MGT610 GDB Solution & Discussion Last Date: 24-01-2014

MGT610 GDB Solution & Discussion Last Date: 24-01-2014

Topic: “Impact of Business Model on Communitarian Ethics”
Learning Objectives:
1.      To make the students learn about sweetshop business model and its ethical implications for a business.
2.      To make the students learn about need for business differentiation and competitive advantage based on ethical practices.
Learning Outcomes:
1.      Students would be able to know how business practices can impact communitarian ethics.
2.      Students would be able to think and give suggestions for developing a business model in line withbusiness ethics.
Context
Sweetshop is the term used for those manufacturing units where there is no regulatory check for child labour / bonded labour and where working conditions are hazardous. Sweetshop manufacturers pay very low wages to the workers and don’t care for safety standards or working environment. Concept of sweetshops is an old one for most of the developed countries of Europe and America. But this concept is still in practice in some of the Asian and under developed African countries. Some of the major manufacturing companies have high manufacturing cost in their original countries but through sweatshops in Africa and some of the Asian countries, those companies significantly reduced their cost. These low cost manufactured items in sweetshops are then exported to parent companies that earn high profit margin in developed countries.
Some of the famous multinational companies that faced allegation of sweetshop business model in low cost Asian and African countries also include Nike Inc, when it produced low cost shoes in China, South Korea and Taiwan.  Although Nike defended it position by stating that it had no control on sub-contractors. Some of the garment factories working in Bangladesh like Tazreen factory where almost 100 people were killed in 2012 due to fire incident have faced the allegation of sweetshop business model. There are many other examples of organizations that followed sweetshop business model in low income countries to cut down their business cost.
Case
Mr. Ali is the owner of a small garments factory where he has also hired local workers for handmade garments. Factory operates with the name of “Sun Garments”. Factory site is located in a far off area where there is very little legal and regulatory check on business practices. Workers get below average salaries in the working conditions that cannot be termed ideal with respect to safety standards. Following of such a sweetshop business model saves business cost and increases margin of profit.  Mr. Ali exports most of his garments to some of the famous brands in Europe and earns huge profit margin. Most of the competitors for Sun Garments are also following a similar sweetshop model of business to cut down their business cost.
Although following of this sweetshop model earns good revenue for Mr. Ali along with employment for local residents. But even then; Mr. Ali does not want to enhance investment on the betterment of human resource of Sun Garments to save extra margin of his business profit.
Question:
Do you think that by following sweetshop model, Sun Garments is violating communitarian ethics while its direct competitors are also following the same business model? Give five suggestions to Sun Garments for bringing its business in line with business ethics.