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The defects will be the concern of the local manufacturer and not that of the business. This, again, will mean savings on waste, labor and shipping. As a desirable consequence, outsourcing will boost the host country's economic condition by providing affordable products to the citizens. This enhances consumer spending (Marie).
Outsourcing manufacturing, however, encourages dependence on the outsourcing partner (Marie, 2010). This is a disadvantage on the side of the contractor if the partner goes out of business. Fortunately, this can be offset if the parts for manufacturing are distributed to different contractors and all the elements sent to a final contractor to assemble the finished product. Cost and time other disadvantages. Tests will require more time for fine tuning before distribution. These processes cannot be avoided. However, strategic planning with the right outsourcing partner may prevent or eliminate the risks of outsourcing manufacturing internationally (Marie).
Ethics and Social Responsibility
These issues can develop in connection with future employees and contractors (Marie, 2010). Hiring an international project manager instead of one from the United States illustrates this issue. Even if both of them possess the required skill, the international employee speaks more languages than the one from the U.S. But the employee from the U.S. is connected with the outsourcing partner and an issue develops from here. Social responsibility is another issue. This can evolve from child labor, waste disposal and product safety situations. The business has the social responsibility to carefully monitor each contractor on his way of handling production. The best way the management of the business can handle these issues is to avoid them. It can develop procedures and guidelines drawn from real-life situations and problems. These should be communicated in writing and thoroughly explained to everyone involved (Marie).
Outsourcing manufacturing decisions by international business should be based on skill, capital and social responsibility (Marie, 2010). It should carefully evaluate and weigh the advantages and disadvantages of every decision before making it. It should consider other options in facilitating manufacturing if other factors surface. Over and above, the business should be sensitive to dilemmas that arise from ethical and social responsibility and that sensitiveness and readiness should form part of the role of management (Marie).
Case Study: Nike
Nike makes $10 billion in annual revenues and sells its products to about 140 countries without manufacturing them (Hill, 2007). Nike only designs and markets its products, which its contractors manufacture from a global network of 600 factories. These factories are owned by subcontractors, which employ approximately 550,000 workers. This highly successful international enterprise has been cited for decades by repeat and persistent accusations. Nike's subcontractors are said to manufacture the products in sweatshops where many of the workers are children whose working conditions and wages are way below subsistence levels. Its critics see Nike's huge success and wealth as being built upon the burden and disadvantage of the world's poor. It is viewed as a symbol of exploitation and oppression. It engages these poor people to turn out expensive shoes and clothing for the rich in the developed world. This is why Niketown stores have become the regular targets of protesters, especially by human rights groups for human rights, environmental, political and social justice. The media have exposed the grim working conditions of factories, which produce Nike products (Hill).
These exposes brought attention to Nike's subcontracting business practice, which was perceived as unethical (Hill, 2007). While Nike did not see any violation of any law, its management conducted certain measures in response to the complaints. These included a code of conduct for its subcontractors and an annual monitoring by independent auditors of subcontractors' operations and working conditions. The code of conduct limited workers' age to 18 years and exposure to potentially toxic materials within permissible limits set by the OSHA. Nike concluded that ethical behavior goes beyond what the law requires. This requires rules that observe accepted moral principles of right and wrong (Hill).
Stricter FDA Inspections
US regulator FDA will inspect overseas factories within the next decade and work more closely with other countries in this matter (Larkin & Edney, 2011). This was in response to mounting criticism from Congress about their lack of oversight on the matter. FDA performs inspection activities every 9 years on the average as compared with every 30 months in the U.S. It intends to conduct third-party programs to fulfill the goal. FDA Commissioner Margaret Hamburg said they are focusing on globalization and innovation in particular (Larkin & Edney).
Despite widespread and voluntary self-regulation among business facilities, the government should still encourage self-policing (Short & Toffel, 2007). Study findings show that facilities still tend to make self-reports of violations with frequent inspections and stronger compliance efforts. Even hostile relations will not stop self-reporting. Businesses, which recently incur significant legal costs and penalties or injunctions, are likelier to encourage self-reporting. Findings also reveal that more inspections and enforcement actions lead to greater self-disclosure. Self-policing and compliance are equally enhanced with deterrence incentives. Self-reports signal a "pro-compliance" stance to regulators. Frequently inspected facilities are better able to reduce regulator scrutiny by increasing the latter's confidence in their compliance and motivation (Short & Toffel).
Scope may include allegations covering accounting, auditing and internal financial controls of serious acts (Lauer & Ciancio, 2009). Serious acts include antitrust and fair trading, destruction of business records, espionage or sabotage, falsification of financial records, falsification of travel and expense reports, gifts, bribes or kickbacks, misrepresentation of information, trading and other inside information. The contractor should be provided with a code of conduct it can observe, an awareness program, and training and certification. The awareness program should include the types of allegation that may be self-reported, reporting conduits, anonymity, whistleblower protection, and translation of local language. Implementing this program requires phone lines, websites, allegation categories, case management, and reporting (Lauer & Ciancio).
International businesses and their managers can infuse ethics into their business decisions in specific ways (Hill, 2007). Favor hiring people with a well-grounded sense of personal ethics. Build the organization culture on ethical values. Their leaders both articulate and behave according to these values. Implement decisions based on these values. and, lastly, develop moral courage throughout the organization (Hill).
Hill, C.W.L. (2007). Ethics in international business. Chapter 4. McGraw-Hill.
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