Selecting a company to subcontract to is a very complex decision-making process. Initially, direct and indirect factors need to be considered because they significantly direct outcomes. Factors that might decidedly affect the company are cost, export tax, location and quality expertise. Indirect factors may be the factory’s regulations and its working conditions. Often times some elements may clash. Then, companies need to make sacrifices on aspects that have less prominence. These disadvantages are generally seen as costs of the decision making. Moreover, occurred externalities to third parties outside the corporation should not be overlooked. Finally, a decision should be made based on the benefits that outweigh the costs. On the surface, there are no direct disadvantages by subcontracting in Mexico. Their labor fee and lenient environmental policies are far more desirable from an operational point-of-view. Conversely, the benefit of cheap labor costs can be a drawback since they can be perceived as exploitation. Corporations are typically held liable on how they produce their products. Hence producing in regions with poor conditions might risk putting the business in a less desirable light. Furthermore, due to their size and reputation, multinationals are ordinarily more vulnerable to criticism. Major firms can hardly withstand negative publicity associated with bad practices. Thus, even if the disadvantage of producing in Mexico is only indirect, it could still be a substantial negative factor in terms of the company’s reputation. Nonetheless, due to the nature of large size multinational companies, they should undoubtedly be able to overcome those negative perceptions by several methods. First, they may administer their o... ... middle of paper ... ...rom https://www.continuetolearn.uiowa.edu/laborctr/child_labor/about/causes.html Lozaday, C. (2014, July 17). Multinationals, Wages, and Working Conditions in Developing Countries. Retrieved from http://www.nber.org/digest/oct03/w9669.html Mojonnier, T. (2012, February 17). When Child Labor is Ethical. Retrieved from http://businesstheory.com/child-labor-ethical/ Duhigg , C & Wingfield, N. (2012, February 13). Apple Asks Outside Group to Inspect Factories. Retrieved from http://bits.blogs.nytimes.com/2012/02/13/apple-announces-independent-factory-inspections/?_php=true&_type=blogs&scp=1&sq=apple%20in%20shift&st=cse&_r=0 Sweatshops. (n.d). Retrieved from https://www.mtholyoke.edu/~nshah/fashioncrimes/Sweatshops.html Wazir, B. (2001, May 20). Nike Accused of Tolerating Sweatshops. Retrieved from http://www.theguardian.com/world/2001/may/20/burhanwazir.theobserver
Following the globalization, many companies in developed countries move factories to developing nations. As a multinational company, there is at least one facility in one country other than its home country. Those companies have offices and factories in different countries and usually have a centralized head office in their home country. Advocates of multinationals say they create jobs and wealth. And multinationals can improve technology in developing countries, which are in need of this. On the other hand, critics say multinational companies often barely pay employees enough to live on in developing countries, and it is unethical to pay cheap wages.
Outsourcing in the long-run might negatively impact employees. Timbuk2 may decide to move the company as a whole to China is order to reduce their operational cost. This can be a possibility as a result of technology change and the ever increasing cost of living. Another important area Timbuk2 must pay attention to is their sales and customer base. If their sales decrease, is it due to customer dissatisfaction due to price, quality or diminished interest in the product. Timbuk2 can control the quality of the product by regularly doing product and process
Moorhouse, A. (2005, November). International Management Organizational Behavior. Retrieved October 16, 2008, from University of California Berkley: http://www.ocf.berkeley.edu/~matran/Files/proKarenLeary.doc
A Multinational Corporation (MNC) can be defined as “a single entity that controls and manages group of goal-disparate and geographically dispersed productive subsidiaries” (Triandis and Wasti, 2008, p. 2). Multinational corporations are entities that make Foreign Direct Investment (FDI) and produce added value in countries other than the country in which they are headquartered. One of the key objectives of the MNC is to obtain capital where is it cheapest and to invest FDI and undertake production in areas that yield the highest rates of return (De Beule and Van Den Bulcke, 2009). However, many theories have been advanced to account for the decision-making process that MNCs undertake in relation to FDI. The purpose of this paper is to explain the two main theories – internalization theory and OLI eclectic paradigm theory – and to critique these in relation to some of the other conceptual models that have been advocated.
American companies purposely make their goods in other countries such as India because their labor practices do not meet US standards and can easily be manipulated for maximum profit. By paying their employees extremely low wages, they are still able to manufacture their products. As a result they pull out more profit that does not have to be given back to their employees due to minimum wage laws not being in effect in these countries. In “Distributional Effects Of Globaliz...
Recently, multinational companies have lost their standing in the community and many view businesses as part of the problems plaguing the society. Nonetheless, the reduction in public sector resources and its power has put more pressure
Globalisation allows individuals, groups, corporations, and countries to reach around the world farther, faster, more deeply, and more cheaply than ever before. Most large local companies regard globalisation as opportunity, thereby exploring overseas markets for maximum market share and optimum business strategies. However, managers would face a series of challenges caused by leadership models, cultural backgrounds, political and economic risks, HR management, etc. To study multinational management skills is very useful for my future career. In this essay, I will set goals for this subject, identify the skills I have honed and need to improve, and explain my strategies for achieving goals.
