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Arguments against outsourcing domestic production

Question:

1) Does the NYMO organization in its course for Corporate Social Responsibility, has Corporate Citizenship obligation to try to preserve the jobs of its workers in their home-country market? (Justify your advice). As part of John’s report to the CEO, give few key arguments in favor and against the need for outsourcing domestic production, and therefore, cutting down jobs at home.

2) Given that the joint venture, has decided to implement a geocentric staffing policy in appointing the venture’s CEO, identify the key advantages and disadvantages of each type of international staffing policy. Namely ethnocentric, polycentric and geocentric staffing.

3) What are the risks the Joint venture might have with the contract labor strategy planned to be implemented in rehiring staff laid off in its effort to keep the costs down (“reengineer”), right after the first signs of recovery from the financial crisis? Can you propose any alternative(s) to the contract labor strategy for the joint venture?  

4)How do you judge the senator’s proposal for the tax incentives offered to attract the NYMO’s organization new investment? Would the outlay be proper use of taxpayer money? Why or why not? If you were in John’s position, would you feel comfortable defending your acceptance for the tax incentives if it were to become public?

5) Suppose you were asked to decide the course of action with regards to the announcements of the new government’s spokesman? It is up to you to decide on behalf of the NYMO’s organization board, a course of action. Can you make an ethical decision that is also a good and profitable business decision? Specifically a) Do you pull out of the country, effectively abandoning your investment and employees? b) Do you publicly and directly confront the leaders of the new government and insist that they owe to respect the rights and interests of all multinationals operating in their soil? c) Do you proceed more discreetly and pursue diplomacy individually, out of the public’s eye? d) Do you advise a different course of action?

A Corporate Citizenship is the degree to which organizations are socially accountable for meeting economic, legal and ethical liability put on them by shareholders. The goal of Corporate Citizenship for businesses is to build quality of life and higher standards of living in the communities in which they function. In this case NYMO is operating in both New York and in some Latin American country, but its main operating market is shifted to Latin American country and it is fulfilling its Corporate Citizenship obligation for Latin America by providing jobs to the people of Latin America. So we can say that it is performing its Corporate Citizenship responsibility to a large extent (Prasad, 2011).Our advice is that even though NYMO is completing its responsibility in Latin America, it should keep some of its operations in its home country, and fulfill its responsibility for the home country, especially that the new venture may be subject to political/financial crisis.

As part of John’s report to the CEO, give few key arguments in favor and against the need for outsourcing domestic production, and therefore, cutting down jobs at home. Arguments in favor of outsourcing domestic production

Advantages and disadvantages of different international staffing policies


Swiftness and Expertise–The workers to which task is outsourced have explicit equipments and industrial skill, many of the times superior than the ones at the company that has outsourced. Efficiently the jobs can be completed quicker and with improved eminence output (Vining & Globerman, 1999).

Focusing on core process rather than the sustaining ones –Outsourcing the sustaining procedures gives the organization additional time to reinforce their core trade procedure.Risk-sharing -one of the most vital issues forming the result of a campaign is risk-analysis. Outsourcing definite constituents of your business procedure helps the company to transfer some accountability to the outsourced vendor.

Cheap Operational and staffing costs -Outsourcing avoids the necessity to employ employees in-house; hence staffing and operational costs can be reduced to a great degree. This is one of the major benefits of offshore outsourcing (Lewin & Johnson, 2000)

Arguments against outsourcing domestic production

Risk of divulging secret data -When an association contracts out HR, Recruitment services and Payroll, it engages a danger if revealing secret company information to a third-party.

Coordinating the deliverables -In case right partner is not chosen for outsourcing, some of the ordinary difficult areas comprise prolonged delivery time frames, inferior quality output and unsuitable classification of duties. At times it is simple to control these issues within an company rather than with an outsourced partner (Quelin & Duhamel, 2003).

Hidden costs -Although outsourcing majority of the times is gainful at times the concealed costs concerned in signaling an agreement while signing an agreement across international borders may pretense a serious danger.

Ethnocentric staffing advantages

The obvious benefit of ethnocentric staffing is the agreement of point of view and interests of the head office with all other overseas subsidiaries. Communication is simpler in ethnocentric staffing as there should be no cultural and language barriers. A company practicing ethnocentric staffing is also capable to move workers with an obvious presentation proof that will offer some level of certainty (Kakabadse & Kakabadse, 2002).

Ethnocentric staffing disadvantages

You can mislay local viewpoint and imminent that local workers can give that may assist overcome exceptional obstacles in each foreign office. Furthermore, appointing emigrants is inclined to be costly contrasted to appointing locally. In addition, a high ratio of deportees may build local hatred at foreign subsidiaries, which may harm self-esteem (Hajduk, 2000).

