Global Issues for Accounting: Banglades Textile Production - Case Study Example

Section/# Aussie Textiles and the Case for Bangladesh Executive Summary: The following discussion will seek to provide a commentary on the advantages and disadvantages of choosing the location of Bangladesh as a center for manufacturing of textiles that will in turn be exported and sold throughout the Asia Pacific region. The indication of these variables and the strengths and weaknesses of choosing the nation of Bangladesh will be compared to the overall benefits and drawbacks that this location exhibits and whether or not the textile manufacturer, Aussie Textiles, would overall benefit from a decision to outsource labour to Bangladesh. Introduction: The incessant drive for access to new markets and decreased cost of production has encouraged many firms to look outside their own national boundaries as a source of potential raw material and/or labor. Essentially, this particular process is oftentimes referred to in the broadest extent as globalization; and necessarily impacts upon almost each and every product and service that is consumed within the current global economy. Not surprisingly, this drive to represent goods at lower prices and to cut costs wherever possible has ultimately engage stakeholders in more advanced and industrial societies to understand the fact that outsourcing certain low-tech or low wage earning job is ultimately not only a means of benefiting their bottom line but also as a means of creating increase efficiency and access to markets that they might not otherwise have. As such, consideration of which specific geography to choose involved a litany of different dynamics that must be accounted for (Passariello, 2013). As will be illustrated within the forthcoming paper, some of these relevant determinants include, but are not limited to, seeking to answer whether a particular region or nation has an established base of production similar to the good or service that is targeted for outsourcing, the overall wage structure that exists within a given region or nation, the overall level of political instability that is reflected, the geographic proximity to the market that is to be supplied, and the strength of infrastructure and elements of the existing supply chain that are evident within such a region (Bajec, 2013). Whereas this report has asked the individual with considering Indonesia, Thailand, and Bangladesh as potential targets for outsource textiles for the firm Aussie Textiles, Bangladesh was ultimately selected as the better choice; and will consequently be measured and related as such within the forthcoming analysis. Point 1 Bangladesh: An Established Base of Existing Textile Production: One of the greatest strengths towards choosing Bangladesh as the outsourcing nation of focus is based upon the fact that the nation itself has an established textile industry that has been growing successfully over the past several decades. For instance, even a cursory review of the existing market space reveals the fact that textile production is perhaps one of the most drastically involving industrial bases over the past 50 years. For instance, industrialized and post-industrialized nations formally performed nearly all textile production within their borders. However, with increased labor costs and the rate at which globalization was taking place, industrialized nations began to realize that textile production was ultimately something that could more effectively be performed and outsourced overseas; oftentimes for a significantly decreased investment and total overall cost (Kristjánsson et al., 2014). Whereas China has been the dominant textile producer in recent memory, nations such as Bangladesh, Vietnam, and a handful of others have come to represent a relevant challenge to China; as Chinese labor costs continue to rise in the overall technological development of the Chinese economy moves slowly away from textile production. One of the noted strength of choosing Bangladesh, at least as compared to island, has to do with the fact that the Thai economy is also slowly moving away from textile production and attempting to focus on more high-tech jobs and those that do not require a basic skill set as a function of performing (En-lin, 2014). Naturally, this slow, yet gradual, move is one that warns textile manufacturers that the overall wage rates that will be expected within Thailand in the coming years are necessarily set to increase. Whereas it is true that wages should be expected to increase regardless of where one seeks to establish and industrial base, the overall rate of wage inflation that would be experienced within Bangladesh would be an order of magnitude lower as compared to the overall weight of wage changes that might be exhibited within Thailand in the coming years. The aforementioned discussion represents the secondary point that should be considered with respect to whether one chooses the nation of Bangladesh or whether the alternatives of Thailand and/or Indonesia are decided upon. Point 2 low wages As indicated above, Bangladesh represents the lowest cost in terms of overall wages; as compared to either Thailand or to Indonesia. Although Indonesia comes close, the political situation there is tenuous enough to warrant further consideration; a point that will be discussed at some depth later in the analysis. Irrespective of this, the primary rational for Aussie Textiles to move its base of textile production away from Australia and