Case Study of ‘Leaving Bangladesh’ by Sinthi
Multinational companies Like Walter,Mango,etc are now In dilemma about terminating their contracts with Bangladesh manufacturing Industries after the building collapse In Saver, The eight-stored building Ran Plaza was one of hundreds of buildings In the crowded streets of Saver, an Industrial suburb of Bangladesh capital and the center of the country’s $20 billion garment industry.
If Bangladesh remains one of the world’s poorest nations, it is no longer a complete economic cripple. Instead, it turned its poverty to its advantage, heralding workers who make some of the world’s lowest wages and attracting some of the world’s leading brands. But this same economic miracle has plunged Bangladesh into a vicious descending spiral of keeping down costs, as major retailers compete for customers who want ever cheaper clothes.
On one hand,the multinational companies do not want to leave Bangladesh because of cheap labor cost.
On the other hand,they are feeling pressure from consumers to leave Bangladesh If the working condition do not Improve. In this case study,we have analyzed the problems that litigation companies are facing and offering solutions for the major and minor problems they are facing.
Statement of the Problem Major Problem for Multinational companies doing business in Bangladesh: C] C] C] D D D Further tarnishing of their reputation Frequency of accidents of labors increasing at an alarming rate Pressure from angry consumers to move out from Bangladesh It takes months to build good relationship with new factories in other countries Cheapest labor wage in Bangladesh Their profit will decrease as cost will increase Minor Problem for Multinational companies doing business In Bangladesh: CLC If they ATA, they might have to spend large amount of money for Improving working condition In Bangladesh If they leave, they will face criticism for abandoning a developing country There are shortage of skilful workers in Bangladesh Alternatives and Solution for major problems: Problem:Further tarnishing of their reputation Alternative 1 :They can initiate new marketing strategies to improve their reputation. They can publicize how they have helped the troubled workers in Bangladesh. They can offer monetary compensation to the victims of garment fires and building collapse. Alternative 2:They can provide Information to consumers that working conditions In other developing countries are much worse than that of Bangladesh According to Nameplate’s Labor Rights and Protection Index which measures risk with violations of labor rights, Bangladesh ranks less risky than India,Pakistan on other labor issues like child labor.
Alternative 3:They could peduncles targeting teen Tamale consumers tout teen International Tanat most garment workers are females Girls and women are major constituents of workforce in Bangladesh. Elf multinational companies leave Bangladesh,the female labors will be unemployed,This will cause more sorrows and pain for the labors. Garment sector is the largest employer of women in Bangladesh. The garment sector has provided employment opportunities to women from the rural areas that previously did not have any opportunity to be part of the formal workforce. This has given women the chance to be financially independent and have a voice in the family because now they contribute financially. Women are paid far less than men mainly due to their lack education.
Women are reluctant to unionize because factory owners threaten to fire them.
Disadvantages and Limitations of Alternatives: There is less chance that people will be persuaded if Alternative 3 will be used. This is because it will focus on females. After the recent devastating accident which is fresh on people’s mind,arguing and promoting that Bangladesh is less riskier may backfire. But alternative 2 can be implemented after some months. So,the best solution will be to initiate marketing strategies in order to gain customer loyalty and to regain their reputation.
Solution : The best solution will be to initiate marketing strategies in order to gain customer loyalty and to regain their reputation. Though it will cost companies money but that will be compensated by low cost that Bangladesh is offering to them.
Problem:Frequency of accidents of labors increasing at an alarming rate According to Wisped,five deadly incidents from November 2012 through May 2013 brought worker safety and labor violations in Bangladesh to world attention putting pressure on big global clothing brands such as Primary, Lobar, Joe Fresh, Gap, Walter, Nikkei, Techno, Calvin Klein and Tommy Hellfire, and retailers to respond by using their economic weight to enact change. No factory owner has ever been prosecuted over the deaths of workers. Other major fires 1990 and 2012, resulting in hundreds of accidental deaths, include those at That’s It Sportswear Limited and the fire at Étagère Fashions Ltd.
