Contemporary Business Ethics Issue: Outsoursing

Modern business world is under the strong impact of globalization. Globalization is a many-sided process, which influences various spheres of business and forces companies change their approaches and methods. One of the most widely-spread and controversial strategies, applied by many companies worldwide, is outsourcing. Outsourcing is the practice of hiring specialists for performing contracted types of work from other countries. The key advantage of this strategy is certainly related to cost saving. Outsourcing has definitely become very controversial issues within recent years. The process of development of global economy and technological advances continues and contributes to further development of outsourcing or offshoring, as it is sometimes called. “As Senator Kerry pointed out in the most recent Presidential election, the American economy has lost 1.6 million jobs under Bush’s watch.  This is largely due to many American jobs moving to foreign countries.” (Kokemuller 2017). There is no limitation to only one concrete sector in economy or profession, almost all professions in America are impacted by outsourcing. Outsourcing has become an integral part of global commercial environment and business organizations. Politicians, economists, business representatives participate in heated debates about outsourcing and its ethical aspects for modern business world. Supporters of this strategy underline its role for the economy, their opponents, however, state that this is a way to disrupt economic features of a great number of individuals and thus outsourcing should be considered unethical.

The opponents of outsourcing are convinced that all companies should have their moral obligation to protect jobs for their citizens, without depriving them of their competitive advantage in the labor market. Often the problem of outsourcing and creating of domestic employment opportunities is used by political candidates during their election campaigns as means of manipulation of their electorate. Sometimes companies include information about outsourcing into their advertising campaigns in order to overcome their competitors. “The simple practice of outsourcing certain elements of a business operation fits into the free enterprise system. As part of strategic competitive planning, companies must strike a balance between quality processes and affordability.” (Kokemuller 2017). Outsourcing is related to globalization closely, still it should not always be seen as a global move. There are a lot of businesses, which outsource some of their services to other companies locally. Thus outsourcing could be viewed as just using various means for more beneficial organization of work process. In such situations, it would be illogical to state that outsourcing is unethical.

In most cases outsourcing is associated with sweat shop labor, and this is the reason, why it is considered to be breaking some of the ethical principles in business. Sweat shop labor is a slang expression, used to describe the kind of labor at manufacturing facilities of foreign nations, where workers do not receive the corresponding payment for their work and are forced to operate in poor conditions in comparison to those of developed countries. Such working conditions confront the legal and ethical standards of America and other developed countries. In this case companies, which produce their goods, using foreign firms, are under the attack of public sphere. A well-known example is Nike company, which “had to overcome image issues in the late 1990s when it first detached itself from “sweat shop” criticism, but then advocated higher standards when massive public boycotts hurt the company.” (Kokemuller 2017). Initially most of the companies are attracted by the unique opportunities to save costs and increase of income, still these effects might become misleading and as some time passes, the negative impacts of outsourcing become evident. Before the managers of the company are able to conclude that outsourcing is not acceptable for their company and is not worth it, the reputation of the company might already suffer. This might happen not only by those companies, which choose to outsource in different countries, but also by those, which do it locally.

A lot of attention is paid towards confidentially issues in considering the ethical aspects of outsourcing. All companies, which take the decision to implement outsourcing strategy, should be aware of the risks, related to violation of their confidentiality and intellectual property. Especially the situation is difficult in those cases, when the companies outsource to the countries, where there are no such strict confidentially laws as in America for example. “According to Stanford University, a study conducted by financial audit firm Deloitte found that 10 percent of companies that outsource had already been faced with violations of confidentiality by organizations to which they had outsourced. Even companies that outsource to domestic companies are at risk because some of these companies outsource to organizations overseas without the client’s knowledge or permission.” (Wickford 2017).

