ManufacturingOffshoring and Stakeholder Management
ManufacturingOffshoring and Stakeholder Management
Theconcept of stakeholder management
Stakeholdersare persons or group of people with an interest in an entity,portfolio, or program since they are involved in the decision-makingobjectives of the organization or they are affected by the outcomesof the firm or portfolio. Stakeholders can include owners, employees,suppliers, customers, financial institutions, public agencies,advocate groups, political groups, trade associations, andcompetitors (Howitt & McManus, 2012). Stakeholder managementinvolves a different and dynamic set of approaches that strengthenthe effective or positive influences and diminishes the outcome ofthe negative influences in an entity. The concept of stakeholdermanagement holds that both external and internal stakeholders have amoral and ethical obligation in the strategic decisions they make toenhance the development of an organization. Stakeholder theory movespast the traditional participatory management approach that putemphasis on the popular involvement but ignores the intrinsicstructural conflicts that affect middle managers. Therefore,stakeholder management theory puts into consideration thedistribution of benefits and costs of different stakeholders and theway they impact on the performance of the organization.
Implicationsof offshoring on stakeholders
Thecompany is considering manufacturing offshoring, which will affectdifferent stakeholders differently. Manufacturing offshoring denotesthe assembly or full production in a nation where materials or laborare cheaper. It is important to note that the firm has previouslybenefited from customer loyalty thus, the considered offshoring ofthe manufacturing unit may increase profitability, but affect thecompany negatively in other aspects. This is because firms havedifferent stakeholders who view the decision to offshore differently.The decision will not affect the stakeholders the same way sinceoffshoring means the end of jobs for some employees especially thosein the manufacturing and mostly reduced prices for consumers. Tostart with, employees and their unions will be significantly affectedwhen the company decides to offshore it manufacturing facilities toanother country. Some employees may lose their jobs since theirservices will no longer be demanded when manufacturing activities aretaken to another country. The company has had a good workingrelationship with the unions but this may come to an end ones theemployees’ representatives discover the discreet objectives of thecompany. Harrison and Wicks (2013) argue that suspicion and conflictmay lead to demands of formal bargaining which can lead to increasedcosts and time delays. Studies have shown that stakeholderrelationships that tend to support each other usually encourage trustand efforts that are mutually collaborative. However, the actions ofthe company of discreetly offshore its activities can lead tointernal conflicts.
Otherstakeholders that will be negatively affected by the actions of thecompany are the communities. It is important to note that the companydepends on the small rural communities that are located in theEastern U.S. Moreover, all the employees come from these small, ruralcommunities. Therefore, these rural communities which supply rawmaterials to the company will lose market ones the company decides tooffshore its activities. This implies that both employees and thecommunities at large will be worse-off in terms of theirsocioeconomic wellbeing. Harrison and Wicks (2013) say thatstakeholders tend to seek utility that is more complex and whichsurpasses more than simply an economic value. From this perspective,it can be argued that the community will lose more than just theiremployment opportunities but also their social and economiclivelihood. It is evident that the community is an importantstakeholder which sorely depends on the company to satisfy itsinterests.
Animportant recommendation is for the firm to stop focusing on profitsalone and seek a strategy that will benefit all stakeholders. Forinstance, the management team can implement a strategy that reducesthe costs of manufacturing the garments in order to lower the totalcost of operation. The company should recognize the significance ofhaving an ethical reputation as well as operating in a sociallyresponsible manner. Terris (2005) posit that a firm should putworkers first and develop a business conduct that benefits allstakeholders. In this regards, the firm should engage allstakeholders in the decision to offshore its manufacturing unit sinceoffshoring may not necessarily mean increased profits. However, it isimportant to note that manufacturing offshoring helps firm cut costs,realign its organizational values, and helps a firm’s strategicapproach in the long run. The firm should offshore the unit slowly,for example, by starting with a few unit of manufacturing, which willallow it to learn from foreseeable slip-ups and build up skills,knowledge, confidence, and competencies. Furthermore, the firm shouldnot outsource the full production unit as doing so will hurtemployees thus, it should retain the design unit. For example, Applehas become successful in its strategic approach as it has onlyoutsourced some units of the manufacturing. This will be animportant factor in enhancing the competitive advantage of thecompany. Furthermore, the company can negotiate with the trade unionsso that it can off-shore part of the operations to other marketswithout severely affecting the well-being of the employees and thecommunities. Thus, the firm should implement the decision, but in achecked manner and supplemented by other approaches.
Harrison,J. S., & Wicks, A. C. (2013). Stakeholder theory, value, and firmperformance. BusinessEthics Quarterly,23(1), 97-124.
Howitt,M., & McManus, J. (2012). Stakeholder management: An instrumentfor decision making. ManagementServices,56(3), 29-34.
Terris,D. (2005). Ethicsat work: creating virtue at an American corporation.Brandeis University Press. Waltham, MA.