North American and European countries employ outsourcing in populous countries.

If there is
an increase in population, manufacturing prices directly decrease. A cheap labor force is the
most important factor in international outsourcing. Following this, technological and political
dimensions come second. When we look at top outsourcing countries we find India, Indonesia,
Estonia, Singapore and China. Beyond the borders of those countries that receive outsourced
enterprises, we can see that the outsourcing countries are experiencing a decline in employment
rates in the labor market. However, for receiving countries such as India, Malaysia, China et
cetera, the demand for cheap labor in the labor market shows an upward trend. In general,
outsourcing creates new employment opportunities. In the countries that receive outsourced
enterprises opportunities are becoming more plentiful, whereas developed countries are
experiencing increasing unemployment rates.
For years, people have talked about the U.S. and China's economies. Multinational corporations
represent the dominant providers in China's high-end market and U.S. multinational companies
often choose China as the location of their manufacturing operations. There are several reasons
for this. First of all, labor costs are cheaper in China when compared to the U.S. or Europe.
Secondly, when manufacturing is undergone in a certain country, it is much easier to gain access
to that domestic market. In addition, upon gaining access to the Chinese market, Asian markets
also become more accessible. Third, raw materials in China are cheaper and its supply chain and
logistical are easier than in the U.S., all of which drive down operating expenses.

Furthermore, its high population has become a problem for China. This is because when the
population increases wages will decrease. Conversely, Apple is an American brand that does not
produce many of its products in the U.S.; they use outsourcing and Foxconn to manufacture in
China. Apple globally outsources its manufacturing activities because they want to decrease
costs, especially labor costs. Another reason is that Apple uses a large amount of glass for device
displays which is much cheaper and easier to manufacture in China.

Outsourcing benefits corporations by cutting costs, increasing their profits and product quality.
On the other hand, workers have shown displeasure at the deteriorating standard of working
conditions. Often, they work many hours and receive low wages, especially in the manufacturing
sector. Many factories in China do not provide good working conditions and they do not abide
by standards like the U.S. and others. Also, the methods and principles of regulation regarding
workers' health and safety are not the same in China, due to different land and labor laws. Apple
originates in Cupertino, California in the U.S., where they employ strict rules for workers and
working conditions. Outsourcing their employee base abroad means employment for the same
company but these employees do not have same rights.

In recent years, unemployment rates have increased in the U.S. and President Barack Obama
made a provision which called for jobs outsourced to China to return to the U.S. The forum is
entitled "Insourcing American Jobs." Obama stresses the importance of products bearing the
label "Made in America" for the next generation, because the U.S. government wants to
guarantee wealth for its future generations. Obama's message to business leaders today is
simple: "Ask yourselves what you can do to bring jobs back to the country that made our success
possible." If the U.S. cannot stop outsourcing, it will result in a loss of more jobs. The White
House has been encouraging American multinational companies to reinvest in manufacturing
activities at home.
 Advantages of outsourcing
There are many reasons why a business may choose to outsource a particular task, job or a process. For
example, some of the recognised benefits of outsourcing include:
 improved focus on core business activities - outsourcing can free up your business to focus
on its strengths, allowing your staff to concentrate on their main tasks and on the future strategy
 increased efficiency - choosing an outsourcing company that specialises in the process or
service you want them to carry out for you can help you achieve a more productive, efficient service, often
of greater quality
 controlled costs - cost-savings achieved by outsourcing can help you release capital for
investment in other areas of your business
 increased reach - outsourcing can give you access to capabilities and facilities otherwise not
accessible or affordable
 greater competitive advantage - outsourcing can help you leverage knowledge and skills along
with your complete supply chain
Outsourcing can also help to make your business more flexible and agile, able to adapt to changing
market conditions and challenges, while providing cost savings and service level improvements.

