Question

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."

Answer 1

The true statement regarding the risks of global sourcing is that bureaucratic and legal hurdles in foreign countries complicate operations. These challenges include navigating complex legal systems and regulations, which can hinder efficiency and increase costs for businesses. The correct option is a.

Step-by-step explanation:

With regard to the risks of global sourcing, the statement that is true is: Inadequate legal systems, red tape, convoluted tax systems, and complex business regulations complicate local operations in many countries.

This reflects the reality that businesses often encounter various bureaucratic and legal obstacles when setting up operations abroad, which can include dealing with unfamiliar and sometimes contradictory regulations, as well as facing difficulties protecting intellectual property rights.

On the other hand, sourcing from countries with strengthening currencies does not lead to lower costs; it actually increases the expenses for the sourcing firm due to the higher costs of purchasing in the stronger currency.

Additionally, global sourcing does not necessarily weaken competition; instead, it can intensify it by adding more players to the market.

Finally, environmental challenges related to global sourcing can indeed include currency fluctuations, tariffs, and other trade barriers, in addition to high energy and transportation costs. The correct option is a.