The Role of Offshoring in the Performance of MNEs

Question 1

Offshoring of production is a good strategy, especially if it reduces the cost of production. For instance, the cost of labor is high in most countries, which forces many companies to move their production in other countries. However, it essential for these companies to consider other factors that may increase the production cost in foreign countries such as the taxation of foreign entities. In addition, offshoring is a better strategy if it seeks to take advantage of subsidies in the chosen country of production. Some governments encourage foreign companies to invest in their country through offering certain subsidies such as zero tax on the importation of a given range of raw materials. However, the government policies on these subsidies may have specific time limits and upon elapse may have adverse effects on the foreign firm’s production efforts. Moreover, offshoring of production aims at taking advantage of advanced technology, which is not available in the current country of technology. This makes offshoring a good strategy, as improved technology increases the rate of production in an efficient manner. Nonetheless, the breakdown of such advanced technology may require high-skilled labor that may be expensive for the offshoring firm. Furthermore, offshoring of production may decrease the efforts of innovation in a company that subsequently decreases research and development initiatives (Junge & Sørensen, 2017). Thus, the producing company may not benefit from the gain of external knowledge that could be adapted in the production process for the benefit of the company and other stakeholders (Junge & Sørensen, 2017). However, innovation efforts may prove costly to the local firm and offshoring of the function in the production process could become a source of competitive advantage.

Question 2

MNEs should accept full responsibility for the unethical behavior of their employees. Some of these organizations often reward employees that engage in behaviors that may seem to be a violation of ethical standards. For instance, if an employee cuts a deal through successfully offering a bribe, they are usually praised for their good work and may receive promotions. However, some MNEs give harsh punishment for unethical employees including the termination of their employment contracts. The organizations rather reward employees that are wiling to become whistle blowers on the unethical behavior of other employees. MNEs have a social responsibility to undertake ethical behavior in all their undertakings (Daniels, Radebaugh & Sullivan, 2017). Thus, it is critical for the organizations to ensure that they uptake due diligence in the hiring process to ensure that morally upright individuals are hired. This means that the chances of an employee engaging in unethical behavior is minimized and in the event that they engage in such behavior, then the organization needs to take full responsibility and proceed to deal with the employee on a personal level. However, in most cases these organizations outsource the human resource function, especially for contractors. MNEs should only be responsible for the unethical behavior of such workers only to the extent stipulated in the contracts, especially considering the extent of outlined disclaimers therein. Moreover, MNEs adoption or failure to adopt an organizational culture that discourages unethical behavior determines their responsibility regarding the professional conduct of their employees. However, personal morality levels render employees to full responsibility of their unethical behavior, which excludes the organization from liability. Thus, although organizations need to accept full responsibility for the unethical behavior of their employees, the personal morality of the latter pushes them to personal liability in some instances.

References

Daniels, J., Radebaugh, L., & Sullivan, D. (2017). International business: Environments and Operations (16th ed., pp. 12,144). Prentice Hall.

Junge, M., & Sørensen, A. (2017). Domestic R&D and offshoring: does offshoring reduce knowledge production?. Applied Economics Letters, 25(18), 1283-1287. doi: 10.1080/13504851.2017.1418068