Business Relocating to Third World Countries Pay Cheap Essay

Business Relocating to Third World Countries Pay Cheap - Essay Example (Vestring Till et al, 2005) Source: Bain & Company, 2005. Reasons There are several reasons attributing to this shift of both the service sector and the manufacturing factories to third world countries. Apart from cheap labour that is available, people in these countries have become a highly educated workforce in terms of manufacturing, R&D and engineering. Countries like India and China have succeeded in providing cheap labour while at the same time maintaining quality. Data shows that 77 global companies have set shop in India. (Vestring Till et al, 2005) Cost of manufacturing in countries like Taiwan and Singapore is one fourth of the cost of manufacturing the same component in countries like Germany. Other reasons why some of these third world countries attract off shoring of factories is that it enables these MNC’s to expand market base. Having a manufacturing hub in Asia or Latin America helps them to cut transportation costs and engage in expanding business operations i n these countries. Emerson for example has put up shop in Asia and Mexico with its engineering and manufacturing being done at China, India and Philippines. Source: Bain & Company, 2005 Another major factor is the wide disparity in wages paid in the West and those in third world countries. A job that would require 20-30 dollars/ hour to be paid in the West could be completed in about 1 dollar/hour in China. (Vestring Till et al, 2005) Human right laws and adherence to such practices are also questionable in these countries. Severe lack of job opportunities, inflation and rising poverty indexes make employees work under harsh conditions without questioning authority. These have prompted civil society to question whether this kind of manipulation and exploitation of... This report stresses that the ethics of companies off shoring factories to third world countries and managing their business by paying meagre salaries and violating several labour laws regarding minimum wages and working hours are being debated constantly. It is true that to an extent the developed countries do not promote the growth of indigenous industries as it would severely impact their business. Import duties in rich countries on a variety of goods are high which discourages third world countries in developing their own industry. This paper makes a conclusion that several multinational companies over the last decade have relocated their factories and businesses to third world countries. This to an extent has managed to open up the economy of these countries by generating employment and also creating foreign exchange. In the face of stiff competition from emerging economies like China the concern of the business houses to look for cheaper avenues of manufacturing is true and needs to be considered. There are several examples of factories in third world countries running as per the stated labour laws of the particular nation but the number of companies doing it otherwise far exceeds those doing it ethically. It is therefore imperative that a fine balance needs to be struck between these extremes since it ultimately boils down to the question of human dignity, basic rights of fair wages, ethical business practices and whether you as a company or a consumer would want to be associated with a product that has been manufactured at the cost of another’s misery.