Conscience or the Competitive Edge - Essay Example

Introduction According to Mintz, “Outsourcing is just another example, like allowing illegal immigrants to receive driver's licenses, of putting economic and political interests ahead of doing the right thing. We need to examine issues like these from an ethical perspective. You know: Is it right or wrong?” (2004, pg. 1) The purpose of this paper is to find a company which has a problem or a success with social responsibility when outsourcing overseas. Then, explain the problems and choices that the company has when it decides to outsource like what it wants to consider or prioritize; discuss whether or not the manager or the representatives of the company are really concerned about the stakeholder condition overseas such as safety, working conditions, cheap labor, and child labor; determine if the manager chooses to only think about maximizing profits and does not care about the welfare of the stakeholders in the foreign country; determine the dilemma and the final decision; and determine what the implications are of that final decision. Discussion For the purposes of this paper, the world-famous Nike Shoes outsourcing case will be used for illustration. Nike most definitely has had a problem with social responsibility when outsourcing overseas. It is understandable that the company would like to earn a profit, and decreasing labor costs is one sure-fire way to do that, but it all came with a large price. Nike ended up over their heads in a short period of time and it took a great deal of repair to come back from the reputation they had created for themselves (Christensen, 1996 and Van Dusen, 1998). According to SourcingMag.com, “Outsourcing is contracting with another company or person to do a particular function. Almost every organization outsources in some way. Typically, the function being outsourced is considered non-core to the business” (2008, pg. 1). One way in which a company can decrease labor costs is to employ workers who work for low wages. This is most often accomplished outside of the United States, because it has a relatively high standard of living. Companies will hire poor workers in foreign, developing countries such as China, India, Indonesia, and South Korea (Christensen, 1996). When an organization chooses to outsource, the dirty work of huge corporations is sub-contracted to these workers and they are often exploited. At first glance, it may appear that bringing jobs to these developing countries is a good thing, but it is not if these workers are being forced to work in sweatshops and similar conditions (Christensen, 1996). In describing the dilemma, Christensen (1996, pg. 1) wrote, “Nike shoes, like those of most of their competitors in the athletic shoewear industry, are currently manufactured by young women in Indonesia who flock from their village homes to the Nike production factories to be paid 20% less than the "minimum physical need" for a single adult (about $2.25 a day). This means that Nike's factory workers are hardly making enough money to eat. Also, these Nike employees sometimes work over 10 hours a day in poorly-ventilated areas. Overall, the working conditions for these factory workers are lousy and Nike continues to ignore the crisis.” At the time of the crisis, the managers and representatives of the company clearly were not concerned about the stakeholder condition overseas such as safety, working conditions, cheap labor, and child labor. They instead only chose to think about maximizing profits and did not care about the welfare of the stakeholder in the foreign country. For a time, the company appeared to try to hide this situation, but before long, things hit the spotlight (Thunderbird, 2004). A company such as Nike can run into a variety of problems when it decides to outsource, like what it wants to consider or prioritize when moving certain operations overseas. First of all, many companies grossly underestimate the time, money, and people that it takes to successfully outsource a portion or all of their operations. In choosing a location, companies must consider which locations have the cheaper labor prices if they are going to save money by outsourcing in the first place. Choosing an area with a high standard of living will end up costing the company way more than what it is worth (DiCarlo, 2004). There is a tremendously big step that is often overlooked when companies are considering outsourcing. According to DiCarlo (2004, pg. 1), “Before deciding on a country or service provider, first determine the cost of running your business processes and what your objectives are. If your service levels and costs are already competitive, it won't make sense to farm it out. Study the expertise of each potential partner, considering proximity, costs, cultural and language barriers, telecom infrastructure and tax laws among other factors, before making a decision. India will not always be the right answer.” One of the most controversial problems that a company will run into when considering outsourcing is the laying off of its workers. New jobs may be created in the foreign country of choice, but that means that jobs are lost at home. This creates former employees who are bitter and demoralized and, worst of all, unemployed (DiCarlo, 2004). Two more problems that companies tend to face when deciding whether or not to outsource are possible risk and competition for talent. If a company has all of its operation in one area and a disaster happens, they will be caught completely offguard in a real crisis. The cost of labor is going up as more and more companies are outsourcing and creating more competition, so at some point, it may not be cheaper to outsource at all (DiCarlo, 2004). Nike.com (2008, pg. 1) states their Corporate Responsibility as, “These impacts come as we've evolved how we frame, define and approach corporate responsibility. We see corporate responsibility as an integral part of how we can use the power of our brand, the energy and passion of our people, and the scale of our business to create meaningful change. So we've set aggressive business targets that embed our corporate responsibility goals into the company's long-term growth and innovation strategies, because we believe there's no better way to achieve them then to tie them directly to our business.” Clearly, they have made a large effort to rebuild their reputation, both in the media and on their own website. When these problems first started to surface, the CEO of Nike and other management officials knew they had to do something fast in order to save their face. They went onto the television and into the radio airwaves vowing to change their ways so that every shareholder could see. It was no longer a matter of denial, but more of an apology and a promise to make things good with those who had been exploited. Nike raised the wages they were paying overseas works and vowed to not hire children or operate sweatshops. They improved the working conditions in their factories so that workers were no longer suffering in a harsh environment. These actions encompassed the final decision made by Nike’s management team. Conclusion Other companies can take a look at what Nike did wrong and how it ruined their reputation, avoid the problems listed above, and be successful in outsourcing. There is nothing wrong with saving money; it is saving money unethically that is wrong. References Christensen, E. (1996). International outsourcing and Nike. Retrieved March 16, 2008, from http://www.lclark.edu/~soan221/96/nike.html DiCarlo, L. (2004). The six most common outsourcing errors. Forbes. Retrieved March 16, 2008, from http://www.forbes.com/2004/05/26/cx_ld_0526mistakes.html Mintz, S.M. (2004). The ethical problems of outsourcing. The San Diego Union-Tribune. Retrieved March 16, 2008, from http://www.signonsandiego.com/uniontrib/20040806/news_lz1e6mintz.html Nike on global economics. (2004). Thunderbird. Retrieved March 16, 2008, from http://www.enewsbuilder.net/thunderbird/e_article000335345.cfm?x=b11,0,w Nike Responsibility. (2008). Nike. Retrieved March 16, 2008, from http://www.nikebiz.com/responsibility/ Outsourcing—What is outsourcing? (2008). SourcingMag.com. Retrieved March 16, 2008, from http://www.sourcingmag.com/content/what_is_outsourcing.asp Van Dusen, S. (1998). The manufacturing practices of the footwear industry: Nike vs. the competition. University of North Carolina. Retrieved March 16, 2008, from http://www.unc.edu/~andrewsr/ints092/vandu.html Read More