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A drink manufacturer finds setting up a plant to make its own bottle caps expensive and technically difficult. Which of the following will be most helpful in solving the manufacturer's problem?

A. Outsourcing
B. Achieving economies of scale
C. Lowering input costs
D. Increasing bargaining power
E. Going for a vertical integration with a distributor

User Nebuto
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Final answer:

Outsourcing the production of bottle caps is the most helpful option for a drink manufacturer that finds setting up a plant for this purpose expensive and technically difficult. It allows the company to avoid the complexities and costs of manufacturing caps in-house.

Step-by-step explanation:

A drink manufacturer finding the setup of a plant for making its own bottle caps expensive and technically difficult should consider outsourcing as the most helpful solution. Outsourcing would enable the company to procure bottle caps at a potentially lower cost and avoid the complexities of setting up a special plant. This is consistent with the business practice of focusing on less expensive inputs when a particular input becomes too costly, as exemplified by multinational companies adjusting their production technologies depending on labor costs across different countries.

While economies of scale might reduce costs per unit as production volume increases, it requires the manufacturer to actually be in the business of making caps, which is the problem they're trying to solve. Similarly, vertical integration with a distributor wouldn't address the immediate technical and financial challenges of cap production. Reducing input costs and increasing bargaining power can be strategic long-term objectives, but they don't provide a direct solution to the manufacturing difficulty.

User Zhengtonic
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