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Answers of good hopes for global outsourcing:

1. What motives and specific strategic goals can Good Hope achieve by outsourcing to
India? Identify strategic goals that Good Hope could potentially achieve in the future
Good Hope Hospitals, Inc. (Good Hope) is a chain of nine hospitals in California. Andy
Delgado is Good Hopes Vice President for Finance and Accounting, and Joy Simmons is the
senior manager of Information Technology. The two executives needed to make significant cuts
in operational costs in their respective areas.
Extremely reluctant to lay off workers, they mutually agreed on a plan to outsource some work
now done by contractors in California to less expensive suppliers located abroad. Good Hopes
ongoing business processes could be outsourced, including data processing for accounts
receivable and accounts payable, certain customer service applications, transcription of medical
records, and some data processing. Both managers had heard about the benefits of global
sourcing but neither knew how to proceed. They began to research their options.

2. What are the specific risks that Good Hope faced and potentially faces in outsourcing the
activities to India?
Delgado and Simmons learned that services are often more challenging to outsource than
manufacturing. This is partly because it is usually more difficult to judge the quality of services
than that of manufactured products. Firms that use global sourcing sign legal contracts with
suppliers binding themselves to deliver promised levels of service.
To achieve satisfactory outcomes, the contracting firm should emphasize developing trust and
understanding with the supplier, especially critical in cross-cultural settings. Delgado and
Simmons wondered about the enforceability of legal agreements in different country settings.
Another potential concern was the quality of workers. Some foreign suppliers cannot hire a
sufficient number of skilled managers to oversee the work performed by their staffs. Workers
must be trained, supervised, and properly motivated.

3. What specific guidelines should management at Good Hope have taken into account as it
ventured into global sourcing? What should Good Hope do now to resolve the problems
it faces in outsourcing to BangSource?

The countrys outsourcing sector had been growing at 25 to 50 percent per year. Indias labor
costs are 25 to 40 percent of those in the United States and English is widely spoken. The team
learned that reputable firms such as IBM, Dell, and Citicorp had offshored numerous service
operations to India
Their investigation revealed that China was also a potential destination. The country has millions
of suitable workers and is soon expected to rival India as a provider of services such as insurance
underwriting and back-office operations. Outsourcing costs are currently lower in China than in
India. However, China has a reputation for excessive regulation and bureaucracy. Delgado and
Simmons wondered if they could develop sufficient trust and understanding with partners in an
unfamiliar and distant culture with language differences.
Delgado and Simmons also considered sites in Latin America such as Chile, Mexico, and Costa
Rica. Latin America offered various attractions. In addition to being cost effective, it is
geographically closer to the United States and in the same or nearby time zones. Outsourcing
customer service to Latin America also makes sense to Californians, many of whom speak
Spanish as their first language. Latin Americas outsourcing infrastructure is still young and
Delgado and Simmons worried about whether they could find an appropriate supplier.

4. Suppose that thousands of additional firms in California decided to outsource their backoffice activities (such as accounting, finance, and data analysis) to India. What would be
the implications of such a trend to Californias workers and economy? What steps could
California take to reduce the potential harm to its citizens of widespread global sourcing?
According to the outsourcing broker, BangSource had a good reputation and was already
handling accounting, data processing, transcription, and customer service operations for several
large U.S. hospitals. BangSource expects to pick up many new accounts in Australia, Canada,
and Europe. BangSource is located in one of the fastest-growing areas of Bangalore. The
outsourcing broker confided that although BangSources employee annual turnover rate was 25
percent, this was consistent with other outsourcing firms.
Some had hard-to-understand accents and a few of Good Hopes customers had complained.
Various misunderstandings had arisen between BangSource and Good Hope. The problem was
made worse by recent fluctuations in the rupee-dollar exchange rate, which sometimes inflated
the cost of BangSources services even further.