Tee-shirt and tears
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1. The Gap has demanded certain quality working conditions for the Mandarins. Since the Mandarin’s costs will increase due to changing working conditions, who should shoulder the burden? If the Gap has to pay higher prices, what is their responsibility to stay customers of Mandarin’s when other firms might be more competitive? Do you know the facts that the Gap T-shirts made at Mandarin sell for $20 each in the U.S., while the Mandarin workers only earn 0.6%, $0.12, of the sales price of the Gap shirt they make? Do you know the facts that the gross margin of Gap has achieved to as high as 36.1%, and the owners of Mandarin could make over $300 million in profits for its $3.6 billion sales, while at the same time, the real wages of the maquiladora workers could only provide 18% of a family’s basic needs? Based on these data, there is no doubt that it is the right time for Gap and Mandarin to give back some of their earnings to the maquiladora workers, who still could not make a decent living whereas because of their efforts, the shareholders of Gap and Mandarin had grabbed huge inequitable profits. Under other circumstances, sometimes the customers should also take on the burden more or less, especially when changes are inevitable for the whole industry, for example, a new regulation enacted and implemented globally for environmental protect, or a cost increasing due to the vulnerable prices of global raw materials, etc. However, it is not applicable in this case. It is Gap and Mandarin’s faults when there are still other firms are doing well. On the other hand, a broader topic, how about if it is a normal phenomenon in this industry and each firm in this industry will face the trend of costs increase just because of the increasing wages of workers in less developed countries? Who will shoulder the burden? Perhaps it will develop a debate. To what extent the profits could be treated as “reasonable” earnings? How to distribute the burden among customers, OEM factories, firms which own the brands, or even the distribution channels? It is a so complicated issue that unsolved today. However, no matter what happens, several basic rules should be complied- an ethical frame that recognized by all the stakeholders to take related social responsibilities; legislations and regulations enacted by local government and tread organizations to protect the poor; the customer-oriented market system that could not be dominated by the powers. We should avoid the phenomenon that the other firms might be more competitive just because of Gap and Mandarin’s actions of changing working conditions. First, the local government should be urged to enact related bills to define the minimum requirements of working conditions for local factories which want to do business with MNCs. When the global organizations, such as IMF, provide aids to less-developed countries, when MNCs want to locally establish a factory or purchase merchandises, these requirements should be put on the negotiation tables. The wealthy countries and the up-stream MNCs should try their utmost to promote the concept of ethical business. Second, the local government should enforce the implementation of related acts and more additional, establish subsidies to award, compensate or subsidy the firms which promise and employ the ethical activities, and punish the ones that disobey the acts. As such, the cost differences could be shrunk. Third, including Gap, all the MNCs should boycott the merchandises of firms which cannot improve the working conditions. At this point, some trade or industry organizations could do more to encourage the improvement. 2. The Gap was persuaded to resort o an independent monitoring team in order to ensure compliance with its Code of Vendor Conduct. What alternatives exist for a firm that does not have the resources to install independent monitors in each of the countries in which it conducts business? First, the firm does need to establish its own Code of Vendor Conduct (CVC) and tells all its OEM factories that if it determines that any factory has violated this code, it may either terminate its business relationship and/or require the factory to implement a corrective action plan. If corrective action is advised but not taken, it will suspend placement of future orders and may terminate current production. Second, by means of internet and telecommunication technology, this firm can set up a disclosure system and open to the public for a more extensive supervising. Along with the more public interest of ethics, no non-compliance phenomenon could be enclosed for a long time. Once an incident is exposed, the firm should take action immediately. Let the public media be its supervisors. Third, maybe it cannot supervise thousands of factories globally, yet each factory must have a middle trader/dealer that does business with this firm. As such, that dealer should take the responsibilities to take place of this firm to check out whether there are factories that disobey the codes. It is unbelievable or unqualified for a dealer that it does not know the situations of factories with which it does business. It is necessary that this firm should have another CVC with its traders. Last, this firm should consider incorporate the items in CVC with the corporate quality standards. The function team of quality control has plenty of opportunities to contact various suppliers and they know how to control the vendors. This team could be an internal team to fight with the non-compliance phenomenon, and try to seek for the outside resources to accomplish its target.
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