Global Operations Strategy
The company has been carrying out its operations in Indonesia and South Korea in order to reduce the cost of productions, especially labor, as the workers in these countries are willing to work more, compared to American workers, therefore reducing the cost of labor. However, the company now faces an ethical dilemma of whether to go ahead with making the shoes in China, so as to meet their expected sales but this will cost more by one dollar per pair and the company may face political risks, as well as damage to the company’s socially responsible reputation.
In the past years, the society deemed cheap labor as a vice, which is wrong, as companies would want to maximize profits and reduce their costs at the expense of human dignity. However, the working conditions have improved over the years. Taking production to China, however, will be advantageous to the company, as it improves the supply chain and provides better quality goods and services to the markets. This would also offer employment opportunities in China, despite the increasing cost of labor in the country.
The company’s vision and mission should be reviewed in order to ensure the strategies to be made and decisions are aligned with the company’s interests. Taking production to China would be costly in the short run, as the company would have to revise the labor practices in the country and ensure that ethical practices are followed. However, with the increasing cost of labour in China, which is expected to continue for the next few years, means that cheap labour in China will be outdated. Increase in costs can translate to an increase in the prices too will in turn reduce sales. The company should not take production to China but continue to produce in South Korea and Indonesia and, therefore, protect its reputation.