26th of November 2012
In this case I am working in Electrocorp, as the Chief Executive of the company. Electrocorp is an electronics company manufacturing onboard computer components for automobile. The company is facing an important choice to do. It can make more money for shareholders in relocating plants to a country with lower labor costs, less strict environmental regulations. Until now, all our plants are implanted in United States and until recently the company was ...view middle of the document...
Some of our competitors have decided to outsource their production plants to emerging countries, and have managed to earn a competitive advantage and thus be more competitive than Electrocorp due to lower prices on their production. The declining profits of Electrocorp are an important worry for the shareholders, and we have to decide how to make the company more competitive and make the company again profitable. In order to reach all these aim, Electrocorp is willing about outsourcing to developing countries, like our competitors. But to move from United States to less-developed countries with less labor and environmental restrictions bring us some ethical issues.
Labor issues Three countries were identified as the potential locations for outsourcing: Mexico, Philippines and South Africa. We hired Marta Smith, who is an expert in companies that want to move their operations to less-developed countries in order to reduce their operating costs. Basing on her analysis, Mexico and Philippines were economically beneficial for Electrocorp, as the employees working in production plants comparable to Electrocorp received $3 in Mexico and $1 in Philippines. Nevertheless, these wages were insufficient for good living conditions in both countries. In Mexico, turnover in the workforce is frequent according to the employees’ complain who want a more appropriate wage for living better. As I said above, Philippines workers also haven’t fair wages in order to have appropriate living conditions but in this country the claims are not successful yet. About South Africa, labor cost is higher than Mexico and Philippines but still more attractive than United States market. In average, South African workers are paid $10 per day, whereas in United States it is $15 per hour. Moreover, unions are getting more and more strong and the rise in importance of their movements there may lead to future demands in increasing wages and benefits. Child Labor Another important point in working conditions is the child labor. Indeed, Mexico and in particular Philippines are less concerned about child labor. Mexico is progressing in term of child labor, and less and fewer children are working in this country, but it is still an important issue in some part of this State1. About Philippines child labor is much more serious. Even though Philippines ratified the ILO Convention 189 in 2012 2 , which protect children working, child labor is always real and present in Philippines. Young workers (under 16) are often paid less than $1 per day, which put
“Children at work in Mexico, Still a Major Issue”: http://www.worldbank.org/en/news/feature/2013/01/18/children-at-work-in-mexico-still-a-major-issue, (accessed on 19/11/2013) 2 “Philippines”: http://www.dol.gov/ilab/reports/child-labor/philippines.htm,(accessed on 25/11/2013)