Disadvantages of outsourcing
Outsourcing involves handing over direct control over a business function or process to a third party. As
such, it comes with certain risks. For example, when outsourcing, you may experience problems with:
 service delivery - which may fall behind time or below expectation
 confidentiality and security - which may be at risk
 lack of flexibility - contract could prove too rigid to accommodate change
 management difficulties - changes at the outsourcing company could lead to friction
 instability - the outsourcing company could go out of business
Offshore outsourcing, although potentially more cost-effective, may present additional challenges such
as hidden costs of provider selection or handover, severance and costs related to layoffs of local
employees who will not be relocated internationally, etc. Even simply managing the offshore relationship
can prove challenging due to time zones, different languages or cultural preferences.
With more than 10,000 suppliers in China manufacturing for Wal-Mart, the great majority of its
merchandize is "Made in China." Wal-Mart is now becoming a major retail presence there as
well. The company has already opened close to 200 stores in 101 Chinese cities and hopes to roll
out ever more big-box emporiums across the urban Chinese landscape. What happens when the
world's biggest retailer and the world's biggest country do business with each other?
Wal-Mart isn't the first multinational to source so heavily from Asia. Beginning in the 1970s, the
relocation of labor-intensive manufacturing to Asia nurtured the growth of the Four Little
Dragons (South Korea, Taiwan, Hong Kong, and Singapore), whose companies entered into
contracts to manufacture for Western brand names. When China opened up to foreign investment
in the early 1980s, offering vast stretches of greenfield sites, attractive tax breaks, and an
abundance of labor at just one-tenth the cost of the Dragons' wages, another wave of regional
manufacturing relocation was set in motion.
So massive was this shift that the majority of the so-called Chinese manufacturing suppliers
today are actually companies from the Four Little Dragons that have set up assembly plants in
China. Only in the past decade have local Chinese companies, having learned the ropes of
manufacturing for export, been drawn increasingly into this supply chain-first as subcontractors
for the Little Dragon–owned factories and more recently as direct producers for Wal-Mart.
Once sourcing from China became a bandwagon, Wal-Mart led the way in driving down wages
in the suppliers' factories. To cut procurement costs, Wal-Mart moved its global outsourcing
headquarters from Hong Kong to the southern Chinese city of Shenzhen in 2002 and began
focusing intensely on directly sourcing from factories in China rather than buying through
wholesalers and agents. As Wal-Mart has squeezed its China-based suppliers for lower prices,
their workers, largely poor migrants from the countryside, have borne the brunt of the pressure to
cut costs. As one Hong Kong buying agent put it, "Suppliers still have places where they can cut
fat, but the easiest fat to cut is workers' wages."

Everyday Low Factory Wages

We obtained information a few years ago about work conditions and wages at nine Wal-Mart
garment- and toy-supplier factories in the outskirts of Shenzhen city. Chinese research assistants
stood outside factory gates and interviewed 88 workers when they left at the end of the day.
Overall, the workers were paid an average of only 59 cents per hour. Most of the garment
workers were on piece rates and were paid at a lower rate when doing overtime work than during
their first 40 hours per week, even though Chinese law requires a higher wage for all overtime
work. In the belief that they would earn more the harder and faster they labored, these workers
were actually trapped in a frantic, exhausting race that was being illegally manipulated by
unscrupulous employers trying to make a profit in the face of Wal-Mart's squeeze.
Until about 2004, most of the export factories in south China recruited only young women
between the ages of 18 and 23. Managers explained that young female workers have nimble
hands, are more meticulous, and, above all, are more obedient. But once the young women
reached their mid-20s, they were considered too old to keep up with the very rapid pace of work.
However, the supply of young, poor rural women workers under the age of 24 was not endless,
especially as new factories kept pouring into China, and starting around 2004, the export-goods
factories began to run into labor shortages. So managers had to employ workers they had
previously turned away. At the nine surveyed factories, the blue-collar workforce included a
sizeable number of men and also a lot of women older than 23, even up into their 40s.
The level of overwork in these nine Wal-Mart supplier factories is extreme. The vast majority of
the interviewed workers (88 percent) worked more than 11 hours per day, and 81 percent of them
had fewer than the four rest days a month required by Chinese law.
Making matters harder for the workers, the supplier factories responded to the cost pressures
they faced from Wal-Mart by increasing the pace of work. When asked in 2007, "In comparison
to 2006, did your factory direct you to speed up your production [this year]?", exactly half of the
workers answered that they had to work faster, often due to increased work quotas. Fifteen
percent said the work speed was a lot faster. Worse yet, the workers were not being paid more
for working faster.
The consequence of the fast pace and excessive hours is burnout. Workers wake up one morning
and simply cannot physically and mentally endure another day of such exhausting toil. To
prevent workers from quitting, the factories deliberately delay wage payments by two weeks, and
a worker who quits "without permission" forfeits those two weeks of pay. Despite this, the
interviews revealed that the majority of the workers in these Wal-Mart supplier factories lasted
less than a year. When Wal-Mart brags of "everyday low prices," it is these workers who
ultimately pay the price.
Migrant workers have started voting with their feet. More and more have refused to travel to
Guangdong, which is filled with factories like those that supply Wal-Mart. Wages there have
begun shifting upward as a result. The search for cheap labor never ceasing, another wave of
relocating export manufacturing is taking place in China right now. A growing number of the
manufacturers have begun moving inland from Guangdong, closer to where migrant workers
come from and where factory sites are cheaper. In coming years, Wal-Mart suppliers will be
more spread out in China's interior provinces to ensure that the products sent to the U.S. continue
to be cheap enough to satisfy Wal-Mart's demands.

