Busm4692 _ Assessment 2: Case study report

You will be working in a group of a maximum of 5 students for this assignment. The case study for this assessment can be found hereDownload here You need to write a report that answers the case study questions. As this assessment is a report, there should be a short executive summary to begin (this will not be included in your word count) and limited headings subheadings are encouraged. Standard academic referencing conventions should be used. Formal language should also be used. Your report should conform to the following structure: Executive Summary (not included in word count). This summary gives an overview of what you are going to doargue in your report, and would normally be placed at the beginning of the report. People often write the Executive Summary when they have finished answering the case study questions. Answer to question 1 (approx. 400 words) Answer to question 2 (approx. 400 words) Answer to question 3 (approx. 600 words) Answer to question 4 (approx. 600 words) Answer to question 5 (approx. 1000 words) We suggest you use subheadings in this last section where you can outline each step in your proposed strategy and give details of what it involves. Reference list (not included in the word count) Formal language and academic referencing conventions should be used throughout. There is a lot to cover and ensuring that you are clear and succinct in your written expression is very important. This is a vital and highly transferrable skill. You are expected to use course concepts and theories to inform your answers (see the marking guide) You must use at least three peerreviewed academic references (per person) in addition to the assignment resources listed in the case study. You can also reference other published government reports and publications, institutional reports and regulatory standards, NGO reports and websites.

GLOBAL CORPORATE RESPONSIBILITY

ASSESSMENT 2 COVER SHEET

Name of the tutor: Thanapat Kijbumrung

Tutorial Day: Thursday Time: 11:30 BUSM4692 Global Corporate

Responsibility Date of submission: 21 August 2022

Checklist

 Number of words: 3210 (references, executive

summary, appendix excluded)

(excluding cover sheet, reference list, tables and

figures)

DECLARATION AND STATEMENT OF AUTHORSHIP

1 I hold a copy of this work which can be produced if the original is lost/damaged

2 This work is my original work and no part of it has been copied from any other student’s work or from any other source except where due acknowledgement is made

3 No part of this work has been written for me by any other person except where such collaboration has been authorised by the lecturer/teacher concerned

4 I have not previously submitted this work for this or any other course/unit

5 I give permission for this work to be reproduced, communicated, compared and archived for the purpose of detecting plagiarism.

6 I give permission for a copy of my/our marked work to be retained by the school for review and comparison, including review by external examiners.

I understand that:

7 Plagiarism is the presentation of the work, idea or creation of another person as though it is my own It is a form of cheating and is a very serious academic offence that may lead to exclusion from the University

Plagiarised material can be drawn from, and presented in, written, graphic and visual form, including electronic data and oral presentations Plagiarism occurs when the origin of the material used is not appropriately cited

