Question

you have learned about how to identify a country, region, community, and site for making a location decision for a Global operation. But, what about the ethics of making a location decision? For example, if an American firm were to set up operations in a foreign country… should new employees who are local citizens of that country be paid at a rate that is customary to other local citizens? Or, should local citizens of that country be paid what an American employee of the company would make? What are the advantages/disadvantages of the cost of labor approach you are recommending?

Answer 1

Ethics play an important role in the decision of making a location choice. A decision maker should inculcate best practices which promotes sound policy intervention for global trade, commerce and business relationship with foreign collaborators. He should think that by the offerings of the product and services other interested stakeholders like customers of that community where location will be get huge benefit, similar as well as standard pay as per the local norms and additional benefits to the local workers, sustainable business development practices etc.

A decision maker should apply cost of labor approach by ensuring himself as there will be no exploitation of labor at any cost. If, he will as per the hourly rate prevalent in the market people will have less motivation to join a foreign company to contribute. People treat this labor as a source of high output with no regular pay. Additional benfits cost and insurance can be saved.If, he will provide them some additional benefits then people will get motivation to work for this new employer to their location.

Cost of labor approach has one major disadvantage that it promotes reduction of wage in terms of exploiting the labor by assigning multiple tasks. Even, many times, shortage of workers can be observed as people might search more nearer location to work from their residence .