Spectrum Sweater Industries, Phoenix Garments, Smart Export Garments, Garb and Garb, Matrix Sweater, KITS Composite Textile Mills and Sun Knitting. Ajar foreign buyers looking for outsourcing demand compliance-related norms and standards regarding a safe and healthy work environment which includes fire-fighting equipment, evacuation protocols and mechanisms and appropriate installation of machines in the whole supply-chain. ARM insiders in Bangladesh complain about the pressure to comply and argue that ARM factory owners are hampered by a shortage of space in their rental units. In spite of this the industry exports totaled $19 billion in 2011-2012. They expected export earnings to increase to $23 billion in 2012-2013.
Two dozen factory owners are also Members of Parliament in Bangladesh.
Alternative 1: They can implement new agreement with the factories that if working control Is not up to teen mark,teen wall terminate teen contract. Many lour activists live the only solution to the string of garment factory disasters in Bangladesh ? since the country itself lacks the necessary inspections of its own labor code ? is to get companies to sign an agreement promising they will improve safety. One option put forward by labor rights groups is the Bangladesh fire and building safety agreement. It was created after a 2010 garment factory fire killed 29 people.
Only two companies ? PH Corp.. , which owns Tommy Hellfire and Calvin Klein, and major German retailer ? agreed to the memorandum.
But it isn’t enforceable until two others sign on. The memorandum proposes a legally binding agreement that ensures independent building audits and higher fees paid to factories to make sure they can afford to bring their buildings up to code.
In the wake of the deadly Ran Plaza collapse, more than two dozen retailers met in Germany on April 29 to discuss Bangladesh factory safety. The fire and building safety agreement was discussed, as were similar options, including talks to create a clearinghouse of information about factory inspection results that companies can access in order to learn of factories where other retailers stopped production because of safety concerns.
Alternative 2: They can invest money to improve labor working condition of Bangladesh Alternative 3: Even though trade unionization is banned inside the Export processing Zones (FEZ), the working environment is better than that of the majority of garment factories that operate outside the Peps. But, pressure from buyers to abide by labor codes has enabled factories to maintain satisfactory working conditions. So,they can urge the government to move all the factories to FEZ in Saver. Disadvantages and Limitations of Alternatives: As government is not doing anything about Disney‘s decision of leaving Bangladesh. The probability of garment owners to improve working condition because of multinational company withdrawal is less.
Solution : As leaving Bangladesh would not be cost effective for them,they could invest money to improve working condition in Bangladesh. Moreover,urging the garment owner to move their factories in Peps can be a very good solution. Problem:pressure from angry consumers to move out from Bangladesh Alternative 1 : They can develop innovative marketing strategies to placate the angry customers Alternative 2: They can show in their websites or news conference that they are eloping the victims from the accidents Alternative 3: They can promote that leaving Bangladesh will make their products more costly to afford.
Disadvantages and Limitations of Alternatives: Alternative 1 will be costly. Alternative 2 may work.
Solution : Alternative 3 is the best among the 3 because low cost is a high motivator for people to buy a product. Problem: It takes months to build good relationship with new factories in other countries Alternative 1: If they have taken final decision to leave Bangladesh,then they can move to China or India. Alternative 2: They can move to their own country Disadvantages and Limitations of Alternatives: In India labor cost is low but not lower than In Bangles. Moreover,teen AAA not Tallow much religiously tenet ladder policy.
The labor costs in China and India has been increasing over the years. China was initially one of the lowest labor costs known to other countries.
However, due to the rising demands of people and the increase in the cost of goods, China is no longer regarded as the ‘cheapest’ country to manufacture goods anymore. China is now deemed as less competitive compared to other countries. The increased labor costs have resulted in some foreign firms citing the country, in search of countries whereby the labor cost is cheaper. Despite China becoming the world’s second largest manufacturer this year, data from the Economist Intelligence Unit (XIII) indicates that China’s labor costs per hour increased from $0.
