Chapter 2, Problem 1ED

Summary Introduction

Summary:

The company is a manufacturer of athletic shoes and has an image that says it is socially responsible. But, in recent times the cost labor wages are increasing in their manufacturing sites in Country IA and Country CA. The ease of business is also improving but also the wage rates. The labor-cost differential is not favorable anymore.

To determine: The course of action for Person X.

Explanation of Solution

Course of action for Person X:

The information given in the scenario indicates that the company can save a lot in production costs over a year if the company moves the production to Country V. The company generally is known for being socially responsible takes into everything before making a decision. Country V is known for not being a democracy where the employees are not being proper wages and sustainability will not be an issue as the employees are exploited.

Person X must not decide to relocate to the production facility to Country V even though the production costs are considerably lower compared to the existing alternatives of Country IA and Country CA. Even if the government of Country V assures that employees will be fairly compensated and also better employee management practices, the company does not have any control over the happenings in Country V. It is important to cut down costs but it should not be at the cost of compromising the socially responsible approach. Hence, the shoe company must not decide to relocate to Country V.