A financially driven reason for outsourcing is that it can reduce costs through a lower cost structure.Question 38Answera.TRUEb.FALSE

Answer to Question 38

The statement that outsourcing can reduce costs through a lower cost structure is indeed a common motivation for businesses to outsource certain functions or operations. By outsourcing, companies often take advantage of lower labor costs in different geographical locations, as well as reduced overhead costs associated with maintaining full-time employees and facilities.

Analysis

1. Cost Reduction: Outsourcing typically leads to a reduction in costs as firms can hire third-party services that provide the same level of quality at a significantly lower price compared to in-house operations. This is particularly true for companies in high-wage countries that may outsource to countries with lower labor costs.

2. Focus on Core Competencies: By outsourcing non-core functions, companies can focus their resources on strategic initiatives and areas that contribute directly to their competitive advantage.

3. Economies of Scale: Outsourcing can lead to better operational efficiency where specialized firms may achieve economies of scale that individual companies cannot, further reducing costs.

Conclusion

Considering these factors, the correct answer to the question is TRUE. Outsourcing is indeed financially driven as it helps companies to lower their overall cost structure while allowing them to concentrate on their main business objectives.

Final Answer

TRUE