elsewhere within the Asia Pacific region is contingent upon the fact that the firm could no longer pay domestic textile workers the type of salaries that would be required in order to make their textile entity profitable and competitive; at least as compared to other higher paying jobs that required a similar skill set. With this in mind, choosing Thailand or even Indonesia would create an improved economic situation no doubt; however, the upward development for both of these economies underscores the fact that investment in these regions would have a significant risk that the wage rates of the employees might grow commensurately with the economic development that is taking place within these nations (Bajec & Jakomin, 2011). Whereas it is true that Bangladesh also experiences upward movement with regard to its wage rates, the overall rate of growth is significantly lower as compared to either Thailand or as compared to Indonesia. Point 3 political stability Another relevant consideration that should be weighed is with respect to choosing Bangladesh as the selected has do with the overall level of instability that the nation has reflected over the past decade. Ultimately, at any time in which a firm seeks to outsource labor or production, the political situation within the host nation should be analyzed by: not only from the perspective of seeking to engage it based upon a level of immediacy – but also based upon understanding the complexities of the local process and what existing issues might have occurred over the past several years. The reason for performing such an analysis is contingent on the fact that there are many cases in which the local hardship that was not sufficiently addressed in the past can easily create difficulty with respect to the way in which the political process takes place in the future. In terms of Bangladesh, the nation is most certainly a third world and underdeveloped patient. However, irrespective of this fact, the nation has had a functional parliamentary democracy for several decades (Banjo, 2014). Whereas it is true that labor strikes, sporadic interruptions of violence, and other less than desirable issues have been illustrated over the past several decades, these are ultimately you and far between; at least as compared to some of the other textile producing the Southeast Asia and the Asia – Pacific region. For instance, one does not need to look back into distant history to find examples in which Indonesian workers have ultimately destroy the production capacity of several of the South are operating within its borders. Likewise, there is a great deal more racial tension within Indonesia as compared to the overall level of racial/ethnic tension that might be represented within Bangladesh. For instance, the cultural dynamic and political ideology of Islam has created a veritable patchwork of competing ethnicities and ideologies within me; something that a firm that is interested in textile production and reducing its overall cost would not likely wish to become embroiled in. A similar review of Indonesia reveals the fact that only in the past 10 years there have been extraordinarily violent clashes between ethnic Indonesia and Chinese business owners. Whereas the overall likelihood of such a violent clash occurring at a textile mill owned by an Australian firm within Indonesia is relatively low, if such an event did in fact occur, it would require tens of millions of dollars to dismantle the existing infrastructure that had been developed within Indonesia and seeking and elsewhere. Likewise, even though it is true that Bangladesh is also predominantly Muslim, the overall level of ethics and/or religious tension that exists within Bangladesh is an order of magnitude lower as compared to by means of contrast in comparison, there is ongoing and simmering level of revolution and even potential civil war that has been exhibited throughout over the past five years (Dudin et al., 2013). Essentially, a rather repressive and one article government has attempted to crackdown on protesters that are seeking a diverse array of different changes within the government that they see as hopelessly corrupt. Even though this ongoing civil strife has decreased over the past year or so, the danger of expending an extraordinarily high amount of money and resources, not to mention, in order to establish a base of operations would not be financially wise. Point 4 Geographic proximity Thus far, almost all of the information that has been presented has pointed favorably to the nation of Bangladesh being chosen as the center for textile productions for Aussie textiles. However, another relevant consideration that must be made by any firm that is seeking to expand internationally is with respect to the overall geographic proximity of the nation or region of production (Khan & Azeem, 2014). In this context, Bangladesh does not represent the clear winner as compared to either Indonesia or Thailand. Essentially, depending on the import/export destination within Australia, both Thailand and Indonesia represent a clear logistical advantage. This is of course due to the fact that the geographical proximity of these regions denotes a situation in which a reduced level of time to market and overall shipment costs, not to mention the fuel costs, would necessarily be reflected. Naturally, in terms of putting forward Bangladesh as the chosen region, it should be understood that all of the aforementioned points must be considered based upon the overall level