Outsourcing

question 7

Multiple Choice

Outsourcing:

• A) is often chosen as a way for the organization to reduce or control operating costs, improve company focus, and gain access to world-class capabilities.
• B) is a low risk venture because the firm can always revert back to performing the function in-house at low cost.
• C) occurs primarily in large manufacturing firms in the private sector, but is rarely practiced in public purchasing.
• D) usually results in increased hiring to attain expertise that the organization does not already possess.
• E) decisions are based on financial factors that most organizations can easily access through their accounting system.

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Definitions:

Paradox of Voting

The situation where individual rationality leads to a collective decision that is worse for everyone involved.

Principal-agent Problems

Situations where there is a conflict of interest between a principal (such as an owner or shareholder) and an agent (such as a manager), due to diverging goals or asymmetrical information.

Industrial Regulation

Government rules and regulations aimed at controlling the activities, standards, and behaviors within specific industries to ensure fairness, safety, and competition.

Natural Monopoly

A market condition where a single supplier is most efficient in providing goods or services due to high fixed or startup costs.