A company considers moving a portion of its production to a distant country to support a major customer. Which of the following actions is most effective in mitigating the risk of financial loss in the event of a global economic downturn?
Risk Mitigation in Global Economic Downturn: Diversification is a key strategy to mitigate financial risk during economic downturns.
Actions Considered:
Expanding the Customer Base Globally: Diversifies revenue streams, reducing dependency on any single market, thus spreading risk.
Reducing the Global Workforce: May reduce costs but doesn't address revenue risks and could harm operational capacity.
Reducing Prices of All Products: Could lead to decreased margins and isn't sustainable long-term.
Adding Features for All Products: Increases costs and may not align with market demand during a downturn.
Conclusion: Expanding the customer base globally is the most effective action to mitigate financial loss by spreading revenue sources and reducing dependency on a single market.
References
"Global Supply Chain Management: Leveraging Processes, Measurements, and Tools for Strategic Corporate Advantage" by G. Tomas M. Hult, David J. Ketchen Jr., and Elnora W. Stuart.
APICS Dictionary, 16th Edition.
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