A Controversial Topic Of Outsourcing To Foreign Countries
It is heard in the news all the time, “China is stealing our jobs”. The reality of it is that U. S. companies want to manufacture as fast and cheap as they can. By offering quick and efficient manufacturing, China and other foreign countries make themselves a more desirable location, thus leaving American companies with no choice but to outsource to them. With both positive and negative benefits, outsourcing to foreign countries is the one of the largest reasons for losses of American jobs. Lee Kuan Yew, former prime minister of Singapore, which is one of the most popular locations for outsourcing, said it best when he said, “If you deprive yourself of outsourcing and your competitors do not, you're putting yourself out of business. ” The main and most important reason is cost effectiveness. Businesses need money and foreign countries save them money, so quite frankly, U. S. businesses are drawn to foreign outsourcing. “The most common reason for outsource manufacturing is the reduction of cost. American companies outsource manufacturing to China to have their goods assembled, or completely built overseas, at incredibly low costs. ”
Many foreign countries are able to provide such cheap work simply because of the wage at which they pay their workers. Although China provides jobs for over 250,000 middle class workers, there is still over 10 million citizens in poverty. Another reason that many companies choose foreign outsourcing, is because of the quantity they can produce and the small amount of time they can get it done in. When small companies suddenly need bigger quantities than they can produce, foreign manufacturers can get the product out quicker and cheaper than anywhere in the United States. Apple, Walmart, and Nike are amongst the biggest companies that do the most overseas manufacturing. By taking advantage of the cheap and effective foreign labor, these companies optimize their productivity and profit margins. ”
There are literally thousands of companies that opt to outsource part or all of their manufacturing to overseas companies, with China being the primary source of overseas manufacturing. ” Along with cheaper and faster labor, outsourcing to China exposes companies to the international market. With knowledge about foreign markets, companies are able to target specific niches of the market and ultimately expand their product on a global scale. “When you have the manufacturing team based in China, you additional insights into foreign markets.
Most companies who manufacture products in this country are likely to diversify their reach and try some of the common local products and this can help in improving your business growth. ” The human and physical capital that the Chinese have obtained is a major help to the outsourced companies. Instead of having to train new workers and come up with new designs, the foreign workforce has plenty of experience to begin work faster and more precise. “But for whatever it is that you're manufacturing, you don't always need to reinvent the wheel, at least for some of it.
For example, if you're manufacturing shirts and you like the fit of Shirt Brand ABC, then buying Shirt Brand ABC and asking your Chinese factory to duplicate its dimensions and fit is an easy way to begin your product-building process. ” Money saved and profit margins increased is the leading factors for companies to outsource to China, but this may come at various costs. These costs include quality control, communication gaps, and even ethical dilemmas. Although China’s capital saves companies money and time, there are many risks involved also.
First off, quality control can be a hard variable to manage. Being half way around the world, it is not always possible to have eyes in the sky. “China can appear very impressive on the surface in that many products look good, but the many standards and regulations differ from American ordinances. That’s why it’s important to have an agent in China that can make sure everything is up to par. ” Basic cultural differences can inhibit productivity with a result of a lack of communication. If the workers only speak Chinese and the boss only speaks English, inevitably, there will be a communication gap. On the same note, with over hundreds of employees in one building, and only one boss, delegation of responsibilities can be a hard factor to manage, again resulting in a lack of communication and productivity. Also, simply finding a factory to work from can be difficult.
Although there is many spaces available, as labor regulations continue to develop and change, companies have to take precautions about the conditions of their warehouse environment and workers. Legal trouble is the last thing companies want to be in. Not only legal trouble can result in a drop of sales, ethical issues can play a factor into whether or not consumers choose to purchase a certain product. An example would be in the 1990’s when Nike was under heat for using overseas sweatshops to manufacture their product. Although legally Nike did not own or manage the sweatshops, consumers frowned upon them for using them unethically to increase profits. Overall, this negatively affected Nike’s sales through protests and boycotts by the public worldwide.
H&M has been in the news recently for a “racist” photograph they undeliberately put out. It was an advertisement for a new sweatshirt they were going to come out with. The photo was a young black boy wearing a sweatshirt that read “Coolest monkey in the jungle”. People blew up about it, bashing on H&M for ever letting it reach the market. This is not the only unethical act that H&M, one of the top five fashion brands, has been associated with, they are known to benefit from unsafe sweatshops in locations such as Cambodia, Thailand, and China.
Overall, as companies look to increase profit margins, some sacrifice their ethical integrity for faster and cheaper production. From the perspective of consumers, foreign manufacturing is arguably more beneficial to them than the companies creating the product themselves. It allows suppliers to provide goods at a significantly lower price, thus saving consumers money as well. On the other hand, price is not always the most important factor when consumers decide which product to buy. Again, Nike is a prime example of how even the highest quality of clothing can get turned away by consumers on account of the means in which they are produced. From a more broad perspective, outsourcing to China means less jobs in America. This could potentially have a direct negative effect on the U. S. economy. “Jobs outsourced to China have diminished American employment opportunities and have helped contribute to wage erosion since 2001”.
With recent changes in presidency, Trump has tried hard to bring jobs back to America. He has does this through corporate tax cuts, taking them from 35% all the way down to 21%. Not only does this save companies money, it also allows them to bring operations back into the country, reinvest the extra money in domestic economy, and compete with other companies on a global level. Apple, one of the United States biggest overseas outsourcer, is a prime example of how domestic jobs are lost to foreign countries. If the company had the ability to keep jobs inside the United States without cutting into their profits, they surely would.
Some people believe that foreign outsourcing should be encouraged on account of the fact that companies have the right to do as they wish. Joseph Stiglitz, a renowned professor and American economist at the University of Colombia put it into his own words saying. “Under the rule of law, if the government wants to prevent firms from outsourcing and offshoring, it enacts legislation and adopts regulations to create the appropriate incentives and discourage undesirable behaviour. It does not bully or threaten particular firms or portray traumatised refugees as a security threat. ” In other words, he believes government needs encourage domestic manufacturing as Trump has, by creating the correct legal abilities and encouraging through physical benefits, not by simply telling companies what to do, but to literally make it more beneficial for them.
Outsourcing to foreign countries has and will always be a controversial topic. Companies want to save as much money as they can, even with possibly sacrificing a few moral values. From the foreigners perspective, no matter the conditions, they are satisfied with the fact that they simply have a job where they can earn money to feed their families and such. The fact of the matter is, as long as American companies continue to benefit from foreign manufacturing, they will continue to take advantage of it. All in all, Larry Elder, who hosts one of the most successful talk shows on American air today, he summed it up best when he said, “Outsourcing and globalization of manufacturing allows companies to reduce costs, benefits consumers with lower cost goods and services, causes economic expansion that reduces unemployment, and increases productivity and job creation. ”