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Position of the Strategic Management Team

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Position of the Strategic Management Team

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The Dilemma:
- Benefits of offshoring vs. Condemnations from stakeholders.
- Concerns about the company's reputation and long-term image.

Financial Background:
- Balancing offshoring benefits with the need for increased wages.
- Monthly minimum wage in Laos: $117 vs. Korea: $1,900.
- Companies must provide $3.75 per day for meals.

Legal Background:
- Working hour differences between Laos and Korea.
- Vacation leave and maternity leave policies.
- Emphasis on safety and health.

Goal:
- Achieving growth and development through labor-management cooperation.

Vision:
- Advancing while considering the environment and the future.

Current System:
- Commitment to safety and health.
- Compliance with laws and guidelines.
- Continuous improvement and training.
- Creating a healthy and safe working environment.

Similar Cases:
1. Nearshoring: Benetton's factory locations and reasons for nearshoring.
2. Onshoring: Cases of Majestic Steel and Barthesian for supply chain reasons.
3. Other Cases: Issues faced by LG Electronics, Hyundai Motors, H&M, Amazon, and Chevron in various regions.

Proposed Solutions:
- Focus on improving labor conditions.
- Consider one-time monetary benefits and gradual wage increases.
- Implement flexible working hours.
- Introduce company lunch to replace meal allowances.

In summary, Hankook Textile is dealing with the complex challenges of offshoring, labor disputes, and stakeholder criticisms in Laos. To address these issues, the strategic management team suggests a balanced approach, emphasizing improved labor conditions, flexible working arrangements, and cost-effective solutions like company-provided lunches.

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1. Disagreement in reshoring and nearshoring

The strategic planning team was adamant about maintaining production in Laos. When presented with solutions such as nearshoring to neighboring countries (ASEAN member countries) the strategic planning team asserted that nearshoring would be difficult for Hankook Textile as Laos Factory is the company's first move abroad.

While we asserted that the movement of assets and labor across ASEAN member states isn't challenging thanks to the interconnections of economic regulations and standards, the strategic planning team maintained their stance that nearshoring would be a costly solution that would take great time and expense.

In addition, the strategic planning team argued that the relocation of production to a different country would set up a negative precedent for the company as it would break the trust that Hankook Textile developed with the local community. For instance, anytime there's a hardship in running a business or worker-manager relations, many external users would anticipate the company to simply move abroad and not address the source of the issue.

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The ethical management team came up with the idea of reshoring to South Korea because not all production processes need to be implemented in Laos.  However, The Strategic planning team wasn’t on board with this possible solution. The team wanted to solve the problem only in Laos. Because their point was the reshoring might take a long time and might cause profit loss. For this reason, they preferred to improve the working conditions of workers in Laos by providing company lunches and creating flexible working hours. /To note: Increasing the wage to improve the working conditions for workers was also one of the possible solutions mentioned in the Ethical management team's ppt/

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Agreement criteria:
1. There must be no financial loss to the company.
2. The company's reputation must not be damaged.
3. We must enable workers to work in a better environment or better working conditions.

Topics for future discussion:
If we implement performance-based wages, we have to discuss how should we measure the worker's performance, whether by working time or by the quality of work; for example, the number of defective products. We also have to think when we measure performance by working time, how can we prevent workers from neglecting work. And when measured by quality of work, we need to discuss the stress workers experience. In addition to wages, there is a need to discuss improving the working environment. We need to discuss how to improve the facilities inside the factory and allow flexible work hours but clearly set the scope.

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The ethical management team and Strategic planning team were able to reach a common ground in implementing a new payment system for the workers.

The ethical management team acknowledged the inherent difficulties in increasing workers' wages overnight and recognized that increases in wages need to be a gradual, long-term process.

The new payment system would create performance-based compensation for the workers.

To mechanize how this payment system would take place, there would be no substantial wages in the worker's hourly wages.

Rather, this payment system would provide opportunities for the workers to have higher incomes as they would be able to receive additional wages apart from their base salaries.

The new payment system coupled with higher ethical standards within the factory is a viable, realistic solution to addressing the dispute.

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Due to the lack of time in the inter-departmental meeting, both teams weren't able to reach a consensus involving how performance would be measured.

If the new payment system were to grant higher compensations based on performance, the standards for performance weren't created in the meeting.

Questions on how workers' performance are measured and quantified as additions to base wages.

