support
B) the relocation of a business process or entire manufacturing facility to a foreign country
C) sourcing from the firm's own production facilities
D) an arrangement in which the focal firm contracts with an independent supplier to manufacture products according to well-defined specifications

Question 55

The likelihood of internalizing ________ rather than outsourcing it is considerably high.

A) R&D
B) manufacturing of parts
C) sales and distribution
D) customer service

Question 56

Which of the following statements is true with regard to the R&D activities of a firm?

A) As a strategic asset, R&D activities are of moderate importance to the firm.
B) R&D activities are usually concentrated at home.
C) R&D activities have a low likelihood of being internalized.
D) R&D activities have a high likelihood of being outsourced.

Question 57

Which of the following most likely explains why India is a popular offshoring destination?

A) total absence of trade unions
B) inexpensive land available for developing new MNE facilities
C) lack of educated engineers, managers, and other specialists
D) skilled workers who work for low wages

Question 58

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 a potential benefit that Echo can derive from global sourcing?

A) cheap R&D
B) access to qualified personnel in the home country
C) strong intellectual property protection
D) improved productivity and service

Question 59

Business activities that would most likely be offshored are characterized by ________.

A) high-value-adding activities that contribute more productively to increasing company performance
B) services related to critical, 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 60

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, if true, most supports the argument in favor of global sourcing?

A) There is no scarcity of qualified personnel in and around Boston.
B) Studies show that by reconfiguring their value-chain systems or reengineering their business processes, companies can substantially improve their production efficiency and resource utilization.
C) Camden Audio, Echo's most formidable rival, follows a strategy of product diversification.
D) The rate of employee turnover at Echo has stabilized over the last decade.

Question 61

Distinguish between captive sourcing and contract manufacturing.

Question 62

Which of the following refers to a risk, stemming from environmental factors, that is closely associated with global sourcing?

A) weak intellectual property laws
B) overreliance on suppliers
C) high energy costs
D) rapid turnover of skilled employees

Question 63

Critics of global sourcing maintain that it ________.

A) leads to reduced national competitiveness
B) results in job losses in host countries
C) enhances standards of living
D) causes production to drop drastically

Question 64

Global sourcing becomes a catalyst to overhaul organizational processes and company operations and increases the firm's overall competitive advantages by ________.

A) encouraging firms to train unskilled labor through extensive training programs
B) allowing firms to free expensive analysts, engineers, and managers from routine tasks to spend more time on high-value-adding activities
C) relaxing quality standards
D) installing a system of rewards to motivate employees

Question 65

A focal firm's overreliance on suppliers can potentially lead to ________.

A) reduced control over important value-chain tasks
B) added competitive advantage for the focal firm
C) an excessive burden on home-country suppliers
D) consolidation of the focal firm's network of intermediaries

Question 66

A ________ is the firm's integrated network of sourcing, production, and distribution, organized on a worldwide scale and located in countries where competitive advantage can be maximized.

A) demand chain
B) buying center
C) global supply chain
D) decision making unit

Question 67

Global Sourcing Debate (Scenario)
Prof. Sean Peterson's class of international business has been studying the controversies surrounding global sourcing. Prof. Peterson divided the class into two groups, A and B. Group A was assigned the task of defending global sourcing, whereas Group B was assigned the task of arguing against global sourcing.
How do firms decide whether or not to outsource? In a short essay, describe the factors that contribute to the decision to internalize or externalize business activities.

Question 68

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 69

Which of the following is a major challenge often faced by focal firms that engage in global sourcing?

A) no control over the quality of outputs
B) domestic management of local distribution
C) increased costs of business travel
D) lower-than-expected cost savings

Question 70

What is offshoring? Describe the types of industries that tend to offshore. What industries are not conducive to offshoring and why not?

Question 71

What are the benefits of global sourcing?

Question 72

An American company that planned to outsource IT development would be most likely to save significantly in salary costs by hiring qualified professionals from ________.

A) Hong Kong
B) Philippines
C) the United States of America
D) Germany

Question 73

Which of the following is most likely to occur if a U.S. firm outsources some of its business operations to a Japanese company, and the Japanese yen strengthens against the dollar?

A) The probability of intellectual property laws being enforced would significantly decrease in Japan.
B) The U.S. company will experience additional cost savings in using the services of the Japanese company.
C) Outsourcing business operations to Japan would become less expensive.
D) The U.S. company will experience higher costs in using the services of the Japanese company.

Question 74

Global Sourcing Debate (Scenario)
Prof. Sean Peterson's class of international business has been studying the controversies surrounding global sourcing. Prof. Peterson divided the class into two groups, A and B. Group A was assigned the task of defending global sourcing, whereas Group B was assigned the task of arguing against global sourcing.
The concept of creative destruction can be reasonably used by Group A to support the view that ________.

A) firms that engage in offshoring are more likely than not to fail in the long run
B) offshoring forces unskilled workers to seek additional education
C) global sourcing creates opportunities and stimulates innovation
D) outsourcing technical jobs leads to brain drain

Question 75

In a short essay, describe three key drivers responsible for the recent growth of global sourcing.

Question 76

When outsourcing, managers can minimize the risk of creating employee tension by ________.

A) increasing the number of junior managers for foreign assignments
B) increasing the annual training budget
C) sending domestic managers to foreign countries for training
D) reaching a consensus of managers and labor

Question 77

To maximize returns, management should outsource those activities ________.

A) that offer great value to the bottom line
B) in which it is relatively weak
C) that are critical to the firm's core competencies
D) in which it has the greatest expertise and knowledge

Question 78

In a short essay, discuss three advantages and three disadvantages of China as a location for global sourcing.

Question 79

Global Sourcing Debate (Scenario)
Prof. Sean Peterson's class of international business has been studying the controversies surrounding global sourcing. Prof. Peterson divided the class into two groups, A and B. Group A was assigned the task of defending global sourcing, whereas Group B was assigned the task of arguing against global sourcing.
Which of the following propositions would most likely be presented by Group B?

A) Global sourcing adversely affects national competitiveness.
B) Global sourcing improves the efficiency of manufacturing firms.
C) Global sourcing empowers workers in general.
D) Global sourcing is usually undertaken by focal firms to increase efficiency.

Question 80

Which of the following is true with regard to strategies for minimizing the risks of global sourcing?

A) To ensure the success of sourcing ventures, the focal firm must exercise great care to identify and screen potential suppliers and then monitor the activities of those suppliers from which it sources.
B) To maximize returns and minimize risks, management should outsource core business operations.
C) Because production quality in an emerging market rarely varies over time, managers at the focal firm are not obliged to closely monitor manufacturing processes.
D) Firms must refrain from maintaining their own sourcing operations abroad in order to trim costs and minimize risks stemming from frequent currency fluctuations.