Polycentric staffing advantages

It will be better for the employees of the operating country to direct the organization on local market circumstances, laws and culture at every overseas locality. Utilization of home workers gives a point to the organization and the customers that the company is agreeable to give an assurance to the nation. Home workers are also contemptible, no transfer costs and top reimbursement are involved. (Harris, Giunipero, Tomas & Hult, 1998).

Polycentric staffing disadvantages                                 

Depending on locals means there may be a few divide in viewpoint and notices with the home country. Locals may place local attentions on top of the company's big interests (Karnitschnig, 2004).

Geocentric Hiring Advantages

Risks and alternatives to contract labor strategies for joint ventures

Geocentric hiring is the practice of keeping the finest people in your company not considering of where they are from. If you have an idol player in your US manufacturing office and your Italy based operations team wants him, you would get him in the geocentric model. The main advantage of this model is that it allocates to use the ability where it is needed the most. (Momme, 2002).

Geocentric Hiring Disadvantages

When you have a small company, you may not construct the wide worldwide infrastructure that lets you to really influence a geocentric model. The costs of this model may be high compared to the number of company’s we have outside. When you start taking employees from abroad, your preparation and transfer costs can go up and you also have the additional difficulty of dealing with immigration related necessities. There is also a risk of weakening the cultures (WiÅ›niewska, 2011).

Some of the risks involved in contract labor strategy for the joint venture are –

  • Many times when workers are on contract they don’t have loyalty to the company when contrasted with full time workers.
  • On contract workers have a higher turnover rate.
  • Company also has a risk that on contract worker is probable to find it hard to mix into the company again and may undergo lower morale; also core workers possibly will feel threatened by the attendance of contingent employees.

Thus, part time workers who once were permanent employees might have more obscurity in cooperate with each other.

Some alternative to the contract labor strategy for the joint venture are –
Leave of Absence -

People are presented a leave of absence with full profits for a meticulous time to help business weather a slump. Although people are promised a job on completion of the leave, it might not be the equivalent job or at the equal pay level (Gilley & Rasheed, 2000).

Employee Buy-Outs
The organization permits employees to acquire the process that was lined up for shutting and set up their own production.

Shared Ownership
The organization permits employees to trade pay raises or pay slashes in revisit for company stock.

We think that senator’s proposal for the tax incentives was a good proposal, as many developing countries today are using such kind of policies for development of their company. This would be a proper outlay of taxpayer money as they are the ones who would be benefited once the company starts operating (Cooper, 2004).

Yes, if I had been in John’s position, I would feel comfortable defending acceptance for the tax incentives if it were to become public as taking tax incentives is not wrong and is profitable for both the operating nation and the company (Biel, 2001).

We would take a different course of action (D)., we should have a meeting with the leaders of the Government; we should try to explain them how much we have invested in the Joint venture and might be difficult for the nation to run the company on their own, as we have prior experience in running this energy business. If the government is still not convinced we can ask them for some time in which we will help the company to operate, and if the government at anytime feels that it will be able to handle the company better than us, then it can immediately take all the powers from us. This way we can borrow some time from the government, we can also ask the government to fix a particular percentage of company profit which we can get regularly; we can also advice government to discuss the issue with employees before taking any decision (Caldwell, 2006).

References

Biel, F. (2001). Promotor.

Caldwell, B. (2006, June 24). The new outsourcing partnership. Information Week, pp. 50-60.

Cooper, C. (2004). Poll shows support for off shoring tax. CNET News.com.

Gilley, K.M., & Rasheed, A. (2000). Making More by Doing Less: An Analysis of Outsourcing and its Effects on Firm Performance, Journal of Management, Vol. 26, No. 4, p. 764.

Hajduk, A. (2010). Outsourcing. 

Harris, A., Giunipero, L., Tomas, G., & Hult, M. (1998). Impact of Organisational and Contract Flexibility on Outsourcing Contracts, Industrial Marketing Management

Karnitschnig, M. (2004). Vaunted German engineers face competition from China. New YorkTimes.

Kakabadse, A., & Kakabadse, N. (2002). Trends in Outsourcing: Contrasting USA and Europe, European Management Journal (Vol. 20, No. 2, pp. 189).

Lewin, J., & Johnson, W. (2000). The effects of organisational restructuring on industrial buying behaviour: 1990 and beyond, Journal of Business & Industrial Marketing vol. 11 no.6 1996, pp. 93-111.

Prasad, R. (2011). The Outsourcing Option, Ebesco Publishing.

Momme, J. (2002). Framework for outsourcing manufacturing: strategic and operational implications, 49 pp. 59ñ75.

Quelin, B., & Duhamel F. (2003). Bringing Together Strategic Outsourcing and Corporate Strategy: Outsourcing Motives and Risks, European Management Journal. Vol. 21, No. 5, p. 652;

Vining A., & Globerman S. (1999). A Conceptual Framework for Understanding the Outsourcing Decision, European Management Journal. Vol. 17, No. 6, pp. 645ñ654.

Wiśniewska M. (2011). Outsourcing.

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