Outsourcing

Subject:  Is Outsourcing a Wise Corporate Strategy?

        Outsourcing is defined as a “practice used by different companies to reduce cost by transferring portions of work to outside suppliers rather than completing it internally”(Outsourcing).  As companies continue to use outsourcing as a means for profit, issues involving offshore working conditions and job loss in the Unites Sates arise.  However, outsourcing can also be a great aid to US companies by cutting costs of raw materials and labor, while also benefiting workers by paying them at rates above minimum wage.

        Although outsourcing focuses on bringing jobs to other countries, the negative effects are not only felt offshore but also right in our own backyards.  During the 2000’s many “US multinational corporations…shifted millions of jobs overseas” (Lach).  Since “the big brand-name companies that employ a fifth of all American workers…” sent jobs elsewhere, they were forced to cut jobs here in America.  The companies “cut their work forces in the US by 2.9 million…increasing employment overseas by 2.4 million”(Lach). However, the conditions in which these people work can sometimes be extremely poor.  Employees from Foxconn, one of the world’s largest electronic outsourcing manufacturers, saw suicide as their only way to cope with stress due to poor working conditions (Chan).  The employees had to “work overtime …to meet basic needs,” “live in small dormitories with up to 10 people a room,” and experience “…daily humiliation, stress, and alienation”(Chan).  These impediments caused around 13 workers to “jump from buildings…”(Chan).

        Even though there is a downside to outsourcing, U.S companies are finding ways to benefit from this trend.  In late January, Nokia decided to “outsource the IT function to Indian technology firms TCS and HCL Technologies…”(Nokia).  Nokia is doing so because it believes that “these changes will increase operational efficiency and reduce operating costs…” therefore creating a better more organized IT segment (Nokia).  When looking abroad sweatshops are sometimes welcomed.  According to a Kenyan woman who studies trade policy, “when there’s a new company opening a factory…people are excited about it”(John).  Also, “[she] wishes we could have more “sweatshops” in [her] country” because the “sweatshops pay twice of what local factories pay”(John).  Therefore, it is clear that outsourcing can also have positive effects on the off shore countries, and the conditions aren’t always sub-par.

           When comparing both sides of the outsourcing argument, there are definitely definitive and reasonable conclusions to both.  In order to come up with an agreement to please both sides, companies who outsource must follow the lead of Nike.  In the 1990’s it appeared Nike tarnished its reputation when it was leaked that the company was “subverting minimum wage laws in Indonesia”(Blog).  Although the company tried ignoring the issue, CEO Phil Knight did not want the Nike name to “become synonymous with slave wages, forced overtime…arbitrary abuse”(Blog).  He announced that Nike would “implement a more rigorous social auditing regime and extend U.S. operating rules and processes to its overseas contractors”(Blog).  This is exactly what needs to be done for all companies who outsource overseas.  All overseas factories under the control of a US company must ensure that the conditions, rules, and processes adhere to the same guidelines that are in place in the US.

Works Cited

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            lee-gifford/>.

Chan, John. "World Socialist Web Site." Foxconn Suicides Highlight China's Sweatshop

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"John Stossel ABC News: Are Sweatshops Factories Good?" YouTube. YouTube, 14

            Mar. 2009. Web. 23 Feb. 2013.

            <http://www.youtube.com/watch?v=JqtS3sFVy7s>.

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            Outsourcing. N.p., 09 July 12. Web. 23 Feb. 2013.

            <http://www.americanprogress.org/issues/labor/news/2012/07/09/11898/5-facts-

            about-overseas-outsourcing/>.

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            to Outsource 800 Staff to TCS, HCL Tech. N.p., 17 Jan. 2013. Web. 23 Feb. 2013.

            <http://zeenews.india.com/business/news/technology/nokia-cuts-300-jobs-to-

            outsource-800-staff-to-tcs-hcl-tech_68336.html>.

"Outsourcing." Definition. N.p., n.d. Web. 23 Feb. 2013.

            <http://www.investopedia.com/terms/o/outsourcing.asp>.