If these standards are based solely on the quantity of product that the workers are able to produce, there would be issues in controlling the quality of the textiles produced in the factory. In addition, these payment methods can foster greater competition among the workers and generate a  toxic work environment, which can negatively affect the working environment.

Standards on workers' performance would be measured and should be carefully discussed with the Strategic Planning team.

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Unilever's Sustainable Living Plan:

Key Initiatives and Strategies:
Unilever's Sustainable Living Plan revolves around three overarching goals, each with specific targets:

1. Improving Health and Well-being: Unilever aims to help more than a billion people take action to improve their health and well-being. This involves initiatives such as:

Reducing the salt content in its food products.

Expanding access to clean drinking water through its Pureit brand.

Promoting good hygiene and sanitation practices.

2. Reducing Environmental Impact: Unilever is committed to reducing its environmental footprint by focusing on areas such as:

Sustainable sourcing of raw materials, including palm oil and tea.

Reducing greenhouse gas emissions from its operations and products.

Reducing water usage in its manufacturing processes.

3. Enhancing Livelihoods: Unilever aims to improve the livelihoods of millions of people across its value chain. This involves initiatives such as:

Ensuring that all agricultural raw materials are sustainably sourced, with a focus on smallholder farmers.

Promoting gender equality and women's empowerment in its supply chain.

Improving working conditions and fair compensation for workers in its factories and supplier facilities.

Impact and Progress:
Unilever has made significant progress in implementing its Sustainable Living Plan since its launch. Some notable achievements include:

Achieving its goal of sourcing 100% of its agricultural raw materials sustainably.

Reducing the environmental footprint of its products, including a 61% reduction in greenhouse gas emissions per consumer use since 2008.

Empowering women in its supply chain and promoting gender equality through various programs.

Relevance to Hankook Textile:
Hankook Textile can draw several lessons from Unilever's Sustainable Living Plan, particularly in the context of addressing labor concerns and community engagement. Unilever's commitment to improving working conditions and livelihoods in its supply chain aligns with Hankook Textile's challenge in Laos. By focusing on ethical labor practices and community development, Hankook Textile can enhance its reputation, mitigate labor disputes, and contribute positively to the local community.

References:
Unilever. (2023). Sustainable Living. https://www.unilever.com/sustainable-living/
Unilever. (2023). Our Progress. https://www.unilever.com/sustainable-living/our-progress/
Unilever. (2023). Enhancing Livelihoods. https://www.unilever.com/sustainable-living/enhancing-livelihoods/
Unilever. (2023). Reducing Environmental Impact. https://www.unilever.com/sustainable-living/reducing-environmental-impact/
Unilever. (2023). Improving Health & Well-being. https://www.unilever.com/sustainable-living/improving-health-and-well-being/

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1. Negotiations of H&M and Bangladeshi workers
After receiving negative publicity from the company, H&M was quick to negotiate with the local textile workers. After a textile factory complex building collapsed, the company formed a strategic alliance with other Western corporations in investing in better infrastructure for textile production along with a substantial wage increase.
2. Nike and its factories in Indonesia
After reports that Nike factories in Indonesia violated basic human rights and international labor rights, the company acted swiftly to create an independent department within the company to audit factories worldwide and make improvements in wages and working conditions of workers.
https://www.hellovaia.com/explanations/business-
studies/business-case-studies/nike-sweatshop-scandal/

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PON - Program on Negotiation at Harvard Law School

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We can learn a lot from negotiation case studies. Back in April 2013, an eight-story building in Bangladesh known as Rana Plaza collapsed, killing an estimated 1,129 people, many of them low-wage garment workers who made goods for foreign companies.

In the weeks after the disaster, apparel outsourcers faced mounting public pressure to address hazardous conditions in the factories where their goods are manufactured. Labor unions focused their efforts on persuading Swedish "cheap chic" giant H&M to take the lead on safety improvements. "Get H&M on board, the thinking went, and others would follow," wrote Liz Alderman in the Times.

Dealing with negative publicity in the heat of negotiations

Negative publicity marked a tipping point for H&M. The company signed on to an agreement that would require Western retailers to invest in improving the safety of foreign workers. Once H&M was on board, other European retailers began to follow suit.

On July 8, 2013 a European consortium of 70 brands unveiled its legally binding agreement. The group committed to inspections of the garment factories of members' Bangladeshi suppliers and developing a plan to correct any safety problems.

