As a manufacturer of athletic shoes whose image, indeed performance, is widely regarded as socially responsible, you find your costs increasing.
Traditionally, your athletic shoes have been made in Indonesia and South Korea. Although the ease of doing business in those countries has been improving, wage rates have also been increasing. The labor-cost differential between your present suppliers and a contractor who will get the shoes made in China now exceeds $1 per pair. Your sales next year are projected to be 10 million pairs, and your analysis suggests that this cost differential is not offset by any other tangible costs; you face only the political risk and potential damage to your commitment to social responsibility. Thus, this $1 per pair savings should improve your bottom line. There is no doubt that the Chinese government remains repressive and is a long way from a democracy.
What do you do and on what basis do you make your decision? Please remember to base your answer on your knowledge of Global Operations Strategy.
A firm can save $10 million in production costs per year. All it has to do is locate manufacturing in China, which is not a democracy. ...