International Outsourcing - Offshoring

Global Services Location Index (GSLI)

I found this index really interesting because of the three components that it takes into account for: financial attractiveness, people skills and availability, and business environment. This index informs companies which countries are suitable for offshoring services. 

I have always thought that companies only consider the cost of production, so if a country with an extremely low cost of labor, such as Bangladesh, the company would prefer to go there than other country. However, with previous knowledge that Bangladesh has an extremely low cost of labor due to the history of Nike, I was surprised that Bangladesh wasn't even in the Top 25 of GSLI. This may be due to the low people skills and availability and business environment in comparison to other countries. 

It was also surprising to see India being the leader in the GSLI, with 3.11 financial attractiveness, 2.76 people skills and availability and 1.14 business environment and United Kingdom being the 16th, which is a relatively high ranking. 


Do these top offshoring countries see this as positive or negative? 

ASEAN

PH retail industry seen to grow in ASEAN integration

Source: http://www.abs-cbnnews.com/business/03/20/14/ph-retail-industry-seen-grow-asean-integration

Summary of Article: 

Association of Southeast Asian Nations (ASEAN) is implementing a regional economic integration next year. This change is said to positively affect the retail industry of the Philippines, allowing foreign retailers to come to the Philippines while Filipino retailers can expand to ASEAN countries. Sy-Coson said, “I think there will be growth in the retail industry.”

My Thoughts:

This economic integration will undoubtedly help the Philippines economy; these foreign ASEAN companies generally have high revenues, so the Philippines government can earn tax income. This will also open the market to new varieties of products, increasing consumer preferences, which will most likely increase the demand of goods. However, with an increase in competition between foreign and local retailers, the foreign retailers may become more dominant due to their advantages of economies of scale. The local retailers may also lose incentives to compete if the foreign retailers get too competitive.

Sociocultural Exchange - Starbucks

Choose either the concept of cultural diffusion (voluntary/consented change in culture) or cultural imperialism (enforced/pressured change in culture) and using specific examples explain how transnational corporations either intentionally or unintentionally spread consumerism through your chosen concept.


Cultural Diffusion is the process in which a particular culture is adapted by not only the original population, but also other populations. This process has become more and more prominent due to an improvement in technology, which had increased accessibility of information anywhere around the world. Transnational Corporations are actively taking advantage of the increase in accessibility to diffuse their own "culture" onto consumers to promote consumerism (idea that encourages people to purchase goods and services). An apotheosis of a transnational corporation that does so is Starbucks Coffee.

Companies are selling their own sets of ideas, and not necessarily products. These sets of ideas are what fabricates the companies' own culture. The images that Starbucks associates itself with is an environment of nice ambiance, a forum of ideas and discussions, working place. Starbucks has made its consumers to believe that its coffee worths more than it costs and moreover, its coffee is a necessity not a desire. Such as that Starbucks coffee is necessary when one works, due to Starbucks' imposed image of "work". Starbucks is the perfect place to meet with one's colleagues because of its image of a "forum". 

Other than imposing positive associations, Starbucks has also convinced its consumers that it's okay to consume its products because they're ethically responsible by having fair trade, and that it aims to provide positive impacts to its neighbors. However, all these praised images of Starbucks are all in use to maximize profits. The more positive the consumers think the company is, the more they will be willing to pay. Starbucks has also quietly diffused the Western culture to the lives of Asian countries, coffee has slowly become a substitution of tea in Asian countries, which further encourages the Asian population to increase consumption.

Starbucks currently operates in over 60 countries with more than 20,000 stores worldwide. As seen through the numbers, Starbucks is extremely successful at cultural diffusing; more and more consumers are increasing their purchasing quantity.  Starbucks has also gained its ground through its ubiquitous presence over the other competing coffee shops, thus manipulating that Starbucks is the way to go. 

With the increase in transnational corporation's cultural diffusion, the people around the world will be spending more money on goods and services. This is because companies now impose cultural ideas to manipulate the consumers to believe that there are only benefits when consumers purchase, no drawbacks. 

Pros and Cons of Globalization

Pros

• Increase in communications among friends and families around the world. 
• ex: Facebook and Skype
• Decrease in production costs for companies, they're able to increase their profits
• ex: Nike main production line is at Bangladesh instead of at United States
• Information travels rapidly, it can become a platform to raise awareness for causes such as racism
• charityintelligence.ca
• freerice.com (raises awareness for world hunger and gather help)
• Increase in demand of products, increase in trade amongst countries. This helps the overall economic growth and development of countries.
• From 1962 to 1989, Korea's GDP has grown 8% every year
• Availability of foreign products around the world

Cons

• Small and less well-known companies cannot compete with famous companies
• ex: local fast food companies is unable to compete with McDonalds
• Labors in developing countries lose job opportunities because companies look for lower cost labors in LEDCs
• Chinese companies settling in the Philippines causes the lower-classes of China to lose job opportunities. 
• Leads to exploitation of LEDC labors and environment
• Nike's sweatshops violates human rights, disregards their working environment and their working wage
• Improvement in communication (shrinking of the world decreases) allows intrusion of bullying or other forms of negative interactions
• Dominant countries are allowed more power, because less economically developed countries fight for connections to trade with dominant countries
• Loss of cultural identity, with the rapid trading of information around the world, people are more likely to assimilate with another culture. 
• Western ideas are becoming more dominant than Eastern ideas