2.9 Ranga Ramasesh is the operations manager for a firm that is trying to decide
ID: 395669 • Letter: 2
Question
2.9 Ranga Ramasesh is the operations manager for a firm that is trying to decide which one of four countries it should research for possible outsourcing providers. The first step is to select a country based on cultural risk factors, which are critical to eventual business success with the provider. Ranga has reviewed outsourcing provider directories and found that the four countries in the table that follows have an ample number of providers from which they can choose. To aid in the country selection step, he has enlisted the aid of a cultural expert, John Wang, who has provided ratings of the various criteria in the table. The resulting ratings are on a 1 to 10 scale, where 1 is a low risk and 10 is a high risk. John has also determined six criteria weightings: Trust, with a weight of 0.4; Quality, with 0.2; Religious, with 0.1; Individualism, with 0.1; Time, with 0.1; and Uncertainty, with 0.1. Using the factor-rating method, which country should Ranga select? Px ..Explanation / Answer
Solution:
1 = Low risk
10 = High risk
This means that the country with the lowest weighted risk score will be selected by Ranga.
Using the factor-rating method, the weighted risk score for each of the identified country is calculated as below:
Weighted risk score = Sum of (Weight x Individual rating)
1) Mexico:
Weighted risk score = [(0.4 x 1) + (0.2 x 7) + (0.1 x 3) + (0.1 x 5) + (0.1 x 4) + (0.1 x 3)]
Weighted risk score = 3.3
2) Panama:
Weighted risk score = [(0.4 x 2) + (0.2 x 10) + (0.1 x 3) + (0.1 x 2) + (0.1 x 6) + (0.1 x 2)]
Weighted risk score = 4.1
3) Costa Rica:
Weighted risk score = [(0.4 x 2) + (0.2 x 9) + (0.1 x 3) + (0.1 x 4) + (0.1 x 7) + (0.1 x 4)]
Weighted risk score = 4.4
4) Peru:
Weighted risk score = [(0.4 x 1) + (0.2 x 10) + (0.1 x 5) + (0.1 x 8) + (0.1 x 3) + (0.1 x 2)]
Weighted risk score = 4.2
Conclusion: On the basis of the weighted risk score, Ranga should select Mexico because it has the lowest weighted risk score of 3.3.
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