Multinational corporations (MNCs) typically choose to outsource their production to developing states because it is cheaper and allows these companies to make more profits. Inevitably, this practice has an effect on the local communities. One of such MNCs that uses the outsourcing practice is Nike. This paper will examine the impact of Nike’s outsourcing on developing nations on local communities.
Most MNCs have a set of compliance standards for their outsources that outline the conditions and quality of the products that the business want to receive. As a result, manufacturers in developing nations have to invest in ensuring that their production complies with these standards. The evident benefit of the outsourcing practice to local communities is that people have more jobs (“Findings from Frankfurt School of Finance and Management,” 2021). Due to the fact that MNCs operate on the global market, these jobs are usually long-term, guaranteeing that the outsourced employees have a job and can provide for themselves for a long time. However, this dependence on the MNCs means that the local communities have little bargaining power over their rights and work conditions. According to Lin et al. (2021), as Western nations tighten their scrutiny of forced labor from the remote northwest region where Beijing has been accused of committing genocide against local ethnic minorities, more and more Chinese factories that manufacture goods for Apple Inc., Nike Inc., and other companies that are sold in the United States are rejecting workers from Xinjiang. This shows that local communities are affected by international politics and, more specifically, by the relationship between China and the United States.
Evidently, this global stratification has an effect on the United States’ economy and society as well. For one, outsourcing practice means that there are fewer jobs in the United States. Moreover, this means that MNCs such as Nike do not invest in building factories in the United States and instead use facilities that are located in developing nations. Thus, the local economy does not receive the indirect benefit from people having factory jobs and from these investments. On the other hand, consumers can purchase products at lower prices because outsourcing allows this company to save costs. Thus, there are both benefits and downsides to outsourcing businesses such as Nike.
Considering all the benefits and issues with outsourcing, the biggest “winner” from this practice is the MNC. However, local communities in developing nations also benefit from this practice because their labor conditions and economic state improves. This is especially true since, in recent years, consumers have begun to pay more attention to manufacturing practices in developing nations. There have been several news stories about work conditions and underpaid labor in these communities, which has sparked a debate among consumers regarding the sustainability of businesses such as Nike (Ziobro, 2020). As a result, these MNCs began to pay more attention to how they approach outsourcing, impacting the safety, work conditions, and pay of the outsourced workers.
In summary, Nike outsources production to underdeveloped nations since it is more affordable and increases revenue. This essay will look at how local populations are affected by Nike’s outsourcing to underdeveloped countries. The majority of MNCs have a set of compliance requirements for their outsourcers that specify the terms and caliber of the goods the company wants to obtain. International politics, and more specifically, the alliance between China and the United States, have an impact on local communities. The economy and society of the United States are impacted by this worldwide stratification. Businesses that outsource, like Nike, have both advantages and disadvantages.
References
Findings from Frankfurt School of Finance and Management has provided new data on economics (why do they just do it? A theory of outsourcing and working conditions). (2021). Economics Week. Web.
Lin, L., Xiao, E., & Kubota, Y. (2021). Chinese suppliers to Apple, Nike shun Xinjiang workers as U.S. forced-labor ban looms. The Wall Street Journal Eastern Edition. Web.
Ziobro, P. (2020). UPS slaps shipping limits on Gap, Nike to manage e-commerce surge. The Wall Street Journal Eastern Edition. Web.