Outsourcing is also known as contracting out. Which statement best defines outsourcing?

• A. The organization arranges for another organization to carry out certain activities for them
• B. The organization merges with another firm
• C. The organization divests assets
• D. The organization expands into a new market internally

Answer: (A)

Outsourcing means you contract out work to another organization to carry out specific activities on your behalf, while you retain responsibility for the outcome and manage the relationship through a contract. This is exactly what the option describes: the organization arranges for another organization to perform certain activities for them. This can happen with functions like IT support, payroll, or manufacturing, often to access specialized skills or reduce costs while letting the company focus on its main offerings.

Merging with another firm would create a single combined entity, not simply contract out work. Divesting assets means selling parts of the business. Expanding into a new market internally refers to growth done within the organization itself, not via an outsourced arrangement.