8 Plagiarism includes the act of assisting or allowing another person to plagiarise or to copy my work.

Table of Contents

1 Executive Summary 3

2 Fabulous Fits business model and the relation to predatory pricing 4

3 The Relation of Predatory Pricing and CSR 5

4 The predatory pricing impact on supply chain 6

4.1 Supply chain factory managers 7

4.2 Supply chain factory workers 7

5 Comparison between the living wage and the minimum 8

6 Recommendations for Fabulous Fits to ensure living wage for supply chain workers 10

6.1 Identify the living wage 10

6.2 Measure the wage gap 10

6.3 Verify calculations of living wage gaps 11

6.4 Close living wage gaps 11

6.5 Share learnings 12

7 References 12

8 Appendix 16

Case study report

1 Executive Summary

This paper initially pointed out some operation characters of Fast Fashion industry, how Fast fashion business, such as Fabulous Fits can adapt and survive in this such highly competitive market Fabulous Fits operate Fast fashion business model, which is the latest model trend in the fashion industry, where retailers can provide large volume of available trendy clothing for consumers at an affordable price Fabulous Fits require fast, flexible and especially low-cost for trendy clothing manufacturing suppliers worldwide in order that it can efficiently work in Fast fashion industry as proving hot-trendy clothes at low prices However, fast fashion mass-production clothing causes many serious environmental and social obstacles such as soil pollution and textile waste, mistreat labor and violate workplace safety and health standard Besides, there is linkage between Fast fashion and significant concept of Predatory pricing that many businesses apply to gain the competitive advantage Due to the fiercely competitive Fast Fashion market, Fabulous Fits apply predatory pricing to eliminated competition to gain the monopoly power for profit maximization This strategy is often set in short-time, illegal and unethical that cause market imbalance, hurt both other operating businesses and customers in long run Secondly, this paper reveals the relationship between predatory pricing and Corporate Social Responsibility Applying predatory pricing induce firms to reduce operation costs so this affect labor wages and working conditions In case of Fabulous Fits, the use of predatory pricing violates on labour and human rights by breaching Pillar 2 of The

UN Guiding Principles on Business and Human Rights (UNGPs) and Labour Standard according to the International Labour Organisation (ILO)

Predatory practices have direct implications for a company's CSR which neglect 4 economic, legal, ethical and philanthropic responsibilities Thirdly, predatory pricing also influences both supply chain factory managers and supply chain factory workers The increasing of bargain and negotiate asymmetrical power permits the customers to squeeze price with their suppliers Price squeezing induces suppliers set 3 strategies to satisfy orders including raising the total working hours, increasing workload, and using outsourcing production that extremely pressure labor force In case of Fabulous Fits, it impacted their suppliers in Bangladesh leading to the laborer’s problems in salary, precarious work, and work

environment Price squeeze for purchasers significantly reduce income of workers whose salary depends on region and gender since suppliers’ force to lessen their manufacturing costs

in case of price squeezing The lower wages of labor as the consequence of squeezed wages from suppliers Next, this essay present understanding of living wages and compare it from minimum wages Minimum wage refers to the lowest sum of salaries paid to the workers hourly while the living wage is considered the number of salaries needed to guarantee people experience an enough and decent living standard The provision of living wages to the garment workers in the organization could make a significant commitment to help them to beat extraordinary emergencies, for example, the COVID-19 pandemic, covering fundamental survival necessities for themselves and their families, giving them ideal chance

to profit from good financial status to fight over the poverty level Finally, authors aim to clarify roles and responsibilities, as well as practical actions to ensure a living wage is paid to the supply chain workers The businesses in general have to go above and beyond existing wage regulations and commit to provide adequate for labor to maintain their lives It recommends 5 steps for Fabulous Fits CSR managers can follow to solve existing problems such as Identify the living wage, Measure the wage gap, verify calculations of living wage gaps, Close living wage gaps, Share learnings

2 Fabulous Fits business model and the relation to predatory pricing

Fabulous Fits implements Vietnamese fast fashion model where retailers expect to provide cheap, low-quality and trendy clothes to customers at unprecedented speeds (Lambert 2014)

In this case, Fabulous Fits works as retailers that have close interconnected relationships with its stakeholders who it creates value from, hence, according to Stakeholder theory, it has to suffer responsibilities for all its business decisions related to stakeholders’ interests (Freeman 1984) Since working in the Fast Fashion model, Fabulous Fits needs highly responsive clothing suppliers who are capable of supporting clothing fast, frequently, and flexibly whether Fabulous Fits has order changes, but at low-cost manufacturing in the shortest time

to enable it to sell trendy clothes at unbeatable prices

Fast-fashion business models contribute to significant environmental degradation and further social injustice as waste, labour exploitation, not paying fair living wages to workers, and unsafe workplaces Fast Fashion styles are not solid and quickly become unfashionable, many are discarded rapidly, piling up in landfills because retailers frequently cancel previous orders

when those styles are obsolete leading to serious textile waste and land population It’s believed that Fast fashion habitats make many businesses become environmentally irresponsible Besides, significant manufacturers exploit workers to keep up with the progress and maximise their benefits by placing laborer’s work in unsafe conditions and long hours for low wages, thence, those businesses act unethically and violated labour safety rights according to GRI 403: Occupational Health and Safety (Dahan, Lerner & Milman-Sivan 2021)

