Which of the Following Is a Disadvantage of Outsourcing Production

question 116

Multiple Choice

Which of the following is a disadvantage of outsourcing production to independent suppliers?

• A) It makes it necessary for firms to invest in specialized assets.
• B) It reduces the strategic flexibility of a firm by limiting its ability to adapt during changes in exchange rates.
• C) It increases the risk of suppliers expropriating a firm's proprietary product technology for their own use.
• D) It increases the bureaucratic inefficiencies and costs associated with transfer pricing decisions.
• E) It makes it difficult to achieve coordination in an organization by increasing the number of subunits in it.

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Definitions:

Price of Corn

The monetary value at which corn can be bought or sold in the market.

Financial Risk Management

The practice of protecting economic value in a firm by using financial instruments to manage exposure to risk.

Hedging

Hedging is an investment strategy used to minimize the risk of adverse price movements in an asset, typically by taking an offsetting position in a related security.

Risk Profile

An evaluation of an individual or organization's willingness and ability to take risks, often influencing investment choices.