Question

"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."

Answer 1

The argument for global sourcing in Echo Corp.'s scenario is best supported by the potential for improved production efficiency and cost savings through global outsourcing and offshoring. Option B, which discusses reengineering business processes for efficiency, aligns most closely with this rationale.

Step-by-step explanation:

When considering the scenario of Echo Corp., a Boston-based manufacturer of high-quality audio components facing competitive pressures, the most supportive argument for global sourcing is option 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." This statement directly connects to the possibility that global sourcing can help a company like Echo Corp. become more competitive by enhancing production efficiency and cutting costs without sacrificing quality. Outsourcing and offshoring to countries with cheaper labor and streamlined production can lead to significant cost savings and allow firms to maintain or even improve the quality of their products through global efficiency.

In contrast, the other options do not directly support the argument for global sourcing. Option A is irrelevant to global sourcing since it does not address the issue of cost competitiveness. Option C deals with a competitor's strategy that is not relevant to sourcing decisions, and option D about employee turnover stability is unrelated to sourcing strategies aimed at improving competitiveness.