Question

Suppose Hewlett-Packard is considering outsourcing its telephone- based technical support functions for its printers to India. The hourly cost of a tech support person in the United States is $ 50 per hour. In India workers are paid in rupees but, at the current exchange rate, cost the equivalent of $ 20 per hour. However, calls serviced in India require paying for long-distance telephone service. Initially the telephone costs were about $ 35 per hour. However, a switch to voice over Internet protocol (VOIP) technology reduced the telephone cost to $ 25 per hour. Explain how the technological change affects the decision of where to base service. How much would the Indian currency (the rupee) have to rise in value (in percentage terms) for Hewlett-Packard to keep the service activity in the United States even after telephone time falls in price?



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  • CreatedNovember 13, 2014
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