Predatory pricing is the illegal act of setting prices below-cost prices to attempt to eliminate the competition, giving the predatory company a monopoly freely to charge the price it wants (Moisejevas 2017) Fast fashion industry is extremely fiercely competitive, and abundant retailers established low pricing strategies to attract more customers Fast Fashion could almost be considered a perfectly competitive market because all of the players compete together in providing cheap, trendy, and available clothes that seem to be assumed identical products, so if any retailer sets a higher price, it will possibly lose potential customers (Joskowt and Klevorickt 1979) Customers have too many selections and substitutes in the Fast Fashion industry Therefore, to gain the monopoly power and larger market share to maximise profits many businesses, no exception Fabulous Fits apply predatory pricing in short-term By eliminating the competition, Fabulous Fits edges closer to a privileged position of market dominance that could enable it to freely price what it desires However, this strategy is illegal and unacceptable, it breaks the business ethics toward both other businesses and consumers and is unhealthy competition Predatory pricing violates antitrust laws, as it makes markets more vulnerable and harms the customer interests in the long-term (Lambert 2014)

3 The Relation of Predatory Pricing and CSR

According to Leslie (2013), the key concept of predatory pricing is to reduce the product's price to below the cost, hence, firms need to minimise their cost of production to minimise the losses By forcing to reduce the cost, it also affects labour wages and working conditions The study of Anner (2019) stated that buyers demonstrate their power over suppliers by engaging in predatory purchasing techniques that allow them to negotiate prices, lead times, and other aspects of sourcing Lead to labour abuse by reducing wages, encouraging informal forms of labour contracts and gender and immigrant discrimination, and using verbal and

physical abuse to boost productivity In the case of Fabulous Fits, as most of the workers are

on a casual contract and paid on the hour they work, the squeezing labour wages force the worker to work overtime until they are out of energy in order to earn more money to send to families Nevertheless, the working hours are not stable and depend on the order size For example, if a big order was made, the worker immediately considered it as work overtime and more hours of pay Hence, the use of predatory pricing has a negative impact on labour and human rights by breaching Pillar 2 of The UN Guiding Principles on Business and Human Rights (UNGPs) and Labour Standard published by the International Labour Organisation (ILO) Businesses have the human right responsibilities not to cause or contribute to conduct that has a negative impact on human rights, and also attempt to avoid or reduce negative consequences that are directly related to their activities even if they did not contribute to such impacts (United Nations Human Rights 2011) Therefore, predatory practices have direct implications for a company's CSR This practice did not fulfil the 4 economic, legal, ethical and philanthropic responsibilities Corporations are expected to achieve their economic goals but still follow the rules and regulations of the government Regarding ethical responsibilities, the standard and expectations are based on what stakeholders consider fair to protect and respect stakeholders' moral rights (Carroll 1991) Furthermore, predatory pricing will require a firm to sustain losses for a certain period until they dominate the market with the monopoly price in order to recoup the losses This conduct will affect the benefits of stakeholders According to Parmar et al (2019), by creating value for various stakeholders, companies will fulfil the employees' satisfaction more than focus on just shareholders In Fabulous Fits’ case, they have failed to satisfy not only workers but also the criteria of CSR

4 The predatory pricing impact on supply chain

In the garment industry, the relationship between purchasers and suppliers is built on trust and sustainable commitment, but the companies had no long-term sustainability commitment

in the case of Fabulous Fit However, buyers can bargain and negotiate to reduce the cost equal to the competitive price of suppliers along with other suppliers in peak periods leading

to the imbalance in power between purchasers and suppliers (Anner 2021) Based on predatory pricing practices, clients leverage over suppliers in order to squeeze prices, accelerate the pace, and request for resources In the global supply chain, the rise of

asymmetrical power permits the customers to squeeze price with their suppliers As a result, suppliers fource their labourers to do precarious work for a lower salary (Alamgir 2019) The Fabulous Fit have affected their suppliers in Bangladesh as a result the labourers have problems such as salary, precarious work, and work environment

