Outsourcing has generally benefited companies in term of low costs and economies of scale. However, as consumers have been becoming more “socially conscious,” the tag “Made in China” could influence consumers purchasing behavior. Under the new Trump administration, it appears that outsourcing has become increasingly unpopular as well. President Trump has openly criticized companies, such as Apple and Boeing, for outsourcing. Overall, it appears that globalization has become unpopular. Due to past consumer behavior towards companies which have outsourced their manufacturing, should companies avoid moving business operations overseas?
Global companies such as Apple and Nike have both been criticized for unethical outsourcing. Nike outsourced its’ manufacturing in South East Asia in order to reduce costs. When the poor-working conditions of one of Nike’s factories was exposed, Nike faced a huge backlash from the public and its’ consumers. According to Forbes, “Nike saw its earnings fall 69 percent and was forced to lay off workers.” (Guthrie) Nike was only able to avert the crisis when it created the Fair Labor Association (FLA). (Nisen) This non-profit organization works with companies to improve abusive labor practices across the globe. Apple also joined the FLA when it was criticized by consumers for its relationship with its’ manufacturer in China, Foxconn. Thus, Apple also quickly adapted to consumers’ behavior to avoid further criticism. As a result, companies across the global have created Corporate Social Responsibility reports. By 2013, 72% of S&P 500 companies have created a Corporate Social Responsibility report. (Bliss)
Therefore, it is highly possible that outsourcing manufacturers has had a large impact on consumer behavior globally. Due to this shift in consumer behavior over the past decades, companies should adjust their supply chain strategies and align it with consumers’ values. According to a global Nielsen report, 66% of consumers globally say they would prefer to buy a product or service, “from companies that have implemented programs to give back to society.”(Nielsen) Additionally, the study continues that the “socially conscious consumer” would prefer to work for companies, which give back to society as well as invest in these companies. These consumers across the globe generally are under the age of 40. Thus, the study also concludes that not all consumers currently care for CSR. However, there is a large segment of consumers who do care and this segment could increasingly grow over the next few decades. (Nielsen) Thus, outsourcing manufacturers could hurt a company’s brand to consumers who are socially conscious.
Companies, which have focused on “giving back to society,” have generally been very successful. Shoe company, Toms, promises consumers that after every purchase, a pair of shoes will be donated to someone in need. His socially conscious and for-profit strategy resulted in helping more than 51 million people and revenues were as high as $392 million after 10 years CEO, Blake Mycoskie, started the business. (Buchanan) Another example, can be seen with Unilever’s Sustainable Living strategy. Therefore, the criticisms Nike faced as well as the success of Toms, show that consumers are becoming increasingly socially conscious. Perhaps it is not directly outsourcing which consumers dislike, but overall how ethical a companies’ supply-chain is and whether successful companies strive to give back to society.
Bliss, Richard T. “Shareholder Value and CSR: Friends of Foes?” CFO. N.p., 28 May 2015. Web. 25 Feb. 2017. <http://ww2.cfo.com/risk-management/2015/02/shareholder-value-csr-friends-foes/>.
Buchanan, Leigh. “What’s Next for Toms, the $400 Million For-Profit Built on Karmic Capital.”Inc.com. Inc., 27 Apr. 2016. Web. 25 Feb. 2017. <http://www.inc.com/magazine/201605/leigh-buchanan/toms-founder-blake-mycoskie-social-entrepreneurship.html>.
Guthrie, Doug. “Building Sustainable and Ethical Supply Chains.” Forbes. Forbes Magazine, 09 Mar. 2012. Web. 25 Feb. 2017. <https://www.forbes.com/sites/dougguthrie/2012/03/09/building-sustainable-and-ethical-supply-chains/#720d2ed04179>.
Nisen, Max. “How Nike Solved Its Sweatshop Problem.” Business Insider. Business Insider, 09 May 2013. Web. 25 Feb. 2017. <http://www.businessinsider.com/how-nike-solved-its-sweatshop-problem-2013-5>.
“The Global, Socially Conscious Consumer.” Newswire | The Global, Socially Conscious Consumer | Nielsen. N.p., 2012 Mar. 201227. Web. 25 Feb. 2017. <http://www.nielsen.com/us/en/insights/news/2012/the-global-socially-conscious-consumer.html>.