Globalization of Production

Question 1

Identify and describe the two major ways goods may be acquired internationally.

Answer 1

1. Foreign outsourcing - acquiring goods from foreign suppliers
2. Foreign direct investment - producing goods in facilities owned or controlled by U.S. companies but located in foreign countries

Question 2

Identify risk encountered when engaged in foreign outsourcing.

Answer 2

1. Quality risk - goods/services so not meet buyer’s standards
2. Security risk - foreign provider misappropriates proprietary information
3. Export/Import risk - trade barriers prevent transfer of goods/services
4. Currency exchange risk - exchange rates change unfavorable
5. Legal risk - home country or foreign country laws are violated