Case Study Analysis - Disaster in Bangladesh

← Disaster Recovery (DR) Lessons Learned: September 11th

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 start 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 among all developing countries that produced textile. Second, regulations in Bangladesh are poor, and it enables Western companies to minimize costs of production and do not take care of labor conditions significantly. Third, as these enterprises do not want to be dependent 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 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 themselves benefit from sourcing textile products from countries with low labor costs, such as Bangladesh. As they can use cheap labor and poor employment regulations, they can minimize expenses. Their customers may benefit as well because they will be able to purchase cheaper goods; if the latter were produced in high-wage countries, they would cost much more. Compared to apparel prices in 1990s, they are currently lower in adjusted prices. Developing countries that produce textiles for Western companies also receive benefits because their citizens are employed and receive wages that are higher than minimum while the state as a whole 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. It seems that the gains outweigh the losses because there are more parties that 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 corruption of its officials. A famous building collapse of 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 in order to bit for cooperating 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? Dose it go far enough? What else might be done?

Answer 4

In my opinion, the legal 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 enough. Due to corruption in Bangladesh and regular violations of laws, it is likely that not all agreements with companies will be fulfilled and local business owners will continue their previous line of behavior in order 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, which will stimulate factory owners to be responsible for their workers and their 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 problem?

Answer 5

I believe that Walt Disney’s decision to avoid purchasing products from Bangladesh is not relevant. It is an inappropriate way of dealing with problem because the difficult condition itself will not be removed. Disney refused from buying 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. Government wants to attract foreign investors and partners, and they often break rules and labor safety requirements in order to maximize benefits from exports. Moreover, problems in Bangladesh are likely to 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 from buying 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 from signing an agreement for unclear reasons, which cannot be considered positive. However, Wal-Mart provided its requirements for local companies and government in terms of improving labor conditions and regulations. Those demands were followed, particularly Bangladesh government agreed to raise minimum wage and make regulations tighter (Case 9: Disaster in Bangladesh n.d.). However, I think that the company is not doing enough because the refusal from legal agreement is a significant failure. Government may promise to improve something; however, without a legal agreement, its assurances may not be fulfilled. Establishing the official settlement would provide the stricter control and more opportunities for the meaningful advancement of labor conditions and safety.