Lesson 20 — Activity 1: How Do Companies Cut Costs?

What brand name of clothes do you wear? Where do the clothes you wear come from? You probably know what you like to wear, but you may not know where these clothes come from. In an earlier activity, you were asked to find out where some things around your home were made. You probably noticed then that many of them were made in other countries.

Today, many companies selling consumer products (like clothes, home furnishings, and electronics) don't actually make these products themselves. These companies pay other businesses to make the products and then buy these products to resell.

 

Source: Images from Pixabay.com

 

For example, a company like Nike would have smaller factories in Asia make shoes for them. These factories would use Nike's designs and company logo on the shoes. Nike places orders and then pays for the shoes once they are made. Then Nike sends them to stores to be sold.

Why doesn't Nike make the shoes in its own factories? Many big companies have found that it is much cheaper to close factories and pay other businesses to actually make the products they sell. In this way, Nike and other companies can "shop around" and find factories that will make their products for the lowest price.
 
 

Source: Images from Pixabay.com

In the assignment for this activity, you will see a list of countries where many factories (also called "sweatshops" because the people work so hard for such small wages) exist to produce consumer goods for big companies. These big companies are also called multinational corporations and are usually based in North America and Europe.