4.1 Supply chain factory managers

Price pressure is a manifestation of predatory trading behaviour (Figure 1) The influence of a price squeeze leads to income reduction of workers whose salary depends on region and gender (Bouckaert & Verboven 2004) In the peak period, suppliers have followed three methods to fulfil orders including raising the total working hours, increasing contingent work, and using outsource production (Anner 2019) First, the majority of suppliers always increase overtime, workers are not allowed to rest until the workload is accomplished Suppliers seek

to complete clients' orders, in order of that, the manager used verbal and physical abuse with their workers such as yelling at them Moreover, suppliers alter the workload from daily to hourly to lead to a rocket in work intensity In general, suppliers usually face predatory purchasing by regular adjustment of working hours and increased workload (Anner 2020) In addition, the factory usually signs contracts with 6-month temporary informal workers, this helps suppliers reduce labour during the off-season The last option is to cloak suppliers that the factory reduces production in the main facility and then transfers orders over hidden suppliers to save cost. 

4.2 Supply chain factory workers 

Workers have to pay attention to work intensity because the time and amount of work puts a lot of pressure on both physically and mentally, they can only feel comfortable after completing their daily target workload (Fontana & Egels-Zandén 2019) ‘Sweatshops’ labour

is an issue in which workers are forced to work for a long time, pay low salary and under poor working conditions The garment industry makes mistakes for human right abuses in production of goods under ‘sweatshops’ condition (Emmelhainz & Adams 1999) While quotas hourly is stressed that workers cannot leave the supply chain if they haven't finished despite any reasons (Anner 2019) In the supply chain, there are 3 types of labour contract including worked piece-rate, on day contract, and long-term contract (6 months) The situation of workers is simply precarious and difficult to form earning benefits The total

salary of workers is only enough to pay for 77 percent of their fundamental needs (Anner 2021) Therefore, workers and their families of the supplier’s Fabulous Fit have to lower the expense for food and nutritions, this is a consequence of squeezed wages from suppliers The segmentation of gender is an argument in the garment industry in India The distribution between men and women workers in each region is extremely high (Alamgir & Banerjee 2019) The gender pay gap is the distinguish between male and female receiving the salary at the same time working (Blau & Kahn 1999).  Although both male and female workers have the same amount of time working, the men workers are paid higher than women workers As

a result, the male workers that are looking forward to be paid higher tend to quit the job because the more female employees working in the factory, the lower the salary (Anner 2019) However, the women employees do not have any opportunities to develop their career and rise their wages in the long-term Some areas have a lot of migrant workers to work in the supply chain, but migrant workers are pressured from intense work schedules and the poor labour accommodation, which is provided by suppliers

5 Comparison between the living wage and the minimum

There are some differences between the living wage and the minimum wage According to Harasztosi and Lindner (2019), minimum wage refers to the lowest sum of salaries paid to the workers on an hourly basis, which is determined by legal authorities or police The government of each nation might determine the minimum wage for the workers and the employers assume responsibility for following the national guidance or else they might face a legal prosecution On the other hand, the living wage is associated with the number of salaries needed to guarantee individuals might experience a sufficient and decent living standard The role of living wages is to pay the living costs facing workers and their family members regardless of the locations they are currently living in (Zeng and Honig 2017) The effects of living wage play a crucial role in cultivating poverty reduction, enhancing social welfare, and elevating physical and mental health of the workers (Lester 2011)  

