The global labor market has changed a lot over the years. One of the most notable developments has been outsourcing labor by companies in foreign countries (Budd & Scoville 30). Some organizations choose to take their jobs offshore in a bid to expand their market, get cheap labor, and harmonize the production process. Research has established that these changes develop due to factors such as globalization of production by most organizations, high costs of production due to economic and environmental regulation measures, as well as increasing cost of labor (Shaw 112).
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This concept has attracted a worldwide debate, especially among economic researchers who have conducted numerous studies in a bid to establish the motivation behind the growth of this practice among organizations and its possible impacts. Research has established that a number of factors influence the development of this phenomenon.
They include the need to increase profitability, lower operational costs, recruit highly qualified personnel, and to create a diverse workforce that can take jobs that natives consider less lucrative (Budd & Scoville 39). A number of arguments exist in favor, and against outsourcing. Although most organizations that outsource labor in other countries have a chance of expanding their business and increasing profitability, there are a number of ethical implications involved (Shaw 120).
The ethical dilemma
Research has established that the concept of moving jobs overseas has created a huge ethical dilemma between its proponents and opponents. The proponents of sending jobs to the offshore have developed a number of arguments in support of the practice. First, contrary to popular believe that outsourcing is all about reducing the cost of labor, the practice plays a pivotal role in improving the efficiency of various organizational processes (Budd & Scoville 46).
For example, an American organization that moves its production process to a foreign country creates the opportunity to create more job opportunities, research and development, as well as acquiring more resources to enhance specialization. Second, outsourcing helps businesses to achieve strong market competitiveness through better utilization of its resources, the intellectual capacity of the workforce, and opportunity to venture into various international markets (Shaw 127). Economic experts argue that the opportunity for organizations to venture into international markets helps in strengthening its brand.
Third, organizations that move their jobs to foreign countries also help in the provision of competitively priced and easily accessible products (Budd & Scoville 51). One of the main things that organizations consider before deciding to outsource is the ability to improve the efficiency of the production process in terms of meeting the market demand in an economic manner. Proponents of outsourcing argue that the practice is very good because it takes jobs that highly skilled natives reject and offer them to others who need them for economic empowerment (Gold 66).
For example, most American companies that outsource for labor in countries such as India argue that the local people tend to avoid taking some jobs because they have low wages or think they belong to people of lesser social class. Research has established that most people in developing countries prefer taking jobs by foreign companies to those offered by the government (Gold 70). Outsourcing has helped to improve the economic welfare of most people in developing countries, where the level of unemployment is very high due to limited job opportunities (Budd & Scoville 59).
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Opponents of outsourcing have also developed their own set of arguments with regard to the moral implications of the practice. First, they argue that outsourcing allows businesses to work with ineffective labor and environmental regulations that influence the stability of the brand (Gold 73). Most businesses in developed countries outsource for labor in developing countries, which have poor regulation on issues such as minimum wage.
This can affect the ability of businesses to achieve prolonged success because the output of the workforce is usually low due to lack of motivation. Low wages and a poor working environment often have a negative impact on the productivity of the workforce. Outsourcing also reduces the ability of employees to have any form of control over their working conditions because of the bureaucracy associated with fighting for employee rights in developing countries (Gold 84). Opponents of outsourcing believe that the practice is unethical owing to the fact that businesses choose to take their operations in countries where they can exploit people for their labor.
Outsourcing reduces the capacity and ability of an organization to maintain high standards of production (Budd & Scoville 64). Businesses that take their jobs offshore often experience a slow start in their new markets due to various market dynamics. This often affects the efficiency of the production process. Research has established that this phenomenon also affects the ability of organizations to develop a culture of innovation within the workforce because poor working conditions and low wages influence negatively on the employee retention rate (Shaw 161).
Outsourcing often leads to a long-term effect on mother economies due to loss of certain industry sectors. Experts argue that prolonged outsourcing by businesses in a single economy can weaken crucial sectors, thus leading to poor performance and inability to attract investors. This in turn affects the ability of local people to meet their needs due to lack of employment and a drastic reduction in wages.