Working at Wal-Mart's Chinese Stores

Unlike in the U.S., where Wal-Mart is a low-end retailer, Wal-Mart in China largely serves an
expanding prosperous middle class. Some of the stores in China feature large parking lots to
accommodate this new auto-owning class.
How are conditions for Wal-Mart's 50,000 Chinese store employees? To find out, we arranged
for Chinese research assistants to interview employees and managers at three Wal-Marts in
Beijing in 2007 and three in Shenzhen between 2006 and 2009.
First, the good news. Working conditions at Wal-Mart's stores generally adhere to China's
occupational health and safety regulations. As a Chinese researcher remarked to us, "Wal-Mart
doesn't mind cheating workers but doesn't dare cheat the government." Wal-Mart also pays
workers on time, which is much welcomed by the stores' employees. Many of them are migrants
from the countryside, and in previous jobs, they often encountered serious problems of delayed
payments and owed wages.
Similar to Wal-Mart workers in the U.S., the problem facing Wal-Mart store workers in China
has been the low pay, which sometimes has failed to keep pace with rises in China's legal
minimum wage. In five of the six Chinese cities where we have information for the 2006–2008
period, the increases in Wal-Mart's salary packages were outpaced by both inflation and by the
rise in the local legal minimum wage.
At the Beijing and Shenzhen stores that we studied, Wal-Mart also kept labor costs low by not
giving employees paid overtime work, which legally requires higher hourly pay. If a Wal-Mart
store worker has to work overtime, he or she either is told to "volunteer" to work for free or is
given time off during a slow period in lieu of overtime pay.
Wal-Mart also cuts back on the wage bill by employing a large percentage of its workforce as
part-time or casual staff, who receive an even lower hourly pay. They work an average of four to
six hours per day, six or more days a week, and their schedule may change from day to day
depending on how busy the store is. For both the full-time workers and the casuals, Wal-Mart
imposes very detailed rules and disciplinary procedures and closely monitors workers'
compliance. The interviewed employees complained that they work under enormous pressure.
Wal-Mart at first seems attractive to newly recruited low-skilled workers looking for a service-
industry job, as the retailer presents itself as a sophisticated international company. However, the
image soon sours. The turnover rate is very high, reflecting employee dissatisfaction. A
department head at one Beijing Wal-Mart stated that the store has a 30 percent to 40 percent
annual turnover rate. An official in the human-resources department of the same store said that
many ordinary employees quit because of low salaries. After deductions, he said, as of mid-2007,
the full-time store workers took home each week only about $25 to $28. The pay was so low that
the Wal-Mart stores in Beijing relied largely on migrant workers from other parts of China to fill
the jobs. The store department head said only one out of the 22 workers in his section was from
Beijing, and he noted that many of the migrant workers stay at the store only until they can find a
better-paying job.
Unionizing Wal-Mart's Chinese Stores
The All-China Federation of Trade Unions is widely considered to be toothless. It was a surprise,
therefore, when the ACFTU took on Wal-Mart in 2006 and succeeded in setting up workplace
union branches at 22 Wal-Mart Supercenters within just four weeks. Equally surprising, the
ACFTU achieved this through a technique it had not used since the early 1950s-grassroots
organizing. Wal-Mart management was caught off guard.
The prior experience of the ACFTU in establishing workplace union branches in foreign-funded
enterprises had been limited to one method-top-down. Whenever the ACFTU sought to establish
a union branch at a foreign or private company, the official district-level union would first seek
management approval and cooperation. Once an agreement was struck, management and the
