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Business Relocating To Third World Countries Pay Cheap - Case Study Example

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This paper "Business Relocating To Third World Countries Pay Cheap" discusses the phenomenon of offshoring business to third world counties, the business reasons for such policy decisions, the salaries and work conditions in these countries and ultimately the ethics of such practices…
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Business Relocating To Third World Countries Pay Cheap
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Download file to see previous pages There have been several instances of how businesses have been able to consolidate themselves by moving to low-cost countries. Emerson Electric had devised this strategy way back in the ’70s when it moved its operations to countries in North America and Western Europe. These countries now account for 44% of manufacturing labour expenses and have seen profits shore up for the company with it being able to provide a 19.8% dividend for a shareholder. (Vestring Till, Rouse Ted, Reinert Uwe & Varma Suvir, 2005)

General Electric has seen significant relocation to China in early 2000 and its sourcing costs grew to four billion USD by 2005. General Motors also has significant operations in China with auto parts being sourced to the tune of 10 billion US dollars. (Vestring Till et al, 2005) White Goods Co which had about 85% of its manufacturing taking place in first world countries had to face stiff competition from their Korean rivals who were not only making rapid progress in the knowledge field but also had access to cheap labour. With these factors in mind, White Goods started manufacturing specific parts of its product in third world countries. Data shows that this offshoring has to lead to it being able to compete with its Asian counterparts like Haier, LG and Samsung. (Vestring Till et al, 2005)

There are several reasons attributing to this shift of both the service sector and the manufacturing factories to third world countries. Apart from cheap labour that is available, people in these countries have become a highly educated workforce in terms of manufacturing, R&D and engineering. Countries like India and China have succeeded in providing cheap labour while at the same time maintaining quality. Data shows that 77 global companies have set shop in India. (Vestring Till et al, 2005)  ...Download file to see next pagesRead More
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