Multinational enterprises date back to the era of merchant-adventurers, when the Dutch East India Company and the Massachusetts Bay Company traversed the world to extract resources and agricultural products from colonies (Gilpin 278-79). While contemporary multinational corporations (MNCs) do not command the armies and territories their colonial counterparts did, they are nevertheless highly influential actors in today’s increasingly globalized world.
Brands like Armani, Polo, Nike, GAP etc. have their manufacturing unit in emerging markets like India, China, Thailand, etc. Cost reduction is one of the major reasons for western companies from U.S.A., U.K, France, countries to opt for outsourcing. Outsourcing of activities incurring high indirect costs generate cost reductions. Costs incurred for recruiting, motivating and training of staff is reduced due to the difference in value of currency. One such company is Louis Vuitton, a French brand outsourcing its processes from emerging countries like India & China. The time difference between the companies enables the production to be carried 24/7. Outsourcing enables redistributing resources to the core areas within the company that have direct impact on profitability. Countries where the taxation & government regulations are unfavourable, explore to other countries where the sam...
Multinational enterprise (MNE) is “a company that is headquartered in one country but has operations in one or more other countries” (Rugman and Collinson 2012, p.38) that has at least one office in different countries but centralised home office. These offices coordinate global management in the context of international business. MNEs have increasingly essential influence on the development of the global economy and coordinate with other companies in different business environments. However, there are many issues involved with how MNEs operate well overseas, especially in emerging markets (EMs) (Cavusgil et al., 2013, p.5).
There has been increased the outcry by international labor organizations accusing multinational companies of foul play when dealing with their workers. Many multinational companies, in a bid, to reduce operation costs and costs of production, end up suppressing their clueless workers. Some multinational companies have gone to the extent on having their central productions being done in low-income earning companies where they would not have many responsibilities to bear for the workers. Coca-Cola, however, has received widespread criticism for its mistreatment of workers and the way it has...
can both own and operate the factories that produce their products, or subcontract their products out to secondary manufacturers. These facilities can be located either domestically or internationally, and both present a myriad of positives and negatives. Firms that produce domestically benefit from ease of monitoring, skilled workforce, government stability, job creation, and well understood labour rules, while suffering from the relatively high wages required in the U.S. as compared to developing countries. By manufacturing products overseas, in particular in third world economies, tremendous efficiencies are gained in the form of reduced wages, but are countered by the increased difficulty of monitoring the quality of their products and the actual working conditions in the factories. Companies that are vertically integrated, who own and operate the factories where their products are manufactured, are faced with large
However, this route is not always the most cost effective. In this case the organization would choose to outsource the required production. Some of the benefits that come along with making this decision is that any and all costs pertaining to the retools of the production line are incurred by the supplier. The supplier is also liable for all personnel and material costs. Another advantage can be based off of the desired length of production run. Some disadvantages are that if the outsourcing takes place outside of the buyer 's country there is a higher probability that production standards will vary with a high frequency than typically expected. For example, a respective division of Mueller Water Products based out of Boston, Massachusetts which deals in the installation of industrial water monitoring and regulatory systems found a need to reduce costs of production. In the past five years this division had made the decision to outsource the production of the housing for the monitoring equipment. This part is made solely out of high grade plastic due to level a pressure that typically occurs on an hourly basis during operation. The division was convinced to change their decision on sourcing due the rise costs of union labor. The contract was given to a production firm out of China, which does not hold to the desired levels of quality in the manufacture of the
“Today, we do not live in a civilization, we live in a ‘globalisation’ – with a globalisation of resources, a globalisation of business activity and a globalisation of humanity” (Schermerhorn et al., 2014, p. 151). This large scale societal evolution of the global economy of late has resulted in the need for managers to possess a transnational outlook, be competent in working with other cultures, be more informed of international developments (Schermerhorn et al., 2014, p. 90), as well as be able to successfully manage the expansion of their firm into international territories by respecting the culture of the host country, and through the use of expatriates. These are employees who live and work in foreign countries on short-term or long-term assignments and, as a result, gain valuable international and corporate experience (Chew & Debowski, 2008, p. 4). Globalisation signifies the “interdependence of resource flows, product markets and business competition” (Schermerhorn et al., 2014, p. 89) on a global scale. The expansion of international corporations into uncharted competitive territories has brought managers of these MNCs to face a vast number of greater challenges than before, such as problems that arise from managing expatriates and repatriates, management across cultures, managing cultural diversity, the transference of knowledge across cultures, and the need for alterations to the existing management practices. This essay will further examine the aforementioned challenges that managers are required to surmount to succeed in today’s global economy.
Nowadays, business is set in a global environment. Companies not only regard their locations or primary market bases, but also consider the rest of the world. In this context, more and more companies start to run multinational business in various parts of the world. In this essay, companies which run multinational business are to be characterized as multinational companies'. By following the globalization campaign, multinational companies' supply chains can be enriched, high costs work force can be transformed and potential markets can be expanded. Consequentially, competitive advantages of companies can be strengthened in a global market. Otherwise, some problems are met in the changed environments in foreign countries at the same time. The changed environments can be divided into four main aspects, namely, cultural environment, legal environment, economic environment and political system problems. All the changed environments make problems to multinational companies. In particular, problems which are caused by changed culture environment are the most serious aspect of running a multinational business. This essay will discuss these problems and give some suggestions to solve them.