district union would decide together on a midlevel company manager to serve as the union chair.
But since the 1990s, the ACFTU has seen a decline in its national membership, as the numbers
of employees at state-owned factories has fallen. In the mid-2000s the ACFTU became
determined to offset this by expanding membership at foreign-owned firms. Wal-Mart was
selected as a special target. The reasoning was that if Wal-Mart fell into line, other foreign
companies in China that refused to accept a union would have to follow suit.
According to Chinese labor law, only 25 employee signatures are required to establish a union
branch at a workplace. In July 2006, the city-level union in Quanzhou rented a room close to a
Wal-Mart store and began holding secret meetings after work hours with a number of store
employees. When enough workers agreed to join, they held a secret founding ceremony one
night and elected the store's union branch committee. The next day, they announced the fait
accompli to a surprised Wal-Mart management. In quick succession, 21 similar branch elections
were announced across China. Within a week, Wal-Mart conceded it could not resist
unionization and declared it was willing to work with the union to achieve "harmony." In mid-
August 2006, union officials from Beijing met with Wal-Mart's top executives in China at Wal-
Mart's headquarters in Shenzhen and signed a five-point memorandum, promising multi-
candidate elections for a union committee at every Wal-Mart store in China.
However, Wal-Mart soon succeeded in reshaping the situation to its own advantage-by gaining
control of the union branches. In Beijing, city district union officials frankly admitted in
interviews that at the Wal-Marts in their districts, they simply handed all of the decisions on the
composition of the union branch committees to the stores' human-resources departments. Why
did they do so? For one, union officials at this level are government functionaries with scant
knowledge of trade unionism. They are accustomed to enterprise-level union committees serving
as welfare arms of management and providing such things as leisure-time activities for
employees. For another, the district-level unions are controlled by the district governments,
which were happy to have a Wal-Mart Supercenter in their midst and preferred to work arm in
arm with Wal-Mart management. At a Wal-Mart typical of the six stores surveyed, the ballot
sheet to elect seven union committee members contained the names of eight nominees, all of
whom were midlevel and junior management staff preselected by the stores' human-resources
department.
Union membership is voluntary. A worker at one Beijing Wal-Mart said she became a member
only because her supervisor signed her up. Two workers there who had not signed up thought the
only people interested in the union were those who wanted to impress their managers and get a
promotion. Another employee-a woman who was a low-level manager-described the union as
"hollow": "What does this union do? It has nothing to do with us. After the union was set up, no
one any longer mentions it, and there have been no meetings."
Elsewhere, at the stores where union branch committees had been genuinely elected in the weeks
prior to the signed national memorandum, Wal-Mart either co-opted the union branch leaders
with offers of promotion or hounded them till they quit Wal-Mart in frustration, after which Wal-
Mart was able to appoint their successors. According to Chinese sources, no Wal-Mart store
today has a branch union that is independent of management.
Wal-Mart continues to make big profits in China, and from China, by squeezing down labor
costs in the factories that produce Wal-Mart's goods and in the mega-stores that the retailer
operates. There is a symmetry between Wal-Mart's behavior in the U.S. and the company's
actions in China, which is both Wal-Mart's global production hub and retail frontier. For its part,
the Chinese government and its trade union put on a show but in the end are not serious in doing
much for workers.

