Case Study Analysis - Disaster in Bangladesh

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Question 1

From an economic perspective, was the shift to a free-trade regime in the textile industry good for Bangladesh?

Answer 1

From the economic perspective, the shift to a free-trade regime in the textile industry was positive for Bangladesh. It enabled the country to cooperate with large Western companies that started ordering their products to be produced in this country. Thus, Bangladesh benefited from the growth of employment in this field. Despite the competition of other developing countries in the textile market, this state managed to increase its exports of textile products quickly due to its economic advantage. First, Western companies preferred ordering their products in Bangladesh because labor costs were among the lowest in developing countries producing textiles. Second, regulations in Bangladesh are poor, enabling Western companies to minimize production costs and not take care of labor conditions significantly. Third, as these enterprises do not want to depend only on China in terms of imports, they regard Bangladesh as a relevant alternative (Case 9: Disaster in Bangladesh n.d.). All those factors contributed to high employment rates in the textile industry, simultaneously growing exports and the national income of Bangladesh.

Question 2

Economically, who benefits when retailers in Europe and the United States source textiles from low-wage countries such as Bangladesh? Who might lose? Do the gains outweigh the losses?

Answer 2

Considering the economic perspective, retailers benefit from sourcing textile products from countries with low labor costs, such as Bangladesh. They can use cheap labor and poor employment regulations to minimize expenses. Their customers may also benefit because they can purchase cheaper goods; if the latter were produced in high-wage countries, they would cost much more. Compared to apparel prices in the 1990s, they are currently lower in adjusted prices. Developing countries that produce textiles for Western companies also benefit because their citizens are employed and receive wages higher than minimum wage while the state increases its exports and national income (Case 9: Disaster in Bangladesh n.d.). In such a situation, Western producers of textiles and their employees might lose the competition with very cheap goods produced in developing countries. The gains seem to outweigh the losses because more parties benefit from sourcing textile products from regions with cheap labor compared to those who lose.

Question 3

What are the causes of the weak safety record of the Bangladesh garment industry? Do Western companies that import garments from Bangladesh bear any responsibility for what happened at the Rana Plaza and other workplace accidents?

Answer 3

The main cause of the weak safety record of the garment industry in Bangladesh is political power and the corruption of its officials. A famous building collapse in 2013 is a relevant example of how the problem occurred. A local politician constructed the building with serious violations, including erecting more floors than allowed. Due to corruption and political ties, such negligence is often overlooked. One more reason for labor safety violation is that Bangladeshi subcontractors have to minimize their costs to bit for cooperate with Western companies (Case 9: Disaster in Bangladesh n.d.). Thus, Western companies that import garments from Bangladesh bear some kind of responsibility for workplace accidents. Trying to reduce expenses, they require low-priced goods from local producers, thus forcing the latter to disregard safety and labor requirements to make production as cheap as possible. Without such demands, the situation with labor conditions would be better.

Question 4

Do you think the legally binding agreement signed by H&M, Zara, Tesco and others will make a difference? Does it go far enough? What else might be done?

Answer 4

In my opinion, the legally binding agreement signed by several apparel corporations with factories in Bangladesh will improve the situation but not eliminate all problems. Naturally, with the enforced labor safety requirements and the regular control in the factories, work conditions will enhance, and accidents will be prevented. However, this strategy is not sufficient. Due to corruption in Bangladesh and regular violations of laws, not all agreements with companies will likely be fulfilled, and local business owners will continue their previous line of behavior to minimize costs. Thus, to improve the situation, international labor and legal organizations should control the issue and provide their supervision over apparel producers in Bangladesh. They can also assist those organizations in following all requirements, stimulating factory owners to be responsible for their workers and safety.

Question 5

What do you think about Walt Disney’s decision not to purchase merchandise from Bangladesh? Is this an appropriate way of dealing with the problem?

Answer 5

Walt Disney’s decision to avoid purchasing products from Bangladesh is irrelevant. It is inappropriate to deal with the problem because the difficult condition will not be removed. Disney refused to buy goods from this state, instead buying them from other developing countries where the related issues may be the same, which is common for this region. The government wants to attract foreign investors and partners, and they often break rules and labor safety requirements to maximize export benefits. Moreover, problems in Bangladesh will likely remain as other companies continue outsourcing their products from this country. Thus, enterprises should find more efficient ways to cope with the problems instead of just refusing to buy goods in Bangladesh.

Question 6

What do you think of Wal-Mart’s approach to this problem? Is the company doing enough? What else could it do?

Answer 6

In my opinion, Wal-Mart’s approach to this problem was not sufficient. It refused to sign an agreement for unclear reasons, which cannot be considered positive. However, Wal-Mart provided its requirements for local companies and government to improve labor conditions and regulations. Those demands were followed, particularly the Bangladesh government agreeing to raise the minimum wage and create tighter regulations (Case 9: Disaster in Bangladesh n.d.). However, I think the company is not doing enough because the refusal of the legal agreement is a significant failure. The government may promise to improve something; however, its assurances may not be fulfilled without a legal agreement. Establishing the official settlement would provide stricter control and more opportunities for the meaningful advancement of labor conditions and safety.