Any company, irrespective of the sphere of its products and services, is dependant upon customer satisfaction to a great extent. In case the products or services are not chosen by the customers, then the company would lose its revenue and its consumers would quickly find another company. Professors of the University of Richmond and the University of Michigan have conducted the study, which proved that in cases of outsourcing of office duties, there is a decrease of customer satisfaction. This could be explained by language barriers of the offshore companies partially and by the negative effect upon customer loyalty to a greater extent.

It was already mentioned that the key aim of the companies, which launch their outsourcing strategy, is to save costs. At the same time often there are hidden costs, which would negate those savings. Elimination of job at such companies had negative impact upon moral atmosphere by the employees and decrease of productivity. Apart of language barriers, there could be also time differences, which affect productivity of the outside employees. There are a lot of travel and other expenses, which need to be considered, when meetings and cooperation between representatives and employees from different countries are organized.

Coming back to the example of Nike company, it is possible to make some conclusions about the ethical side of this strategy. Nike was accused of using sweat shop labor starting from the beginning of the 1970s. The company produced their goods in Taiwan, in South Korea, in the People’s Republic of China. Along with development of the economies of these countries, more and more workers preferred to move to other positions in order to earn higher salaries. “Nike found cheaper labor in the People’s Republic of China and Vietnam, which prohibited labor unions. When workers demanded additional rights and benefits in these countries, the Nike factories closed and moved to a different location that would enable them to continue operating at a low cost.” (Bensusan & Chris 2010). Nike was criticized for using sweat shop labor, but the top managers of the company used to reply that these are not their own companies and productions and Nike can not take the responsibility for conditions there. Later the situation had changed as Nike started to be more involved into the actual state of things by their companies producers. Nike established a code of conduct for the factories in other countries and it was based upon the principles of attitude, health, people, environment and safety. Later Nike created a non-governmental organization – the Global Alliance for Workers and Communities, which is responsible for monitoring of the current work conditions of the manufacturing companies outside the country. Nike has managed to create better working conditions for the companies of their outsourced resources. 

For analyzing of the ethical aspects of outsourcing from philosophical point of view, the ethics of duties, developed by Immanuel Kant could be used. This theory could be seen as the basis for the corporal social responsibility. In other words, those companies, which take the decision to implement outsourcing strategies, should not distance from the problems of the workers and social environment of those countries, as they become interrelated to them, even if legally they are operating separately. Business managers could not simply close their eyes to the evident problems with work conditions, safety or too low salaries aspects, instead they are to consider not only their economic and financial benefits, but also to be cooperative and contribute to making business more ethical in any country of the world. According to John Lock and John Rawls, all individuals are identified on the basis of their dignity, which also helps to define the rights of humans. At the same workers have their free will and they are able to choose, whether they want to work for any foreign company, of they don’t want. Provision of this free will choice does not break any ethical rules in business.

Overall, the practice of outsourcing is rather widespread in the modern business environment; a lot of companies from developed countries prefer to outsource their jobs to other countries with the aim of reducing their costs. There are a lot of debates about the ethical side of this strategy, which involve moral, economic and social aspects, making the debate even more controversial and sophisticated. Attitude of the companies, which implement outsourcing approach, is gradually changing and they become more involved into creating positive working environments for their employees, but till the moment there is no universal solution to the issue.

Works cited:

Bensusan, Graciela; Chris Tilly. “Confronting Globalization: Lessons From Puebla”. New Labor Forum, 2010

Kokemuller Neil. Is Outsourcing an Ethical Practice? Hearst Newspapers, 2017

Weinstein Bruce. The Ethics of Outsourcing Customer Service. Bloomberg, 2007

Wickford, Hannah. Negative Effects Outsourcing Has on Organizations. Hearst Newspapers, 2017

The terms offer and acceptance. (2016, May 17). Retrieved from

[Accessed: March 28, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016.

[Accessed: March 28, 2024]

freeessays.club (2016) The terms offer and acceptance [Online].
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[Accessed: March 28, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 28, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 28, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 28, 2024]

"The terms offer and acceptance." freeessays.club, 17 May 2016

[Accessed: March 28, 2024]
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