Fire in Bangladesh Garment Factory

Fire in Bangladesh Garment Factory

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Fire in Bangladesh Garment Factory

Introduction

            On 24th November 2012, Tazreen Fashion Factory located in the Ashulia District, Dhaka, Bangladesh went up in flames with 112 people confirmed to be dead and 200 injured. The Tazreen fire is recorded as the biggest factory blaze in South East Asia. Initial investigations suggest the fire was as caused by an electrical short circuit, but later findings suspect an act of sabotage or arson. The final finding on the cause of the fire was gross negligence by the factory management. Tazreen Fashion Factory was a division of the Tuba Group producing large-scale amounts of polo shirts and jackets. The factory manufactured clothes for various organizations including Dutch C&A, Walmart, LI & Fung and the U.S marines (North, 2013). The arson case led to a global examination of global supply chains. The examination analyzed why multinational companies outsource clothing production in developing countries and who is responsible for accountability between the local factory and the Multinational organization. The issue of safety management in a global supplier-contractor chain is a vital concern that retail companies have to implement before outsourcing.

Social, Political and Ethical Risks for Foreign Retail Companies

            Political risks refer to the implementation of political controls in a way that pressurizes a company’s value. Political risks for foreign retailing companies manifest themselves in government policies, regulations, and influence of politics on the supply chain. Some countries implement unrealistic regulations on companies limiting and at worse lowering productivity to zero. Unrealistic regulations may include high taxation levels, nationalizing of a nation’s mineral resources, forced audits and renegotiation of concession agreements. All the stated regulations above aim at the pressurizing or bullying of foreign companies by local governments in attempts by the local authorities gaining maximized revenues from the overseas organizations or the government controlling production. An example of such a regulation was by Bolivia’s president Evo Morales who nationalized local oil and gas and forced audits on foreign energy company Shell Petroleum (Broccado, 2009). Influence from politics arises from instability and swaying of public opinion by politicians against a company. Political instability results in a poor performing economy that directly affects the retailing industry. A negative public image may result in riots, lack of a labor force and lack of clients on a firm.

Social risks refer to challenges set by stakeholders on a firm. This type of risk can manifest itself when there is a perception the foreign firm is not adhering to local expectations; the firm is polluting the environment and in conflict of interests between stakeholders. Local expectations are dynamic being unique per region and it is the responsibility of a foreign firm to comply with the set local norms. In most cases, locals relate the establishment of a foreign firm in their region with employment opportunities. Lack of employing the locals normally results in property damage through riots and demonstrations. An example of such a case is in Nigeria where local youths vandalized oil pipelines and held an oilrig hostage in 2009. Foreign firms are also notoriously known of using child labor. This not only represents a social risk, but a legal one too. Use of child labor is against international law and is a violation of child human rights. Pollutant retail factories are health hazards that dirt the immediate environment. The immediate persons at risk from pollution are the locals.

Ethical risks for foreign firms manifest in corruption, pollution and employer-employee relations. Corruption is the main existent ethical risk on a foreign company. The lack of a foreign company understanding how the local authorities operate puts it a t a disadvantage. Corruption may result in a firm losing functionality, businesses and contracts. At the same time, it may result in the firm acquiring the later through illegality. According to Daniels, India and Mexico are ranked highest as foreign risks due to corruption where government officials demand monetary payments for business approvals. Employer- employee ethics apply in safety management in the company ensuring the working environment is safe. Lack of safety management presents a risk such as the Tazreen factory fire.

Legal Risks in Laws that cannot be Bent

Laws in business are unique in nature and address the society as a collective entity. The problem in business laws is that the society is not collective (Weiss, 2013). There exist different cultures, religions and nations that practice contrasting values. In production, a firm has to conform to the set laws of the productive environment. Conforming to the laws may rub off negatively with the immediate society. A negative response from the society may bear political, social and economical risks to the firm. Some of the political risks may include lack of business contracts with the local government that does not want to associate itself with the firm. A government may also implement tough regulations in attempts to hold foreign companies from penetrating their market. Social risks occur through lack of workers, riots and at extreme cases, vandalism. Economical risks manifest themselves in fines from incompliance with set laws and the high initial capital required in meeting set laws by an investing firm. The legal risks in laws that cannot bend and mostly similar to the risks experienced by foreign companies while penetrating a new market.

