In an era where outsourcing is ubiquitous, managing a global workforce is an immense challenge. Given below are the 5 major factors/metrics that brings out the complexities of managing a global workforce.
• Labor Cost
• Labor Productivity
• Labor Supply
• Culture
• Labor Market Regulation
The above factors are, typically and sadly, overlooked and undervalued by companies. This paper analyses the given news stories on Foxconn, using the above framework. They are critiqued based on the factors to be evaluated by companies in their location analysis whenever they consider locating and maintaining their operations or engage in contract outsourcing.
Labor Cost
Labor cost is the primary cause why companies relocate their operations. The basic
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The Foxconn issues, traverse across all of the typical challenges that are enlisted in the opening section of this paper. One would wonder, with all these factors well studied and documented, why the mistakes are being repeated.
In case of Foxconn, in my opinion, the fundamental reasons for most of the issues are
- The upward pressure on labor cost in China
- The razor-thin margin they were operating on which was due to the intense competition in developing economies,
These trigger the secondary issues such as lack of employee welfare and talent management. Employees get pushed to the bottom of the value chain and ultimately get neglected leading to the employees’ unrest. In a manufacturing environment, involving monotonous job, pressure to perform, lack of corporate support and care for employees can lead to psychological issues resulting in mental depressions and suicides as was exposed in 2012. In a later section we will analyze Foxconn’s decision to move to Vietnam, which is Labor cost related predominantly.
Labor
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T Kearney Global Services Location Index’, 2014
Notes: Δ represents the change in rank since the 2011 index.
It is evident from the table above that Vietnam is financially attractive compared to China. It also happens to be within the same cultural cluster (derived from Hofstede’s model), which is an important criterion. On the other hand, it would be interesting to investigate if Foxconn evaluated other risks like, the low “People Skills and Availability” (PSA) index. This significantly could limit Foxconn’s ability to scale to a level of 500,000 people. It is not clear if other better choices like India and Indonesia, which have similar financial attractiveness and a better PSA index, were evaluated.
As it transpires later, Foxconn already has plans to tap the Indonesian market with a $10Billion investment over a 5-year period. It also has a strategic investment in Pittsburgh in a more skilled R&D fuelling innovation. This is in an attempt to move from a manufacturer label to an innovator label.
The A.T. Kearney Global Services Location IndexTM, 2011 – Top
Jim is a upstanding, hard working, American computer programmer who recently lost his job to a man who doesn’t provide the correct code or patches for the computer programs he builds. This man is living in a far off country providing money that doesn’t benefit Jim or America, now Jim has a nice spot in the unemployment line. This is not how any good employee should be treated, but now many companies are dropping their good employees for cheaper foreign employees. Recent outsourcing is factor in the recent downturn in the U.S. economy.
The article also give snap shot of the foreign companies who misjudge the Chinese culture, competition, size the market, and some other factors, have been badly affected by investing in china.
The cost advantages related to raw materials may be explained by better negotiated agreements with suppliers (perhaps due to the larger volumes of purchases – comp. Fig. 5) and possibly less shipping and distribution costs that stem from the fact that Samsung’s fab facilities are geographically collocated (while competitors’ facilities are spread world-wide). In terms of labour productivity only Chinese SMIC outperformed Samsung, but that came hardly unexpectedly: low labour costs in China had been and were to remain unbeatable for some time yet.
In china, for example, Wal-Mart’s importing operations have significantly affected the manufacturing sector in a manner that gradually unemployment has been stimulated (Holmes 1). The trade deficit between Wal-Mart and China have led to a loss of almost one hundred and thirty- three employment opportunities, especially with Wal-Mart importations. Despite China’s efforts of trying to purchase United States’ treasury bills along with federal securities in an effort to reduce the exportation costs to America, Wal-Mart’s entry into the Chinese market has propelled china’s labor abuse along with internal violations of recognized trade norms (Fishman 1). This is caused by the retail’s growing and vast conduit that allows the distribution of subsidized and cheap Chinese exports to the doorsteps of United States’ market (Neumark, Junfu, and Stephen
China also provided a labor force that is able to tackle both white-collar and blue-collar job positions. This made foreign companies rush both monetary and technological resources into China to utilize the manufacturing and development power. Both Microsoft and Sun have created research and development centers to implement and design software applications in China. Domestic companies are not far behind either, for example, China's own Evermore Software is on the rise to challenge Microsoft's office suite with its own.4
...kers. Moreover the Chinese being ethnocentric people may not like a Singaporean of Chinese origin to come into their town and factory, and run it in their own respective ways. Also the MD and Jimmy may not see eye to eye as they both may be rallying for power. We feel that the joint venture is still too premature to have a change in leadership and management. Controls Asia-Pacific at this stage should avoid experimenting with the management especially when the current operations at the factory are beginning to show signs of progress and improvement.
are a major cause for jobs becoming outsourced. The outsourcing of jobs can greatly impact a nation, just like it did in America. The size of the U.S.work force has been reduced due to Chinese factory workers because they were the cheapest labor force and could work longer hours for a smaller pay. No wonder as I grew up I observed the items I was using, very few said, “Made in America”, because most said “Made in China”. It is now seems clear that there is an economic incentive for companies and corporations to produce toys for children, clothing, sneakers, technology in China and other foreign Asian
During the years before 2012, loyal Apple customers were in protest and petition when they found out that the labor conditions of Apple in Foxconn were unaccepted, the issue emerged to a worldwide attention. Also, the customers did not want to buy Apple products anymore because of the increasing number of accidents or suicidal in Foxconn. The employees were working in a dangerous environment and living in dorms that looked like a prison. These issues came to the attention that Apple decided to join Fair Labor Association, a monitoring group including at least 43 violations of Chinese Laws and regulations.