Just two days later, a group of 17 North American retailers (including Walmart, Gap, and Target) announced its own plan for factory safety in Bangladesh, centered on raising funds for safety improvements. The signatories' promises are not legally binding, and the burden falls on factory owners to improve safety. Labor groups immediately panned the North American agreement, saying it lacks the accountability of the European version.

The lead negotiators of the European agreement could have decided to water down their agreement to keep the Americans in the fold. Instead, they chose to stand by their core principles, and the Americans splintered off. In your own talks, use negotiation case studies and examples to your advantage. Weigh the pros of an all-inclusive, more diffuse agreement against the benefits of a smaller, more targeted one.
Do you know of any negotiation case studies that have any insight into labor safety practices? Leave a comment.
Related International Negotiation Article: Overcoming Cultural Barriers in Negotiations: The Importance of Culture and Etiquette in Bargaining Scenarios

Originally published in 2014.

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Negotiation Case Studies: The Bangladesh Factory-Safety Agreements

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We can learn a lot from negotiation case studies. On April 24, 2013 an eight-story building in Bangladesh known as Rana Plaza collapsed, killing an estimated 1,129 people, many of them low-wage garment workers who made goods for foreign companies.

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The paper analyzed various companies in China and found that social activities have become an essential management strategy for multinational companies. Although it is a Chinese case, it would not be much different for Korean companies. Philanthropic responsibility is what influences consumers to purchase products. In other words, doing charity work in Laos can certainly have a positive impact on public opinion.

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https://www.eetimes.com/the-lure-of-offshore/

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Examining & predicting solutions that may be presented by the Strategic Planning Team 

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Examining & predicting solutions that may be presented by the Strategic Planning Team 

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1. Gradual increase in worker's wages
The strategic planning team may present this as one of the solutions to addressing the conflict with the workers. They would try persuading the workers that a sudden wage increase overnight is unrealistic and that the company would promise to gradually increase workers' wages along with labor conditions.
2. Implementation of performance-based wages
The strategic planning may suggest performance-based wages as an alternative to fixed minimum hourly wages for the workers. Rather than increasing wages entirely for all factory workers, performance-based wages can actually increase the productivity of the workers and provide opportunities for the workers to earn higher wages.

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References
- https://www.eetimes.com/the-lure-of-offshore/
- https://www.usitc.gov/publications/332/working_papers/ecwp-2017-10-a-10-03-17.htm

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Pros of each solution and possible rebuttals to the cons

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Pros of each solution and possible rebuttals to the cons

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1. Considering Relocation and Diversifying operations: This solution can help Hankook Textile to reduce the risk of over-reliance on a single country and diversify its operations to other countries. According to a report by the World Bank, Laos has a low-cost labor force compared to other countries in the region. This can help Hankook Textile to reduce its production costs and increase its profit margins.                                                   -> However, relocating factories can be expensive and time-consuming, and it may take several years to establish new factories in other countries. Moreover, relocating factories may lead to job losses in Korea, which can have a negative impact on the company’s reputation.

2. Collaborate with the Lao government (Seek economic incentives and assistance): Collaborating with the Lao government can help Hankook Textile to obtain economic incentives and assistance such as tax benefits, subsidies, and infrastructure support. According to the World Bank’s Ease of Doing Business Index 2020, Laos has improved its ranking by 7 places compared to 2019. This indicates that Laos is taking steps to improve its business environment, which can benefit Hankook Textile.                                                       -> However, collaborating with the government can also lead to bureaucratic delays and corruption issues.

3. Benchmark other MNCs: Benchmarking other multinational corporations (MNCs) can help Hankook Textile to learn from their best practices and improve its operations. According to a report by the International Labor Organization (ILO), MNCs can play a positive role in promoting decent work and sustainable development. By benchmarking other MNCs, Hankook Textile can improve its labor practices and working conditions.          -> However, benchmarking may not always be effective as different companies have different business models and strategies.

4. Create company welfare that is distinct from other companies operating overseas: Creating company welfare that is distinct from other companies operating overseas can help Hankook Textile to attract and retain employees in Laos. According to a report by the ILO, providing social protection benefits such as health insurance, pensions, and maternity leave can improve workers’ well-being and productivity. By providing vocational education for employee children, Hankook Textile can also contribute to the local community’s development.                                                                         -> However, creating company welfare programs can be expensive and may not always be feasible for small companies.