Opponents of outsourcing also argue that this practice influences negatively on the quality, safety, and security of products, thus affecting the level of customer satisfaction (Robbins & Bergman 111). This challenge develops from the need to restructure once a business venture into a new market depending on the dynamics that define various markets. Another factor that contributes to this phenomenon a number of hidden costs, mainly incurred during the production process, thus leading to higher costs of products in the market (Shaw 170).
Although supporters of outsourcing argue that it helps in cutting down the cost of labor, research has established that several dynamics associated with venturing into a new market often, result in additional costs for businesses. Outsourcing is an unethical business practice that can easily harm the reputation and future of a business. Economic experts argue that a business compromises its ability to grow its brand when it chooses to leave its loyal customers and employees in search of more revenue (Gold 100).
The opponents of outsourcing emphasize that it is unethical for a business to compromise the welfare of people in their mother economy in pursuit of cheap labor and a less costly production process. Lack of good oversight by a business during the process of outsourcing can hugely affect its ability to avoid challenges such as fraud and damage to society in terms impact on the economic empowerment of people (Robbins & Bergman 129).
The concepts of utilitarianism, egalitarianism, and libertarianism in outsourcing
Various concepts apply in establishing the moral implication of American businesses that outsource for labor in other countries. These concepts mainly help in establishing the different motivations that influence the decisions of organizations to outsource in foreign countries. The first concept applied is utilitarianism (Hulbert 206). According to the concept, the course of any action should be anything that leads to pleasure, minimizes pain, and ensures the attainment of happiness or satisfaction.
With regard to outsourcing, this concept applies in assessing whether the decision by a business to outsource helps to develop solutions to problems (Robbins & Bergman 132). In addition, it helps to assess whether the outcomes of outsourcing are favorable to all the involved parties. The decision by an organization to outsource depends on the suitability of possible outcomes (Hulbert 210). Research has established some organizations decide to outsource mainly because they want to maximize their profits.
Organizations that outsource out of the motivation to increase profitability often act in ignorance to the ethical obligation of businesses to ensure fairness in their operations (Gold 134). The ethical dilemma that develops out of this issue touches on the desire of a business to achieve prolonged success, but still ignoring the need to provide its customers with quality, safe, and competitively priced products (Hulbert 218).
Although outsourcing helps a business to increase the accessibility of its products, it is important to ensure that its employees have good remuneration on top of considering the economic welfare of their customers. It is unethical for a business to focus on achieving its goals at the expense of achieving the common good (Robbins & Bergman 140).
The second concept applied in assessing the moral implication of outsourcing is egalitarianism. This concept applies the doctrine of the equality of mankind and the desirability of political, economic, and social equality (Robbins & Bergman 166). In the context of outsourcing, this concept applies in assessing whether the decision by organizations to outsource focuses on achieving equality by distributing benefits and burdens across a certain population.
Most proponents of outsourcing argue that organizations that outsource labor have an ethical obligation to ensure that their activities have an orientation towards achieving the common good. Proponents of this model argue that outsourcing should create a win-win situation for all the involved stakeholders (Gold 140). This means that the motivation for organizations to take their operations to foreign markets should be guided by a desire to strengthen their brand, as well as empower the locals through the creation of job opportunities and provision of competitively priced products that meet all the quality standards (Robbins & Bergman 170).
This model provides the real reason as to why more organizations should outsource, as it will lead to positive change in society. Experts argue that organizations have an ethical obligation to exercise, corporate social responsibility in the communities where they work. In addition, foreign companies should focus on developing good relations with the locals for the sake of settling well (Hulbert 234).
It is also important to note that the economies that host foreign organizations also have a burden to carry on ensuring that they benefit from such opportunities. The burden carried by a certain group or population in the host country often leads to negative effects (Robbins & Bergman 170). For example, most businesses that outsource labor in developing countries often deals with accusations of providing their employees with low wages and poor working conditions.
