Question

Allied Bank Corp. utilizes the janitorial services of Marie's Clean-It Corp. to keep their buildings clean. Marie's provides all the necessary cleaning supplies, training, background security checks (because the crew works after hours), and all other associated expenses. The other available janitorial services do not typically provide security checks, and a client such as a bank would have to hire guards to watch the work of the janitors. If Allied Bank were to consider hiring another cleaning service to replace Marle's, which of the following would the bank incur?

A. complementary products
B. favorable quality status
C. high switching costs
D. unfavorable supplier status
E. high employment costs

Answer 1

Answer: C. high switching costs

Step-by-step explanation:

Switching costs are the costs that the bank will incur should they decide to change janitorial services. They are higher depending on the services that will have to be replaced by the new janitorial service.

If the new janitorial service is unable to do some of the things that the old one was able to do, then switching costs will be higher.

As this is the case here, should Allied bank consider hiring some other service apart from Marie's Clean-It Corp. which would most likely not offer the security service, Allied bank would face high switching costs.