The Five Major Factors In The Case Of Foxconn

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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…show more content…
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…show more content…
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

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