5. Reshoring: Reshoring refers to bringing back production facilities from overseas locations to Korea. Reshoring can help Hankook Textile to reduce transportation costs and improve quality control. According to a report by the Reshoring Initiative, reshoring has increased by 170% since 2010. This indicates that more companies are considering reshoring as a viable option.                            -> However, reshoring may not always be feasible for companies that rely on low-cost labor.

6. Philanthropy to local community: Philanthropy refers to donating money or resources for charitable purposes. By engaging in philanthropic activities such as building schools or hospitals in Laos, Hankook Textile can contribute to the local community’s development. Philanthropy can also improve the company’s reputation among stakeholders such as customers, investors, and employees.                                                                             -> However, philanthropy may not always be effective in addressing systemic issues such as low wages or poor working conditions.

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Cons of each solution and rebuttals to the cons

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Cons of each solution and rebuttals to the cons

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이시윤
Reshoring
->한국 정부가 인센티브를 줄 것이라고 확신할 수 있는가
->이번 사태를 라오스 내에서 극복하지 않고 한국으로 귀환해 버린다면 앞으로 오프쇼링을 할 때 이 같은 시련에 부딪칠 때마다 포기할 것인가? 지금 해결해야 앞으로 오프쇼링하는 데 있어서 좋은 선례를 남길 수 있을 것 아닌가?

-->한국 정부 역시 리쇼어링을 유도하기 위해 많은 노력을 하고 있다. 비록 현재 리쇼어링에 대한 보상이 충분히 지급되고 있지는 않지만, 이 사태에 대한 관심이 커진다면 정부에서도 리쇼어링을 유도하기 위해 적절한 보상을 주겠다고 나설 수도 있다. 혹은 Hankook Textile에서 적절한 보상을 요구할 수도 있다.
-->오히려 이번 사태에서 기업이 손해를 봐 가면서 사태를 해결하려 든다면 앞으로도 계속 손해를 보면서 오프쇼링을 해야 할 수도 있다. 이득을 볼 수 없다는 판단이 들면 과감하게 물러나는 것이 기업 입장에서 좋을 수 있다.

->Can we be sure that the Korean government will provide incentives?
->If you return to Korea instead of overcoming this situation in Laos, will you give up every time you encounter this kind of ordeal when doing offshoring in the future? If we resolve it now, shouldn't we be able to set a good precedent for offshoring in the future?

-->The Korean government is also making great efforts to encourage reshoring. Although sufficient compensation for reshoring is not currently being paid, if interest in this situation grows, the government may step forward to provide appropriate compensation to encourage reshoring. Or, you can demand appropriate compensation from Hankook Textile.
-->Rather, if a company tries to resolve the situation by incurring losses in this situation, it may have to continue to do offshoring while incurring losses in the future. If it is determined that there is no benefit to be gained, it may be good for the company to boldly step down.

작업장 개선
->언론과 인권 단체, 대중들은 임금과 같은 수치적인 지표에 더 영향을 받는 경향이 있다. 그에 반해 작업장의 환경은 노동자가 아닌 외부의 사람들에게는 잘 체감되지 않는 지표다. 임금 인상 없이 환경 개선만으로 여론을 잠재울 수 있겠는가?
--> 개선된 작업 환경도 시각 자료 등을 통해 언론이 대대적으로 보도할 수 있다. 좋은 시각 자료는 임금 인상과 같은 수치상의 자료보다 대중들에게 깊은 인상을 준다. 따라서 더 효과가 좋을 수 있다.

Workplace Improvement
->The media, human rights groups, and the public tend to be more influenced by numerical indicators such as wages. In contrast, the workplace environment is an indicator that is not well felt by people outside of the workforce. Can public opinion be calmed just by improving the environment without raising wages?
--> The improved work environment can also be widely reported by the media through visual materials. Good visuals impress the public more than numerical data like wage increases. Therefore, it may be more effective.

최승혁
->자선 사업이 임금 인상보다 더 돈이 들지 않겠는가?
-->자선 사업은 일회성이거나 단기간에 끝날 수 있다. 임금 인상은 영구히 유지되므로 장기적으로 본다면 손해가 적을 것이다.

->Wouldn’t charity work cost more than raising wages?
-->Charity projects can be one-time or short-lived. Since the wage increase is maintained permanently, there will be little loss in the long run.