Dealing with Corruption

It is ethical to avoid and halt corruption cases, thus given a case of corruption; I would advise my staff to cub and reject the local payoff expectations. If I required guidance, I would consult an international body to remove bias and facilitate effective action. Locals may already have a corruption-based norm. In the absence of guidance, I will develop a systematic plan that deals with corruption. The framework will include identification of the corruption scenario, analysis of the scenario in determination of which office should be informed, collection of evidence, getting legal advice and finally remedying the corruption. To protect the firm from future instances of corruption, employee training on the implications of fraud will be implemented. The company can also offer incentives and rewards for employees who stop or report on corruption cases within the firm.

International Responsibility in Foreign Retailing

             The global trend in international responsibility depicts the importance of corporate accountability in the business market, as firms implement the act to gain competitiveness. According to Zentes and Morschett, corporate responsibility in retailing is an avenue of competitive corporation (Zentes & Morschett, 2011). International commercial accountability entails a degree of involvement in a company not only linking maximized productivity, but also joining of all stakeholders in a production line. To attain this, accountability encompasses the concepts of sustainable development, good relations with clients, meeting needs of stakeholders, standardization of standards and creation of comfortable vicinities for employees. Sustainable development refers to the continuous growth of a company in all production sectors. A company has the mandate to ensure per capita revenue, productivity and employee satisfaction improves. Standardization of processes is an international requirement that aims at controlled competition and the development of structured productions (Posner, 2013). All companies working within a similar sector, be it manufacture or retailing, have a set of standards with which they have to comply.

There are four stakeholders in a business, the client, government, board of directors and the employees. To meet the needs of all stakeholders, the retailer has the mandate to conform to the stipulated requirements of all four stakeholders respectively. The mandates may include conformance with the local culture, stipulated laws, company vision and employee rights. One vital concern that is trendy in the retail market is the use of child labor in developing countries. According to Daniels, Radebaugh and Sullivan, an estimated 7.9% of children aged 11-16 in developing countries have once worked in a factory (Daniels, Radebaugh & Sullivan, 2013). The act of child labor leave alone being unethical violates international law and human rights.

Tazreen Fashion LTD had the responsibility of providing a safe working environment for its workers. In a supply-contractor chain, both firms have the responsibility to carry out safety management, as the process is two ways. None of the firms has a greater or lower responsibility in safety management than the other. The difference emerges in the response as the local supplier has the immediate capability of assessing safety levels. Tazreen fashions LTD had the mandate of identifying the hazards, informing the contractor and making the required adjustments.

Comparison and Contrasts in Accord and Alliance

            The Accord in Fire and Building Safety is a legal contract between international retailers and Bangladesh to ensure maintenance of safety standards in the textile industry (Inkpen, 2013). The Alliance for Bangladesh Worker Safety is also a five-year binding contract of twenty-six retail firms in ensuring employee safety in the textile industry (Inkpen, 2013). In comparison, both the Alliance and the Accord entail an inspection of retail factories every six months in evaluation of safety standards. The inspections evaluate on the protective degree of buildings and fire mechanisms. The two treaties similarly, were established in 2013 after the Savar building collapse that resulted in over a thousand deaths (Inkpen, 2013). In contrast, the Alliance is more detailed than the Accord. The Alliance other than legally binding retailers and Bangladesh, it enforces worker participation in safety standards.

