globalization

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Case Studies: – Two pages (unless otherwise specified), 1½ spacing.

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ISSUE:One to three sentence intro/definition of the study subject/issue

FACTS/DISCUSSION:Identification and summary of the factual background leading to the subject/issue

CONCLUSION / RECOMMENDATION: Your summary discussion of the content of the issue and your conclusion / recommendationif you were the deciding official

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Globalization School of Donough. n (Wood- Case Study University phen E Global Profits, Global Headaches MARK BAKER LAURA HARTMAN . BILL SHAWI New York product Consumo adle Darden 5), and Darden N is a Fort Worth-based Nevada corporation that manufactures and Harper- Politics fets textiles. It is a publicly traded firm whose name, for over 50 a been synonymous with men and women's work clothes. The last two indes brought great changes to the textile industry. Among other things, Hor costs have been on a steep incline. In K-PAN's North Carolina and taas plants, costs were squeezing profits to the point that K-PAN's board maded to follow its competitors overseas. Over a three year period, K-PAN ed out its domestic operations with a generous re-training and re- siement program for former employees in need of help; built a $28 mil- wate-of-the-art plant in Nicaragua (with $20.5 million in bonds placed by ng and purchased its remaining needs through local agents in Pakistan i Indonesia. ahor market conditions, labor laws, producer constraints and environmen- Cost advantages of this globalization effort reflect international differences wage rates, fewer effective labor unions, less effective labor laws, fewer restrictions. A typical developing country has higher unemployment levels, haver constraints, and lower environmental standards. In short, many is can be produced at a much lower cost in developing countries than in countries. By keeping production costs low, sweatshops provide a desveloping countries. Increased exports bring jobs for the domestic econ- and hard currency for international purchases. As a consequence, the de wants called "Hangins," put a welcomed spike in its earnings, but also The worldwide Sice President for Academic Affairs at De Paul University. Bill Shaw is Woodson Cen- Professor in Business Administration, University of Texas-Austin. Copyright © 1999. Wak Baker is Associate Professor, University of Texas-Austin; Laura Hartman is the As- popularity of one or Panis articles of clothing, a pair 565 and by permi 566 . lobalization • 567 PART 5 CONTEMPORARY BUSINESS THEMES operate growing hours to work long shops. focused public attention on the corporation. In doing so, the company came under closer scrutiny, not only from the financial markets, but also from those whose avowed purpose was to monitor MNE's to assure confor- mance with modern ethical principals. The adverse publicity that had stunned Nike, The Gaps and Kathy Lee, 4 amongst others , began to haunt K-PAN with a vengeance. Ft. Worth res idents, supported by a vocal group of former K-PAN employees and the Amalgamated Textile Workers Union, assailed the firm via informational picketing and through the media. In addition to a number of stories in the local media, a group of radical citizens, calling themselves Terrorists Against Multinational Suppressors created and circulated adverse e-mails, some of which had no basis in truth. After some inquiry it became apparent that K-PAN's "model" plant in Nicaragua exhibited a number of shortcomings traditionally associated with “sweatshops” (long hours, low pay, environmen- tal, health, and safety problems). None of these concerns violated the laws of their host country and, in many ways, the plant greatly exceeded local minimum standards in all areas. However, the negative publicity generated by its Central American op- erations paled in comparison to the outcry that stemmed from its link with sweatshops in Southeast Asia. Its purchases through local agents in Pak- istan and Indonesia allegedly contributed to the perpetuation of atrocious working conditions and poor economic situation in those countries. This predicament was similar to that suffered by Nike in connection with its In- donesian suppliers. A study of Nike workers in Indonesia found that currency devaluation compounded the problems of low wages. While workers producing Nike shoes were low-paid before their currency, the rupiah, began plummeting in late 1997, the dollar value of their wages has dropped from $2.47/day in 1997 to 80 cents/day in 1998. Meanwhile, the prices of basic goods have sky-rocketed. Workers reported that they had received a 15 percent pay raise earlier this year, meaning that their base salary had increased from about Rp. 175,000 per month (approximately $17) to about Rp. 200,000 per month (approximately $20). However, they estimated that their cost of liv- ing had gone up anywhere from 100 to 300 percent. ... We found that the cost for a single male worker is $33.20/month and $35/month for a female worker. The base pay for Nike workers, however, is $20/month-not enough to fulfill the basic needs for one worker, much less a family.5 K-PAN's insistence that it owned and operated no facilities in those countries couldn't begin to ward off attacks on its corporate policy. K-PAN's internal code of conduct, entitled “K-PAN Ethics," has been in place since 1980 and was patterned after codes of prominent MNE's. Each employee is given a copy of the code, asked to sign it, and subjected to a test on its prin- ciples. The central focus of its code had been untouched since it was care- fully crafted by K-PAN's founder, Mr. W, as he was widely known. K-PAN ETHICS speaks of a "living wage," "shareholder satisfaction," "community responsibility," and "customer confidence"; these components of the code were met satisfactorily (or at least, they were un-protested) since their inception. Members of the marketing team came up with the following background information regarding labor conditions in developing economies. Sweatshops are a product of the industrial revolution. Creative entrepreneurs realized rofits if they could find low-cost Valves to the new machines. The workers were found when new agricultural that they could practices and the closure of the commons created provided factory owners a urban-based pool of workers that could no longer grow what they under unhealthy conditions for very low pay. Though business owners were quick to figure out how to keep labor were slow in finding a term to define the owners The term "sweater" began to be used in the mid-1800s to describe an shop came into use in the late nineteenth century to characterize subcore employer that paid workers very low wages for monotonous works "Sweate tracting systems where profit margins were increased by sweating the workers---requiring employees to work long hours for very little pay. The words sweating and sweatshop crossed the Atlantic as American employers adopted British labor practices. 