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
current 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 flow
directly to your bottom line. There is no doubt that the Chinese
government engages in censorship, remains repressive, and is a
long way from a democracy. Moreover, you will have little or no
control over working conditions, sexual harassment, and pollution.
What do you do and on what basis do you make your decision?