Subcontracting is a situation whereby a company or firm being the main manufacturer (contractor) hires/contracts another firm (subcontractor) to manufacture the products as an alternative. The main benefits is that subcontracting firm focus more on other crucial business areas such as marketing, creation of more employment opportunities since work is done by other people employed by the subcontractor.
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Low cost of production is another benefit. Fourthly, the products or services offered are of high quality due to specialization. The contractor only needs to subcontract another firm for less charges hence lowering cost of production.
Subcontracting has its drawbacks, which include failure to meet or live up to market/clients demands by the subcontractor. For instance, poor workmanship by the subcontractor may tarnish contracting firm’s reputation. Secondly, the contractor may not really have much control over the quality of work. Thirdly, contracting firms’ survival and success usually depends on the performance of the subcontractor.
Outsourcing refers to the acquiring of products or services from other producers or suppliers usually from other firms within or from other countries instead of being the sole manufacturer of the products. Many American and European organizations are now outsourcing and this is mostly due to the positive impacts it has on organizational growth. The main benefit of outsourcing is reduced cost of production.
These organizations mostly outsource from developing countries where labour cost is very cheap, therefore they are able to make massive profits. Like subcontracting, outsourcing leaves the contracting companies with core business of planning and strategizing on marketing and product development.
Outsourcing has its drawbacks as well. One of drawbacks is loss of jobs especially in cases of offshore sourcing, where the organizations bring in cheap labour from other countries. Bad publicity is another drawback, as people who lose their jobs will depict the organization negatively.
Thirdly, there is likely to be a problem of language barrier for instance, if products manufactures use different native languages, then manuals may be in a language that most clients cannot understand. This will cause miscommunications or need to translate. Last but no least, here is no guarantee on time of products since outsourcing delays may be inevitable.
In this case, Nike Inc.’s reason to subcontract its production is mainly on the need to cut cost of production, gain high quality products and make most out of the invested capital as the main aim of any business. In particular, this leaves Nike Inc. with only the most crucial area of its business of advertising, product development and distribution. This saves Nike Inc. a lot of time, money and resources.
The most probable ramifications for laying off 60,000 workers when Nike closed its last factory in U.S. were, increased profit margins since the company was able to do away with responsibilities of managing many of workers, paying workers salary and benefits, insuring the business and many more. Alternatively, it left 60,000 Americans jobless while creating 300,000 jobs in Asia.
Code of conduct refers to certain set rules and guidelines within a given organisation or profession. There are several ethical issues found in Nike manufacturing factories including abuse of workers by the subcontractors. The workers are poorly paid; their minimum wages do not meet their daily liveable wage, there is physical and sexual abuse. Child labour is another ethical issue, where minors were stitching soccer balls for Nike.
The benefits for Nike operating manufacturing plants overseas include increased productivity, increase in profit margins, high quality products and reduced production cost.
It is important to study ethics since ethical behaviour can sometimes be tricky in its form; how a business carries itself can leave a good or bad impression on consumers and other businesses. Most businesses are today interested in profits than anything else, thus failing to check on critical aspects such as ethics and consequently their downfall. Evidently, companies that practice ethical values are incomparable to businesses that just want to make a profit. Implementing Business Ethics in a company’s work is hence critical.