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Case Study: p.565 , Global Profits, Baker/Hartman/Shaw - Book Report/Review Example

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Usual economic laws that are applied within national boundaries have gone into disarray. When global trade was minimal, imports were not disrupting local economies. K-PAN was doing well for as long as 50 years; however, things…
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Case Study: p.565 , Global Profits, Baker/Hartman/Shaw
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Making a New Culture Globalization has put the whole world into turmoil. Usual economic laws that are applied within national boundaries have gone into disarray. When global trade was minimal, imports were not disrupting local economies. K-PAN was doing well for as long as 50 years; however, things changed when foreign textile goods began making inroads into the US markets. Consumers patronize those firms who offer goods at the lowest keeping quality of the goods, more or less, at par with other well-established reputed players. That is a harsh reality of the market economy. The writers of the article want to suggest that it is unethical on part of K-PAN to outsource the goods from low-wage countries where working conditions are dismal.
Before accepting or rejecting such stance, it is important to understand the economic conditions that prevail in the developing countries.
K-PAN moved to Nicaragua establishing its manufacturing facilities and outsourced its major supply from Indonesia and Pakistan. K-PAN just followed the good economics that supports the principle of comparative advantage. After all “Survival of the Fittest” is the natural law. Per capita incomes in developing countries usually range between one-tenth and one-fifth of that prevails in the developed world. Due to this, services are significantly cheaper in those countries when compared with those that prevail in the developed world. That is why the World Bank measures incomes of the people in developing countries in terms of purchasing power rather than at exchange rates of currencies.
Developed countries have not reached to their current state overnight; they have also passed through the same path that developing countries are treading now. Developing countries are starved off resources; they need technology, management expertise, capital from the developed world. What they can provide is abundant low-cost labor (in relation to the developed world) and even that possibility is taken off from them then they have no chance to come out from dire poverty that are facing today. It is difficult to agree with the stance that they are being exploited by the companies from the developed world. After gaining employment they move one notch higher not only economically but they become equipped with new skills that these companies impart them. That is how wages of the people in the developing world move upwards with the passage of time.
It is a fact that after globalization, income levels in the third world countries have improved significantly due to increased employment levels and revenues collected by the governments in the form of taxes and duties. Increased revenues help governments to spend on education, health and social causes; that would not have been possible had the foreign investments not gone to these countries for their own survival. As such it is a win-win situation for both.
Usually, it has been found that foreign investors pay better wages than what they are offered locally. Then how does the issue of exploitation make any sense? K-PAN is in the business of textiles where fashion and style plays a significant role on demands of its products.
Due to fluctuating demand, K-PAN cannot go for a full-fledged installation everywhere; instead it has to outsource some of the supply from local markets as and when needed. After all, it is a sound business sense. At the most, K-PAN can ensure to procure its supply from those manufacturers who agree to meet certain minimum standards of safe working conditions and care for environments.
Outsourcing, per se, is not unethical in the sense as article attempts to presuppose as ethical manufacturers do exist in the developing world too who are equally eager to reduce emissions keeping environment safe and pollution free. What is needed is to enter into a long term contract with them so that they can make necessary investments and provide healthy working environment to their workers.
Reference
Baker, M., Hartman, L., Shaw, B. (1999). Globalization: Global Profits, Global Headaches.
University of Texas-Austin. Read More
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