Q2. Why is globalization seen as a panacea to world problems by some and an instigator of problems by others? What responsibilities should corporations have toward the country in which they operate? To their country of origin?
CASE STUDY 1
The production cost that is labour cost if Martin Textile shift its production to Mexico will be reduced to less than USD2 per hour as compared to wage rate paid to its unionised New York plant(USD12.50 per hour) and non unionised textile plant in southeastern US(USD8 to USD10 per hour).
The production too will be able to avoid cost disadvantage that they have to face in US due to tougher and stricter labour law, regulations and standards imposed by US as advanced country. Further more the production will be able to take advantage of lower labour cost allowing them to better compete with Asian and European rival.
NAFTA agreement that came into force in Jan 1, 1994 which one of its contents stated that abolition by 2004 tariff on 99% goods traded between Mexico, Canada and US. Therefor, the production can enjoy free tariff within next 10 to 15 years and ability to maximized its production profit.
Martin’s major customer will be able to enjoy and benefits from the lower prices of products made in Mexico since the production has taken advantage of the lower labour cost efficiently.
Martin Textile will have to face the situation whether the Mexican workers could be as loyal and productive just like its present employees in New York. In Mexico the production might be facing too low productivity, poor workmanship, high turnover and high absenteeism of Mexican workers as faced by other US textiles companies in Mexico. The question that should be ask is will the production able to create good labor relationship atmosphere and which