Many of the players in the retail
industry manufacture overseas and utilize outsourcing. This is especially true
with companies such as, Nike, Macys, and Wal-Mart. Wal-Mart uses companies like
Infosys and Wipro for their outsourcing in Asia and other international country’s.
In fact, contracts like these are worth upwards of $500million Dollars so the
overseas contracting business is a very competitive business. Keep in mind that
these are not manufacturing contracts, but IT contracts. Furthermore, India has over 26% of the worlds
IT exporting services. Other major retailers like Tesco, the British version of
Wal-Mart, also outsources their IT to countries in Asia, specifically, India.
In fact, Tesco claims it saved over $60million by outsourcing its IT to India.
Wal-Mart saves a similar amount by doing this too. The reason Wal-Mart does
this is to help in the globalization process of their corporation. Wal-Mart also has a joint venture with a
company called Bharti,
to increase its presence in India.
Nike is another Corporation that outsources to Asia.
Nike produces a lot of their shoes in Asia because labor is so much cheaper. As
a result, less is taken from their bottom line and they profit more. Home Depot
and Sears also do a lot of outsourcing to China. A lot of their products are
produced in China because of the cheep labor. There was a famous case in 2006
concerning the Young
Sun Lighting Co, which produces lamps and fixtures for Home Depot and Sears,
because of poor working conditions in the factory. An overall theme for
outsourcing in Asia is that the working conditions in the factories are very
poor. Some controversial companies such as Nike have a tarnished reputation because
of this.
http://www.businessweek.com/magazine/content/06_48/b4011001.htm
David,
ReplyDeleteI really like how specific your post is. Companies that outsource to country's like China or India, as you mentioned, are leading the world in the retail industry. Therefore, we can argue that companies that outsource take risk in doing so, but they earn higher profit at lower cost and have an advantage over competition. We should definitely pay close attention to the companies that focus on expanding globally by outsourcing or having joint ventures, such as Wal-Mart. These companies can and should be part of our recommendation.
Carlos Andreu
Outsourcing is a big deal in the retail industry. I find it really interesting and important to point out, as David did, that Wal-Mart saves money by using outsourcing, having it's products produced in another country. Asia is a huge outsourcing country. Companies are starting more and more to use Asia as an outlet to produce more goods and at cheaper prices. The biggest factor of outsourcing is the cheaper labor.
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