송찬우
->일시성 보너스 지급은 지금은 여론을 잠재울 수 있을지 모르지만, 결국 임금이 개선되지 않는다면 불과
몇 달 뒤에라도 같은 문제가 제기될 수 있는 것 아닌가?
-->여론은 특정 문제에 대한 관심이 생각보다 빨리 떨어진다. 만약 또 문제가 제기된다면 또 보너스를 지급하면 된다.
->라오스 현지의 정치인이 이 문제에 어떤 영향을 줄 수 있는가? 노동자의 목소리를 차단하는 것? 언론의 취재를 제한하는 것? 이와 같은 조치는 더 큰 윤리적 문제를 야기하게 되고 회사가 받을 이미지 손상도 더욱 커질 것이다. 또는 정부가 노동자들에게 보조금을 주도록 유도할 수 있으나, 라오스 정부가 이를 시행하게 하려면 어떤 조건을 제시해야 할지 의문이다. 라오스는 2020~2022년 조사한 부패 인식 지수에서 180개국 중 124위를 차지했다. 순위가 낮을수록 정치인들의 부패가 심한 것인데, 라오스는 세계에서도 부패가 심각한 수준이라는 것이다. 이러한 나라에서 정치인들에게 노동자의 처우 개선을 요청할 수 있을까?
->다른 지역에 공장을 세워 전략을 다각화하는 것은 좋을 수 있으나, 그 나라에서도 똑같은 문제가 터지지 않으리라는 보장이 있는가?
-->같은 문제가 터지는 것을 막을 수는 없을 수 있다. 그러나 적어도 한쪽 지역에서 벌어진 파업으로 인한 피해를 완화하는 등의 효과를 줄 수는 있다.

->Payment of temporary bonuses may be able to calm public opinion now, but in the end, it will only end if wages do not improve.
Couldn't the same issue be raised even a few months later?
-->Public opinion loses interest in specific issues faster than expected. If a problem arises again, another bonus must be paid.
->How can local politicians in Laos influence this problem? Blocking the voices of workers? Restricting media coverage? Measures like these will cause bigger ethical problems and the damage to the company's image will be greater. Alternatively, the government could be induced to provide subsidies to workers, but it is questionable what conditions would have to be presented in order for the Laos government to implement this. Laos ranked 124th out of 180 countries in the Corruption Perception Index surveyed from 2020 to 2022. The lower the ranking, the more corrupt the politicians are, and Laos has one of the most serious corruption levels in the world. Can we ask politicians in these countries to improve the treatment of workers?
->It may be good to diversify your strategy by setting up a factory in another region, but is there any guarantee that the same problem will not arise in that country?
-->It may not be possible to prevent the same problem from occurring. However, it can at least have an effect such as alleviating the damage caused by a strike in one region.

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https://www.rbccm.com/en/story/story.page?dcr=templatedata/article/story/data/2023/07/a-new-wave-of-reshoring-for-us-manufacturers

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A New Wave of Reshoring for US Manufacturers

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After the uncertainty of recent years, companies are increasingly looking to relocate their manufacturing back to the US. What investment opportunities are arising as a result?

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1. Considering Relocation and Diversifying operations

2.  Collaborate with the Lao government (Seek economic incentives and assistance)

3. Benchmark other MNCs

4. Create company welfare that is distinct from other companies operating overseas

5. Reshoring

6. Philanthropy to local community

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Finding real cases of companies to support our solutions

이시윤, 송찬우, 노민, 최승혁

Deadline: Before 9/18

Examining & Predicting solutions and criticisms of the Strategic Planning Team

이시윤

Deadline: Before 9/18

Examining Cons of Ethical Management Team's Solutions

최승혁

Deadline: Before 9/18

Examining Pros of Ethical Management Team's Solutions

송찬우

Deadine: Before 9/18

Finding & Making Visuals

노민

Deadline: Before 9/18

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Core Objectives & Values of Ethical Management Team 1 :
The main objective and value of the ethical management team is to balance corporate ethics and maintain financial gains from the Laos factory. The biggest challenge before the between-group meeting with the strategic planning team is to be able to convince how making concessions with the Lao workers, increasing their wages or improving work conditions, would be beneficial not just socially but economically in the long term. Cooperative work with the strategic planning teams seems crucial in swiftly mitigating the dispute with the factory workers.

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Members Present in the First Group Meeting 

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Members Present in the First Group Meeting 

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All members from Ethical Management Team 1 were present

이시윤

최승혁

노민

송찬우