CASE PROBLEM NO. 1: IMPROVING THE LIVES OF BANGLADESHI GARMENTS FACTORY WORKERS

Bangladesh is one of the top exporters of garments with a 4.8% export market share. It is the most significant industry for the country as it accounts for around 75% of the total export revenue and employs nearly 4 million people. The biggest export destinations are the EU and the USA. New export markets are opening up in emerging economies of Russia, Brazil and China. Beside trade revenue and employment creation, this industry is very important for Bangladesh due to its contribution to social mobility, urbanization and above all to empowerment of women. Most of the workers are female and from rural areas where agriculture is the only source of employment. The remarkable improvement Bangladesh has achieved over the last 25 years in public health, primary education, and poverty alleviation are the fruits of the success of its garment industry. However, working conditions and pay in this industry have not met the expectations. The garment industry value chain is very much buyer driven and suppliers have very limited bargaining power. Buyer-driven value chains are usually noticed in industries where production is labor intensive, non-specialized and requires low fixed cost. Entry barriers are high in designing, distribution, branding, advertising and market intelligence but low in the production stage. Hence, maximum bargaining power rests in the hands of large brand owners, distributors and retailers which endow them with price determining powers. Suppliers are simply required to match the offered prices. This price elasticity also offers limited switching costs for buyers. Therefore, major buyers are able to significantly control their value chain without much involvement in the manufacturing process. Manufacturers are in constant pressure to gain production efficiency and achieve low cost advantages. In many cases, the health and safety issues are being overlooked to save cost. As a result several accidents took place with high number of causalities and subsequent labor unrest halts production efficiency. Many large importers also have cancelled purchase orders. Responding to the working conditions and compliance issues the International Labor Organization, consumers, stakeholders and fare trade agencies are working together with the Bangladeshi government, garments manufacturers, industrial associations and trade unions to raise working conditions and pay. The minimum wage has seen a 77% increase and rigorous inspections are in place for safety and environmental regulation compliances. Also, works are in progress in areas of job security, more value adding, productivity increase through better training and distribution of control power across the value chain etc. Consumers also need to consider the effect of fast fashion on sustainability and well-being. Now, it is ever more pressing to think of ethical consumerism for a better world.

1. How do industries value chains effect working conditions and determine wages in certain industries?

2. How could stake holders positively contribute in improving working conditions?

3. What might be the relationship of ethical consumption and sustainability?