Foxconn, one of Apple’s major manufacturer’s, recently had a breakout of suicides amongst their workers because the working conditions were so awful. Workers are often forced to work continuous shifts through meal times and work up to 100 hours overtime in a single month, even though the legal limit is a mere 36. And to make it even worse, Foxconn now makes their employees sign a contract saying that if an employee commits suicide as a result of the horrendous conditions, the family is not even allowed to sue them. Instead of cutting ties with Foxconn upon recei...
Further investigations revealed Foxconn had been guilty of unsafe and unfair working environments long before the incidents, which included the employment of extended working hours, discrimination, and military management techniques (Xu & Li, 2013). Due to Foxconn’s sole focus on maintaining businesses relationships by fulfilling Apple’s demand of technical products, their subsequent mistreatment of employees was exacerbated and generated 80-100 hours of forced overtime per week (Xu & Li, 2013). However, in an attempt to combat the negative publicity, each firm denied responsibility for the incidents, which ultimately added fuel to the media fire (Xu & Li, 2013). Since then, each firm has enacted superior regulations designed to maintain efficiency while recognizing limitations on labor hours and increased spending on compliance audits (Chandler & Werther, 2014). Yet, as Foxconn continues to sustain their global leadership and Apple’s profits remain unaffected, the disadvantages associated with the incidents at Foxconn have not transcended the outcomes. From a profit standpoint, the increase in spending and subsequent alterations of labor methods serve as the biggest disadvantage to each company’s bottom line. However, after both companies attempted to negate blame, their ensuing developments indicate assuming responsibility was the best avenue to recoup reputation issues and focus on long-term growth. Therefore, the greatest advantage for both companies was their heightened reputation resulting from increased transparency and the employment of business models focused on the welfare of all supply chain
Further investigations revealed that Foxconn had been guilty of unsafe and unfair working environments long before the incidents, which included the employment of extended working hours, discrimination, and military management techniques (Xu & Li, 2013). Due to Foxconn’s sole focus on maintaining businesses relationships by fulfilling Apple’s demand of technical products, their subsequent mistreatment of employees was exacerbated and generated 80-100 hours of forced overtime (Xu & Li, 2013). However, in an attempt to combat the negative publicity, each firm denied responsibility to the incidents, which ultimately added fuel to the media fire (Xu & Li, 2013). Since then, each firm has enacted superior regulations designed to maintain efficiency while recognizing limitations on labor hours and increased spending on compliance audits (Chandler & Werther, 2014). Yet, as Foxconn continues to sustain their global leadership and Apple’s profits remain unaffected, the disadvantages associated with the incidents at Foxconn have not transcended the outcomes. From a profit standpoint, the increase in spending and subsequent alterations of labor methods serve as the biggest disadvantage to each company’s
The growing integration of global trade markets has brought about the fragmentation of production activities, namely in manufacturing, with companies trending towards outsourcing to overseas counterparts due to the profitable benefits (Feenstra, 1998 p.31). This modern model of production characterizes the breakdown of the “vertically-integrated mode of production” also known as the “Fordist” mode specifically relating to Ford cars’ manufacturing process (Feenstra, 1998 p.31). In order to recognise the shifts in production, the conceptual frameworks relating to outsourcing activities must be taken into consideration. Ethier (1982) explores the growth of specialization across nations and the significant efficiency gains in regards to trade. By shifting production offshore, companies can reduce costs and timelines thus creating greater profits. Shenzhen can be considered an exemplary city when studying the rapid growth of a city’s economic sector.
The XYZ Corporation was established in 2004 and their main office is located in Vancouver, BC. The company’s main objective is to create new innovating technology for media devices, computers, and digital music players. They deal with the design, manufacturing and marketing of the products. XYZ Corporation has been providing Canadians with groundbreaking technology throughout the years and continues to create new technology to provide others with top-level technology. Although, recently their success rate has appeared to drop rapidly due to a number of factors that will be explored throughout this case study. Their main objective is to target the problems so that they can work towards having the issues resolved as quickly as possible. If they do not take any course of action, the state of the company may be in extreme danger. This case study is designed to explore the areas of the company and discover the problems blocking the XYZ Corporation from success.
Previously, there were news that in Japan work suicide was common, but there had been no special attention to this. Each time, the pressure to get a job and fulfil their families is bigger, which makes really important to provide employees good working conditions and try not to cause them such a bad working conditions that they think taking ...
The central facts for Foxconn involved protest by 150 of the 32,000 employees at its campus in the city of Wuhan in China and suicides by 18...