Issues Concerning Globalization

            Globalization is normally viewed as a good business model by economists, but the replica is flawed by its unbalanced nature. Currently, the most experienced flaw in globalization is resource and trade imbalances. Global uniformity leads to an imbalance of mineral and product pricing. The latter are cheaper in production areas and expensive in importing areas. Inequity can also be identified in the shift of limited resources moving from developed nations to developing nations. An applicable example is oil that gets a bigger market share in developing nations than developed ones because of high import pricing. This cuts down the spending in developed countries. The inequity leaves developing countries unable to grow their economies to a developed status, as they are dependent on the limited resources (Sople, 2011). A similar effect can be depicted in the shift of jobs and investment spending from developed to developing countries. Foreign firms outsource to developing countries where production is cheaper. The resultant effect is lack of jobs in developed countries. According to the U. S Department of Justice, foreign firms tend to invest in developing countries where they have a competitive advantage (U.S Department of Justice, 2012). The resultant effect is retirement of factories and a reduction in the growth rate of a developed nation.

Inequity in global trade makes it impossible for a country to foresee its implications on the rest of the world. Referencing the United States and China, the two biggest trade nations, a shift in their economy will directly affect the complete global trade patterns. In meaning, if the two countries experienced a recession, the global trade patterns will also decline and vice versa. Another trade imbalance is the flooding of products from the two nations in developing countries. The two countries manipulate the global trade patterns to their benefit. The inequity leaves little market share for other trade nations, which directly affects incomes, job creation, pricing and productivity in the respective countries.

Conclusion

The Fire in Tazreen garments in Bangladesh was a founding incident in the implementation of safety management in the supplier-contractor function. The fire as depicted is a reference case used in the analysis of worker safety in retailing companies. It led to a global analysis in determination of which party is responsible for the safety of workers in a factory between the local and foreign firms, risks for foreign firms and globalization. From the analysis, it can be concluded that both the local and foreign companies are responsible for safety management implementation. Global imbalance is also revealed in the shift of retail markets moving from developed to developing countries and the influx of developed nations’ products in the trade market. Corporate responsibility is also stipulated and standardized in the analysis streamlining a company’s accountability to its stakeholders.

 

References

Brocado, C. (2009). Emerging market Spotlight- Brazil, China, Mexico, India. (Available from Bloomberg News). Bloomberg News.

Daniels, J. D., Radebaugh, L. H., & Sullivan, D. P. (2004). International business: Environments and operations. Upper Saddle River, N.J: Prentice Hall.

Harris, K. J. & Korenchuk, K. M. (2012). The Extraterritorial Reach of the FCPA and the UK Bribery Act: Implications for International Business. Advisory. 1-7. retrieved from

http://www.arnoldporter.com/resources/documents/Advisory%20Extraterritorial_Reach_FCPA_and_UK_Bribery%20Act_Implications_International_Business.pdf

Inkpen, A. (2013). Fire in a Bangladesh Garment Factory. Harvard Business School Press .Retrieved from

https://cb.hbsp.harvard.edu/cbmp/access/26642403

North, A. (2013). The dark underworld of Bangladesh’s clothes industry. (Available from BBC News Asia). BBC.

Posner, M. (2013). When Does Corporate Responsibility Mean Abandoning Ship? Opinion pages: Room For Debate. New York Times. Retrieved from

http://www.nytimes.com/roomfordebate/2013/05/02/when-does-corporate-responsibility-mean-abandoning-ship

Sople, V. V. (2011). Supply Chain Management: Text and Cases. Pearson.

US Department of Justice. (2012). A Resource Guide to the U.S. Foreign Corrupt Practices Act. U.S Department of Justice. 1-130 Retrieved from

http://www.justice.gov/criminal/fraud/fcpa/guide.pdf

Weiss, J. W. (2013). Business ethics: A stakeholder and issues management approach. Mason, Ohio: South-Western/Thomson Learning.

Zentes, J., & Morschett, D. (2011). Strategic Retail Management: Text and International Cases. Wiesbaden: Betriebswirts Chaftlicher Verlag Gabler.

 

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