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However, the ethical dilemma that develops out of this model is the need to provide justice to the loyal workers that a business leaves at home versus the need to provide equal opportunities for several people in other countries that are in need to jobs regardless of their remuneration. Organizations that choose to outsource labor should ensure that the both sets of workers are treated equally (Hulbert 241).
The third concept used in assessing the moral implication of outsourcing is libertarianism. This model applies an ideological belief in freedom of thought and speech. In the context of outsourcing, the model applies in establishing whether the decision by an organization to move its jobs overseas recognizes the value of fair treatment among the various stakeholders involved in the process (Robbins & Bergman 200).
Experts argue that it is unethical for organizations to focus on fulfilling their own interests during the process of outsourcing at the expense of providing justice to employees. Organizations have an ethical responsibility to ensure that they uphold the rights of freedom and expression of their employees with regard to the kind of treatment they receive, as well as working conditions (Robbins & Bergman 209). The fact that most organizations choose to outsource in search of cheap labor, does not mean that the employees should be treated as slaves.
They have employee rights, which all employers should uphold (Gold 202). Research has established that employees in developing countries that host foreign companies are often the subject of major justice issues associated with outsourcing. The main reason for this phenomenon is the fact that their employers look for every possible opportunity to reduce the cost of operation and increase profitability (Shaw 217). This includes providing low wages and ignoring the need to provide health insurance to employees.
Advantages and disadvantages of moving a company overseas
Research has established that there are numerous advantages associated with moving a company overseas. First, it helps to expand the market for a businesses goods and services. Moving a company overseas provides a good opportunity to venture into numerous international markets (Budd & Scoville 76). Second, it helps to expand the brand of an organization.
Economic experts argue that the more a business ventures into new markets the bigger their brand grows because more people will be in touch with their products (Shaw 200). Third, moving a company overseas helps to create numerous job opportunities to people, especially in developing countries where process of economic growth is usually very slow. Other notable advantages include reduced cost of production, increased accessibility to products, and limited legal restrictions (Budd & Scoville 88).
Research has also established that moving a company overseas can be disadvantageous due to the numerous associated risks. First, there is the risk of currency fluctuation that often leads to hidden costs (Robbins & Bergman 231). Experts argue that most companies often experience a currency shock with regard to the cost of raw materials using foreign denominations.
The value of the United States dollar varies across the world, a factor that can affect the cost of production depending on the source of raw materials. The second disadvantage of moving companies abroad is the speedy rise of labor cost in countries where the production process relocates to (Robbins & Bergman 238). Research has established that most companies that outsource are not very lucky at times, because the cost of labor in certain countries rises as soon as they start relocation plans.
Another challenge associated with moving a company abroad is logistical challenges (Robbins & Bergman 240). This often affects the ability of companies to maintain the quality of its products. Political risks are another disadvantage associated with moving a company abroad. Research has established that although some countries have good opportunities for business, challenges such as political instability often compromise their ability to have smooth operations (Shaw 246). Such risks are very harmful to investments.
Outsourcing is one of the strategies used by businesses in the contemporary world to increase their market presence, maximize profitability, influence positive change in developing countries, as well as avoid tough economic and environmental regulations. Research has established that heavy taxation along with numerous economic sanctions contribute to the high number of American companies that outsource labor in countries such as India and China.
The concept of outsourcing has created a huge dilemma among various stakeholders in the business world, as people continue to debate on the moral implications of the practice. There are both positive and negative effects associated with companies moving jobs overseas. Organizations that outsource labor in foreign countries have an ethical obligation to ensure that their motivations for moving abroad have an orientation towards achieving the common good.
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Robbins, Stephen, & Rolf, Bergman. Management. California: Routledge, 2011. Print.
Shaw, William. Cengage Advantage Books: Business Ethics. New York: Cengage
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