What can capture efficiencies of scale, particularly for small companies, and avoid large investments in equipment and software, as well as ensuring standard procedures?

Question

Options

• AOutsourcing
• BInternal auditing
• CInternal control
• DExternal relationships

• A
  71% (39)
• B
  7% (4)
• C
  5% (3)
• D
  16% (9)

Explanation

Outsourcing allows companies - especially small ones - to delegate functions like IT, accounting, or HR to specialized third-party providers who already have the infrastructure, expertise, and standardized processes in place. This eliminates the need for costly upfront investments in equipment, software, and training, while the provider's established workflows enforce consistent, standard procedures across the client's operations.

Why the distractors are wrong:

• B (Internal auditing) evaluates and monitors existing controls - it doesn't eliminate infrastructure costs or create efficiencies of scale.
• C (Internal control) refers to policies and procedures a company implements itself; it requires internal resources and doesn't offload investment costs.
• D (External relationships) is too broad and vague - partnerships or supplier relationships don't inherently provide standardized processes or scale economies.

Memory tip: Think of outsourcing as "renting expertise at wholesale prices" - small companies piggyback on a provider's scale, paying only for what they use rather than building and maintaining it themselves.

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