Overview of Walmart in China

Walmart was founded in the United States by Sam Walton. It has now grown to be the largest
retailer in the world with over 11,200 stores across 27 countries. Walmart entered China in 1996
with its first location in Shenzhen.

The company operates three retailing formats: Supercenters, Sam’s Club and Neighborhood
Markets, all of which cater to different consumers’ needs. Supercenters mainly aim at saving
consumers’ time and money. Walmart is known for “Every Day Low Prices”. Sam’s Club in
China is a members-only warehouse. Walmart China has a similar business model as Costco in
China, which provides low-cost, bulk products for both business and personal use.
Neighborhood Market is located near residential areas, for consumers’ daily shopping needs.
Walmart China currently operates more than 400 stores in over 180 Chinese cities. Of these,
there are 26 Sam’s Clubs in China. It is planning to open 30 to 40 new stores every year.
Strategies of Walmart China
Walmart maintains the same strategy in China as it does globally, which is centered around quality
service and low prices. Walmart and Sam’s Club in China use advanced retailing technologies
methods. While inspiring competition, it raises the level of overall service of the local retailing
industry.
Local sourcing keeps prices low
Walmart China sources locally. Local products comprise about 95% of the goods that are sold in
China’s Walmart locations. Additionally, it has cooperated with about 20 thousand suppliers, and
directly exports about 9 billion USD worth of Chinese products annually. In 2006, Walmart China
was named the enterprise with highest customer satisfaction according to a survey held by
an authority in Shanghai.
Sustainable development lowers operation costs
Sustainable development is another important strategy of Walmart China. It opened its first
environmentally-friendly flagship store in Beijing in 2018 with 40% less energy usage. The store
incorporated efficient cold chain system, energy saving light bulbs, and longer lifespan long-term
assets etc.
Walmart began developing its online retailing services in China in 2012. Since Walmart’s Chinese
stores are mainly distributed in first and second tier cities, great market potential hence lies in third
tier cities and smaller cities through online retail. The development of an online purchasing system
greatly increased Walmart’s awareness and popularity.
Walmart: secret to success
Walmart three core company principles are: Respect individuals; serve the customers; chase for
excellence.

Walmart also has ten rules of operation for its employees: control the cost; make good plans to
share the profits; inspire your co-workers; learn from anybody possible; thank your colleagues for
their contribution to the firm; allow for failures; listen to the advice of everyone in the company; do
better than what customers had expected and they will come again; make administration costs lower
than your competitors; do not follow the tradition.

New moves by Walmart in China

Recently, Walmart announced its plan to open 500 new stores and warehouses in China over the
next five to seven years. This movement by the company is considered to be one of its biggest
footprint in China despite that the overall Chinese economy is cooling. Although that Chinese GDP
growth dropped to its lowest level in nearly three decades last quarter due to trade was with the
United States, the sales of Walmart in China grew by 6.3%. Notably, its growth in the Chinese
market doubled more than its worldwide growth of 2.5%.
Besides, Walmart announced that it is going to invest approximately 1 billion dollars in its Chinese
region to compete with local rivals and other online retailers. James Ku, senior vice president of
Walmart China mentions that the company seeks to deliver freshness, value and convenience to its
customer by leveraging multiple format strategies, in which remodeling of stores, and improving
store features such as self-checkout machines incorporating facial recognition, as well as online
platform stores will be the key to the success of the company’s expansion project. Cooperating with
JD.com will also allow Walmart the chance to gain deeper Chinese consumer insights.
Reaching low tier consumers
Walmart China is also planning to put more weight on its neighborhood stores and to increase the
sales area of fresh groceries. Walmart will continue to expand especially in the second- and third-tier
cities, with a plan to open 40-50 new outlets a year focusing on third-tier cities.

Overall, the future of Walmart China seems to be fairly optimistic as the company continues to
experience revenue growth. However, the future growth will depend largely upon its expansion of
local brick-mortar-stores, improvement of online platforms and relative digitized features.