In this case, it is essential to pay the workers in Fabulous Fit a living wage because of a host

of benefits The provision of living wages to the garment workers in the corporation might make a substantial contribution to support them to overcome unprecedented crisis, such as the COVID-19 industry (as mentioned in the case study) and cover basic survival requirement for themselves and their families The workers of Fabulous Fit completed the orders from the

suppliers and the tasks given to them Yet, since the orders were cancelled, Fabulous Fit was not capable of paying the garment workers due to the lack of revenue and profitability This put the garment workers in an unfavorable condition when they were forced to come back to their hometown live by the little savings from the previous months because the garment workers are incapable of having a quality life in urban areas By providing the garment workers with living wages, the workers stand a favorable opportunity to benefit from decent

or good financial circumstances to live above poverty level (Hirsch and Martinez 2017) This argument is consistent with the findings by Ziang et al (2012), in which living wage might pull the employees out of poverty, offer them with higher quality of life such as sustainable housing, healthcare and savings for long-term emergency situations As a result, paying the garment workers in Fabulous Fit might allow them to face less difficulties confronting the unprecedented negative situation, such as the lockdown caused by COVID-19 situation The integration of living wage to the employees’ payment suggests that the company initiates Corporate Social Responsibilities (CSR) into business strategies, which is effective at addressing the needs of garment workers, who are critical stakeholders of Fabulous Fit Since the garment workers in the company take an active role in making apparel for the company, the use of living wage might trigger employees’ motivation and job satisfaction, which are crucial to stimulate employees’ retention (Chong and Khong 2018) According to Le (2022), the gap between minimum wage and living standard in Vietnam has widened substantially for many years, imposing difficulties for the average workers to make ends meet Therefore, the action to provide the workers with living wage rather than minimum wage means that the company is willing to go beyond their essential responsibilities, which supports the garment workers enjoy better life standards In addition, the living wage implementation to the employees might support the workers in Fabulous Fit perceive favorable treatment from the employers, motivating them to demonstrate desirable attitudes and behaviors, thus cultivating better organizational outcomes (Zeng and Hoing 2017). 

6 Recommendations for Fabulous Fits to ensure living wage for supply chain workers

In the modern day, the government and organizations around the world are working to ensure the living wage Companies in many nations, however, must go above and beyond existing wage regulations since minimum wage does not often provide a decent living (United Nations Global Compact n.d) These businesses are able to guarantee the level of income for

their employees to provide for themselves and their family’s needs, which improves health and well-being For instance, IDH announced a call to action to create a living wage economy

in order to abolish poverty in 2021 (IDH n.d) In detail, firms can put their efforts on both ensuring a living wage for its workforce and their supply chain workers as well The most important factor contributing to the success or failure of ensuring the living income for employees is that changes need to start within the business (United Nations Global Compact n.d) In the case of Fabulous Fits, by ensuring a living wage, workers do not have to work excessively overtime to support their basic needs The IDH Living Wage Roadmap will be applied to help Fabulous Fits to ensure the living wages for their supply chain workers This

is a 5-steps framework to transform the business living wages (Wensing 2022):

6.1 Identify the living wage

The first step is to determine the living wage levels in the locations where firms will be working or sourcing through the appropriate benchmarks For Fabulous Fits, they need to identify the living wage of Bangladesh labour, especially in the garment industry The estimated living wage of Dhaka, Bangladesh can be divided for satellite districts (Narayanganj, Ashuliya and Ghazipur) with Tk13,630 ($177) and Dhaka City (Mirpur) with Tk16,460 ($214) These figures are more than double the minimum wage in Bangladesh's garment sector This is the result of the garment industry’s current wages being so low that is only slightly above the urban poverty line wage (Khan et al 2016)

6.2 Measure the wage gap 

In this step, corporations compare the current wages with the benchmark to generate the wage gap After identifying the living wage, Fabulous Fits are able to determine the wage gap through the difference between the living and current wage. 

6.3 Verify calculations of living wage gaps

In order to build the trust between management, employees, and other stakeholders, corporations are required to verify the data and information acquired This step requires Fabulous Fits to examine the calculations in order to have a better understanding to narrow the wage gaps.