Cheap Chinese Goods: Boon or Bane for Consumers?*

            

Details


Case Code : CLBE014
Publication date : 2008
Subject : Business Ethics
Industry :
Length : 03 Pages

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Abstract: ICMR India ICMR India ICMR India ICMR India RSS Feed

Companies in developed countries were increasingly shifting production to low cost destinations around the world. China, with its large labor force and low wages, was one of the leading low cost manufacturing centers. However, there were increasing concerns about the quality and safety of goods made in China. This caselet explores whether the savings achieved by companies through moving production to low cost destinations is actually counterbalanced by costs of a different kind.

Introduction

Hundreds of new companies are lured every year by the promise of lower manufacturing costs to set up production in low cost destinations around the world. China, with its large workforce and low wage rates, tops the list of low cost manufacturing centers.

Reportedly, moving production to China could cut the cost of manufacturing by 20 to 40 percent, depending on the type of product. However, regardless of the cost advantages of manufacturing in China, concerns have been expressed in the recent past about the safety and quality of the products made in the country.

In June 2007, RC2 Corporation, a toy company based in Illinois in the US, announced the recall of 1.5 million toy train sets that were sold under the Thomas & Friends name in the US. The reason given for the recall was that the toy was coated with a paint that had a high lead content, which could prove to be poisonous if ingested.

The popular toy was manufactured at one of the company's facilities in China that...

Key words:
China, Outsourcing, Low cost manufacturing centers, Product recall, Quality and safety issues





* This caselet is intended for use only in class discussions.
** More comprehensive case studies are priced at Rs.200 to Rs.700 (US $5 to US $16) per copy.