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Felipe Memo

Felipe toured Tech Musica's suppliers in China and found unacceptable working conditions, including underage workers, at their principal Guangdong supplier. He recommends taking corrective action to address ethics, marketing, legal, and cost issues. Specifically, workers face child labor, unsafe temperatures and toxic materials without protection, and live in crowded dormitories without water. Doing nothing risks legal issues and bad publicity that could seriously hurt sales, while changing vendors would be difficult and costly. Corrective action is the best option.

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84 views

Felipe Memo

Felipe toured Tech Musica's suppliers in China and found unacceptable working conditions, including underage workers, at their principal Guangdong supplier. He recommends taking corrective action to address ethics, marketing, legal, and cost issues. Specifically, workers face child labor, unsafe temperatures and toxic materials without protection, and live in crowded dormitories without water. Doing nothing risks legal issues and bad publicity that could seriously hurt sales, while changing vendors would be difficult and costly. Corrective action is the best option.

Uploaded by

sai ram
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Felipe’s Persuasive Memo: Final Draft

Memorandum

To: Humberto
From: Felipe
Subject: Serious Problems at Our Main Chinese Factory

Our supply chain in China is a strategic asset. Without it we


cannot compete against the larger companies in the industry. On my
recent trip to the country, I toured our suppliers and found that
most provide good value and quality and have acceptable working
conditions. There was one exception: our principal supplier in
Guangdong. There I discovered underage workers and poor working
conditions. As a result, we have a decision to make about how to
respond.

In a recent email, a representative of the factory owner said that


he had heard of my reservations about the plant and was upset about
them. I do not know how the owner received this information. I have
not said anything about this matter to anyone outside our company.
In any event, I think this development gives added urgency to the
decision.

Tech Musica is not the first company to confront this type of


situation. You may remember the Nike situation in the 1990s. Nike
received bad publicity for doing business with sweatshops. It faced
consumer boycotts and experienced large sales losses in the year
after its use of sweatshops was publicized. People still remember
Nike‟s association with sweatshops many years after it first came
to light. More recently Apple, the most esteemed brand in consumer
electronics, has been on the receiving end of bad publicity for
working conditions in its supply chain.

As I see them, we have three options:

 Take corrective action.


 Change vendors.
 Do nothing.

Presenting in Business | The Message: Organizing the Content | How Much Evidence?
I strongly believe we should take corrective action regarding the
plant based on several criteria:

 Ethics
 Marketing
 Legal liability
 Cost

Because no one from our company has visited the plant, I will
describe the most serious conditions I found:

 Many of the workers in the factory are young girls, 12 to 16


years old.
 Rooms the girls work in are not air-conditioned and temperatures
in the factory often exceed 100 degrees.
 They are not allowed to look up for eight hours, and they have
no breaks. No magnifying glasses are available to ease the
strain on their eyes.
 Some employees work around toxic materials: melted lead and lead
paint. They have only inadequate paper masks as protection
against lead fumes.
 Employees live next door to the factory in dormitories that have
no windows or running water.

Ethics

I‟m certain we can all agree that our association with these
conditions violates our ethical values.

The factory uses child labor extensively. The children do not go to


school and work in conditions that may ruin their health. Underage
workers are paid less and are more docile than adults, making them
less likely to object to how they are treated. Whether a parent or
not, no one in our company wants to be associated with child labor.

In the factory, employees have no effective protection against


toxic vapors from lead. Long-term exposure can cause memory and
concentration problems, exhaustion, reproductive problems, kidney
failure, and even death.

In the company dorms, diseases spread rapidly because of the


crowded, windowless rooms and the absence of running water.

Presenting in Business | The Message: Organizing the Content | How Much Evidence?
However, we must look at our behavior and acknowledge our share of
responsibility for this situation. We have leaned on our suppliers
to cut their costs to the bone without asking ourselves how they
were going to do that. Our main Chinese vendor has responded with
cost-cutting measures that jeopardize the welfare of workers. We
can‟t expect to solve the problem unless we understand our role in
it.

Marketing
Labor abuses all over the world are frequently exposed in the
media, and the information is available on the Internet, often
overnight. As an electronics company marketing fashion-forward
products, we sell primarily to young people. As music lovers and
cell phone and Internet users, many of them feel strongly about
social issues such as treating workers fairly and humanely. If the
conditions at our vendor‟s factory are publicized, many of our
customers will learn about them on the Internet. As we know, in the
consumer electronics industry, consumers don‟t lack choices.
Quickly, we could lose customers to our competitors; eventually,
the losses could be crippling. The senior vice president for
marketing agrees with this scenario.

We could hope that few of our customers learn about the factory and
those who do will not stop buying from us. Do we want to make this
bet with our reputation? Nike did and lost. Apple has encountered
the same problem, and we don‟t know how the story will end.
Obviously they are much larger companies with financial resources
many times ours, giving them greater resiliency.

By taking action, we can turn a liability into an asset. We can


make our concern for overseas workers part of our marketing,
differentiating us from companies that care only for profits.

Legal Liability

By law, children younger than 16 years old are not allowed to work
in Chinese factories. The law is not enforced very often. However,
there is always the possibility that it will be or that a company
will have bad publicity for tolerating vendors who treat their
workers poorly.

China has laws that prohibit sweatshops. Although the laws are
sporadically enforced, workers harmed while working at the factory
might bring lawsuits against us.

Presenting in Business | The Message: Organizing the Content | How Much Evidence?
Let‟s remember, too, that our entanglement in legal problems over
sweatshop work will result in bad publicity that can lead to the
marketing disaster described earlier.

Cost
In our company the most crucial obstacle to improving the work
environment at our vendor‟s plant probably is the fear of running
up our costs. We compete against giant global organizations. We
can‟t afford to be sentimental about costs.

With one bold step, cutting out the middleman, we have saved up to
30 percent of our manufacturing costs. Suddenly we have a little
more flexibility, which is all that is needed to make a difference
at the factory.

We don‟t have to fund expensive construction or purchase costly


equipment. Small, inexpensive steps now will quickly benefit
workers, such as providing respiratory protection for workers
exposed to lead and plastic fumes and magnifying glasses for the
girls assembling circuit boards.

Difficult negotiations will remain over the use of child labor, but
we will be headed in the right direction. As changes are made, the
factory will become more efficient, attract higher-skilled workers,
and experience less turnover.

Other Options
We do have other options.

We could take our business elsewhere. We have many factories to


choose from, including those with which we already do business. I
recommend this option as a last resort. Changing vendors requires a
huge effort, has high transition costs, and will inevitably disrupt
production for some time no matter how well we plan. We will
probably end up paying higher manufacturing costs.

We can do nothing, accepting the status quo, and essentially take


the attitude that we aren‟t responsible for working conditions in
vendor factories. As I have shown, this option makes us vulnerable
to risks that are much harder to fix than poor working conditions
in a single plant.

Conclusion
I believe we should heed the advice of someone who has been where
we are now. Todd McKean, a Nike executive, once said: “[Our]
initial attitude was, „Hey, we don‟t own the factories. We don‟t

Presenting in Business | The Message: Organizing the Content | How Much Evidence?
control what goes on there.‟ Quite frankly, that was a sort of
irresponsible way to approach this.”

I also think that we should examine whether our demands for cost
cutting at vendors may create incentives for behavior that are
detrimental to our mutual interests.

Presenting in Business | The Message: Organizing the Content | How Much Evidence?

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