60 to $2. 90 between 2000 and 2011. This is now 1. 5 times higher than Thailand labor costs per hour, 2. 5 times the Philippines costs and 3.
Times those of Indonesia, amongst others. It is not only an increase in labor costs that has reduced China’s competitive advantage in this field – increased average land prices n the country have also lead to increasing manufacturing costs. A very distinct example of this trend is US sportswear giant Nikkei. In 2000, 40% of Nikkei shoes sold globally were manufactured in China and 13% made in Vietnam. This changed in 2010 when Vietnam overtook China as Nine’s largest shoe manufacturer, reflecting the worldwide movement to production bases in the Association of South East Asian Nations (SEAN). They can move to their country but it would not be cost effective.
N the United States, workers are generally entitled to be paid no less than the statutory minimum wage. The federal government andantes a nationwide minimum wage level of $7. 25 per hour, while some states and municipalities have set minimum wage levels higher than the federal level, with the highest state minimum wage being $9. 19 per hour in Washington as of 2013. So,if Walter take decision to move to their own country,it would not be cost effective for them.
Solution : It is best for them to be in Bangladesh because it is more cost effective here. Problem: Cheap labor wage in Bangladesh which would not be found in other low risk countries.
Discussion of Problem: Figure 1 shows the minimum wages of garment factory under BEEPS(Bangladesh Export Processing Zone Authority) rule So,their profit will decrease if they move out of Bangladesh Alternative 1: Move to another country like Philippines,Indonesia,Vietnam Alternative 2: Move to countries like Africa which has the cheapest labor cost Disadvantages and Limitations of Alternatives: Thailand and Philippines are some of the countries that are able to provide cheap labor costs. Africa,though,provides cheapest cost,the political condition is not that much favorable compared to other countries. Solution : They could move to another country like Vietnam or Indonesia. Problem.
T teen stay,teen malign nave to spend large amount AT money Tort Improving working condition in Bangladesh Alternative 1: They can walk out from spending to improve condition in Bangladesh Solution : If they chose the alternative,in the long run,it would not be favorable for them. This is because Bangladesh has one of lowest minimum wages . When they will move out of Bangladesh,they need to invest in some place else. Therefore,they an think about improving labor condition in Bangladesh. Instead of leaving Bangladesh, many Western retailers appear to be taking the wait- and-see approach. Canada’s Lobar Companies Ltd.
Owner of the Joe Fresh discount clothing line that was at least partly produced in Bangladesh collapsed Ran Plaza, has been the most vocal about its plans to stay and help where it can. Galen Weston, Lowbrow’s executive chairman, vowed that the company would be a force for change in the country.
As part of its efforts, Canada’s largest grocery retailer sent senior executives to Bangladesh to meet with local officials, non-governmental organizations and other groups to try to seek improvements in the industry. It vowed to audit its own factories and those audits will now include review of whether the building adheres to local building standards. Minor Problems: Problem:Elf they leave,they will face criticism for abandoning a developing country Alternative & Solution: Vietnam is also a developing country.
Elf they move to Vietnam,they would not be criticized so much,They can also chose any developing country to move to,if their decision to move out of Bangladesh remains strong. Problem: Shortage of skilled labor in Bangladesh Alternative & Solution: They can hire people to train the workers in Bangladesh.
This is because they are earning huge amount of revenues doing business with Bangladesh. So,they can invest some money for proper training of labors. This will help them in the long run.
Conclusion: In summary,it can be said that though there are some problems for multinational companies doing business in Bangladesh now but following the alternatives discussed above can minimize some of their dilemma. No problem can be eliminated completely. But,leaving Bangladesh can not be the ultimate solution for multinational companies. They need to face the hostile situation and create new marketing strategies to help their image and maintain their reputation.