8 The Encyclopedia Britannica defines the term sweatshop based on a set of employment practices: “a workplace in which workers are employed for Several organizations define sweatshops based on compliance with national labor law. According to the U.S. General Accounting Office, a place of work with "an employer that violates more than one federal or state labor, indus- trial homework, occupational safety and health, workers' compensation, or industry registration law” is a sweatshop.10 Other groups add to compliance and Textile Employees define sweatshop as a place of employment with sys the concept of labor rights. The AFL-CIO Union of Needletrades, Industrial tematic violation of one or more fundamental workers rights that have been codified in international and U.S. law."ll Some would say that a variety of sub-standard labor practices needs to be present before a place of employ- ment can be called a sweatshop. Others, such as the Interfaith Center on Corporate Responsibility, require only a single questionable practice: "(though] a factory may be clean, well-organized and harassment free , un- less its workers are paid a sustainable living wage, it's still a sweatshop."12 The word sweatshop is emotive and carries prejudicial connotations. The undercurrent of invoked prejudicial emotions makes it difficult to engage in open, multi-party collaboration to improve working conditions in develop ing economies. In an effort to deal with these issues, the K-PAN Board of Directors called a special meeting. "If we forego profits to raise working conditions in the developing world," remarked one board member, "we're just going to have to reduce our purchases and that's going to cost jobs. Who'll be better off Yeah, and our customers won't be happy with the higher prices either. They could ers for this to happen," said another. "I really wish all companies worldwide switch to Levis or Wranglers. It wouldn't be fair to our shareholders or work- had to adhere to the same rules; that way we'd all be on a level playing field. I wonder if such a set of rules or a proposal exists." Manuel Smith, a longtime employee who had worked his way up from plan designed to keep costs low but to also return profits to every employee the minimum wage in each country and split the of the company. "Let's pay profits with the employees." He liked the incentives this offered. on of color, reminded her colleagues that “good social work is good business, and the pers a policy of helping workers in developing countries will encourage enlight- ened consumers to do business with K-PAN, thereby increasing sales; help- ing costs stay low and maintaining our profits.” Her suggestion was to all employees at the plant 150% of the local minimum wage, let the world know of the good deed, and require all suppliers to sign and adhere to K-PAN Ethics. Manuel echoed the sentiment of the group when he said, "she's so young and naïve; consumers only care about the bottom line!” Recognizing that some middle ground must be sought, Professor Dick- inson, boyhood pal of the founder and the most recently elected board member, referred members to his recent speech on the topic that included the following remarks: Economic growth requires market expansion and market expansion depends on growing product demand. A developing country's export sector is the most likely source of market expansion since its domestic markets will likely not ex- pand until the general economy becomes robust. The International Labor Or- ganization found that the most successful economies have been "those who best exploited emerging opportunities in the global economy. An export-oriented policy is vital in countries that are starting on the industrialization path and have large surpluses of cheap labor.”13 Whether wages are low, working hours are long, or working conditions are hazardous and unhealthy, the decision to accept employment by a worker in an MNE is not forced slavery but instead made by the employee. 14 [I]f the choice is between (meeting] subsistence needs and ſhaving] 'decent work hours, the work days will be very long. Or if the choice is between child labor on the family farm or a smaller harvest, children will work long and hard in the fields. 15 Workers wouldn't accept employment if other jobs were more attractive. Research by Sargent and Matthews supports the economists' conclusion. After conducting more than fifty interviews with workers in maquiladoras in Mexico, the researchers found that there was no evidence that workers found their present jobs less attractive than other jobs in that economy.16 It is not that economists are against better working conditions per se. But they are extremely concerned about the manner in which improvements are sought. According to the neoclassicists, improved working conditions will not come from government controls that restrict child labor, raise minimum wage, improve health and safety conditions, allow unionizing, or protect em- ployee rights. At best, governmental controls will improve the working con- ditions for only a few workers; however, workers in the export industries and throughout the rest of the economy will lose their jobs as exports decline and the economy falters. Economists argue that the best way to improve working conditions is to leave markets alone. In the short-run, sweatshops give workers a job and some income. 18 In the long-run, an improved economy will give workers the leverage they need to obtain better working conditions. When a developing country's economy grows, the demand for labor increases and provides workers with more employment opportunities. Producers must then offer if they want to retain existing workers or attract new workers higher wages, shorter work hours, and other improved working conditions
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Explanation & Answer

Attached.

Running Head: GLOBALIZATION AND ETHICS

Globalization and Ethics
Institution Affiliation
Date:

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GLOBALIZATION AND ETHICS

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Issue
The case study presented on global profits and global headaches focuses on two essential
issues including globalization and ethics. Globalization is identified as a leading factor in
influencing the decision of K-PAN organization to follow its competitors overseas. On the other
hand, ethics is portrayed as an element that allows the organization to ensure that its employees
receive fair treatment as expected by the labor laws.
Facts/Discussion
In general, globalization is defined as a process by which organizations integrate
international trade in their operations. Globalization also entails the integration of international
investment, culture, and technology. Globalization enables firms to start engaging in business
operations overseas as well as operate on the international scale (Giddens, 2018). In the sa...


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