of hardship or cost that this particular geographic proximity issue would affect. In other words, in the eventuality that shipment costs and time-to-market were fully twice as long from Bangladesh as compared to either Indonesia or Thailand, a conservative and realistic figure, then the stakeholders in question should consider whether or not this cost is acceptable in terms of the overall goals that they are attempting to accomplish and whether or not the time-to-market and issue of shipment cost is something that will be of vital importance. Essentially, this issue breaks down to an even further level of analysis in that if the time-to-market issue is not vitally important to the success and long-term strategic goals of Aussie textiles, then it will be required to review the overall cost of shipment and create a projection for 10 and 20 year analysis based upon existing understanding of the fuel market and how the logistical supply chain will continue to function in the future (Manik et al., 2013). Likewise, in the eventuality that it is determined that the benefits of labor costs represented in Bangladesh are canceled, or in fact overridden, by the overall cost of fuel and shipment, then the determination that has thus far been made should necessarily be retracted and either Thailand, Indonesia, or perhaps even a third nation should be focused on as the potential base for developing Aussie textiles in the coming years. Point 5 Existing supply chain There is a great importance of analyzing the existing supply chain that exists within Bangladesh, and could potentially be supported by third-party contractors, is also necessary requirement that must be engaged. Due to the aforementioned fact that Bangladesh already has a burgeoning and highly effective textile industry, it is the expectation and understanding of this analysis that the infrastructure and supply chains of providing finished textile goods for shipment, and eventually to market, meet or exceed those that are evidenced within the other nations that have been referenced. Yet, the existing supply chain and infrastructure that exists within Bangladesh is subject to the fickle and whim of nature. Whereas natural disasters and acts of God, as they are known, are likely to occur within any nation on planet earth, the overall threat of flood, typhoon damage, and other natural disasters that exists within Bangladesh places it at a distinct disadvantage as compared to the other two nations that have been referenced. Due to the fact that Bangladesh represents a relatively high population within a relatively small area, the potential for mass casualty events and even one particularly strong typhoon bringing economic and infrastructural damage on a grand scale is commensurately higher as compared to either Thailand or Indonesia; even though these two countries represent some of the same threats (Ahmed et al., 2014). The differential that is ultimately represented with respect to Bangladesh, Thailand, and Indonesia, at least with regard to the issue of natural disasters, is that Bangladesh is the smallest of all of these nations and has a long history of horrific flooding and typhoon damage that it impacted negatively upon the overall rate and extent to which further economic development can take place. Certain analysts have gone so far to indicate that the regular floods and typhoons that Greek such devastation on Bangladesh are at least partially responsible for the fact that this country is still attempting to establish an economic base and move towards a more technologically developed nation. In terms of understanding and defining this risk, it will be the sole responsibility of Aussie textiles to determine where it will seek to place its investment and whether or not the overall rate of danger that is exhibited within such an area is viewed as too high risk or whether or not it can be accepted. Conclusion: From the information that has been provided within this case analysis, it is abundantly obvious that Bangladesh offers a litany of benefits while at the same time offering several key drawbacks. Based upon the needs of the company and where the global economy is likely to expand and develop within the coming years, in tandem with the strategic goals of Aussie textiles, stakeholders will need to make their decisions accordingly. In summary, Bangladesh offers the lowest level of wage rates, a relatively high level of political stability, and an established existing base of textile production as its core overall benefits. By means of contrast and comparison, the existing supply chain that is represented within Bangladesh is directly exposed to a litany of natural hazards and could potentially prove to be extraordinarily costly for a firm that determines it should engage within the region. Similarly, another noted drawback is in terms of the fact that the geographic proximity Bangladesh is further removed as compared to either Indonesia or Thailand. Bibliography Ahmed, T, Lucas, H, Khan, A, Islam, R, Bhuiya, A, & Iqbal, M 2014, eHealth and mHealth initiatives in Bangladesh: A scoping study,BMC Health Services Research, 14, 1, pp. 345-361, Academic Search Complete, EBSCOhost, viewed 9 October 2014. Bajec, P, & Jakomin, I 2011, THE NEXT BIG OPPORTUNITY TO BUILD COMPETITIVENESS: INTELLIGENT LOGISTICS OUTSOURCING, Transport Problems: An International Scientific Journal, 6, 3, pp. 41-50, Academic Search Complete, EBSCOhost, viewed 9 October 2014. 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