Audio Component Outsourcing (Scenario)

question 23

Multiple Choice

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 is a major challenge often faced by focal firms that engage in global sourcing?

• A) no control over the quality of outputs
• B) domestic management of local distribution
• C) increased costs of business travel
• D) lower-than-expected cost savings

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Definitions:

Real GDP

Real Gross Domestic Product, indicating the total value of all produced goods and services in an economy for a year, adjusted to account for inflation, thereby showing true economic value.

Price Level

Calculating the average price across every good and service in the economy's production.

GDP Deflator

A measure of the level of prices of all new, domestically produced, final goods and services in an economy in a year, used to deflate or adjust GDP for inflation.

GDP Deflator

An indicator that measures the pricing of all new, domestically made, final goods and services in an economy.