Management Information System (MIS) Practice Exam

Which example illustrates outsourcing?

1. Volkswagen acquires a steel manufacturing plant to reduce its overall production costs.

2. Dell sources computer parts from suppliers located in Russia.

3. Microsoft hands over its customer service function to Convergys, located in India.

4. Audi starts a manufacturing facility in China to take advantage of low labor costs.

The correct answer is: Microsoft hands over its customer service function to Convergys, located in India.

The example where Microsoft hands over its customer service function to Convergys, located in India, effectively illustrates outsourcing because it involves delegating specific business processes to an external service provider. Outsourcing is a practice where a company contracts another organization to handle certain business tasks, allowing the company to focus on its core competencies while potentially reducing operational costs. In this scenario, Microsoft is not only transferring a function (customer service) but is also leveraging the expertise and operational efficiencies of a specialized firm (Convergys) to manage that function, often resulting in enhanced service quality and customer satisfaction. This arrangement allows Microsoft to benefit from a global labor market, where it can find skilled personnel at competitive rates, thus optimizing its operational strategy. The other scenarios provided reflect different business strategies. Acquiring a steel manufacturing plant demonstrates vertical integration rather than outsourcing, as the company is bringing that function in-house. Sourcing computer parts from Russian suppliers falls under procurement or supply chain management, which is not the same as outsourcing; it pertains to purchasing materials from external vendors rather than contracting services. Opening a manufacturing facility in China relates to offshoring, which is the relocation of business processes to another country but does not involve contracting another company to perform those functions. Each of these choices