Some Companies Still Resist Outsourcing

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In recent years, global and local companies alike have felt the sting of the failing economy and turned to outsourcing in order to produce in the most economically efficient way possible. Outsourcing can be defined as a technique used by companies to reduce costs by transferring portions of work to outside suppliers rather than completing the work internally. Many things must be considered when companies make the decision to outsource. Economically, it would only make sense for the company to outsource if the potential partner had a comparative production advantage. First and foremost, sending parts of the supply chain overseas has the potential to compromise quality and brand image. Critics of the practice among luxury brands argue that outsourcing jeopardizes integrity and reputation; since the production is farther away geographically, companies are unable to maintain tight control over standards. However, outsourcing can also improve the quality of the product; for example, watches from Louis Vuitton are manufactured in Switzerland, a country known for its superior watchmaking, and Hermes’ cashmere products are often made in the Kashmir region of Asia. Environmental concerns are another consideration companies must acknowledge. Outsourcing to developing countries opens opportunities for poor environmental and health regulation, an important ethical and logistical factor. Additionally, if these regulations are compromised, the brand suffers greatly on the public relations front; for this reason, many strive to uphold a code of conduct to bar ethical crises from happening in outsourcing.
Case study FOR outsourcing:
Louis Vuitton and other luxury brands
Louis Vuitton’s outsourcing techniques differ from other competitors because...

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