-
5/28/2018 MGMT - 7600 case 1
1/4
MGMT-7600-01
International Business
Dr. Olu Ijose
Spring 2014
Name: Marina Machado
Case 1: Knights Apparel
Quest ions
1. The case states that higher wage rates at the Alta Gracia
factory have raised the cost per
item by 20 percent. Can you see any way in which the philosophy
with regard to pay and
working conditions at Alta Gracia might lower costs in the long
run?
Knights Apparel must continue to give the best, fastest and
cheapest service to continue to
be one of the best distributors and hold a perfect competition.
It is not easy to keep quality, cost,
price and profit all on their maximum rate but it is possible.
If the company keeps their quality on
performance wasting will be reduced and in a long run profits
will be maximized. Evidence
suggests that some higher costs of Alta Gracias employment
arrangement will be recovered
through operating efficiencies. Employees assume responsibility
for their productivity and quality
of work, thereby eliminating at least one layer of supervision
and reducing costs of waste and
defective merchandise. Turnover has been exceptionally low, as
has absenteeism, thereby
reducing costs of training and backup labor.
2. Do you think Joseph Bozich would have been able to try the
Alta Gracia experiment if
Knights Apparel was a publicly traded enterprise?
I believe if Knights Apparel was a publicly traded enterprise,
the CEOs dream could be
coming true. Most of people think that since it is a public
company, most of stakeholders are justfocused on the highest
profits they could get, and this is not true. They do think in
their profits but
most of them especially nowadays think on the return to the
community once better community
means better life and fewer problems overall.
I wanted to do something more important with my business than
just worry about winning
market sharethat seemed kind of empty after what I had been
through, and I wanted to find a
way to use my business to impact the people that it touched on a
daily basis. On visits to third-
world countries, I saw the people that are manufacturing our
products and where they live, and it
really made me think about what it would be like to go through
(a tragedy) without hope. I asked
myself, how can you use your business to make a life-changing
difference in the lives of the
people who your business touches? And thats really what Alta
Gracia is all about its about
creating hope for a better future.1
As stated above, Bozich said at the Penn State Forum that he
wanted to do something more
than just sell apparel, something that could impact peoples life
in a good way and Im sure a lot
of CEOs and stockholders think the same way as him and more than
worry with huge profits they
are worry with the environment, community and the people that
work for the company. Happy
1 Joseph Bozich, Knights Apparel CEO and founder of Alta Gracia
Apparel in Alta Gracia, Dominican Republic,
speaking at the Penn State Forum
-
5/28/2018 MGMT - 7600 case 1
2/4
people produce more and better. So once again, I believe that
Knights Apparel would be able to
succeed and try Alta Gracia experiment the company if was a
publicly traded enterprise. It is
possible and probably with a long way to work through it. There
are people outside worry with
ethics in business, but there are people that just dont care
about it and put in first place the
amount of profit they will have back at the end of the year.
Convince those people to give up their
material profit, in benefit of a living wage for workers, is not
be an easy task.
3. What do you think might stand in the way of Alta Gracia
becoming successful? What
strategies might Bozich adopt to minimize the risk of failure
while still adhering to his high
ethical standards?
Knights Apparel's Mission is to Strive every day to be the
supplier of choice of licensed
sports apparel to our retail customers and licensors by
providing the best valued innovative
product, and the best service in the industry. (Knights Apparels
website)
With a mission like that it is hard to fail, but doing business
is not easy at all times and it is
important to deal with ethic and hope your competitors have the
same ethic as yours. Bozichneeds a good strategy to keep doing the
ethical standards and at the same time improving the
company sales. It is important to focus and to know how to work
on internal and external
environments.
Things like, let everybody knows the companys mission, vision
and objectives, what they
are doing to improve the workers life and at the same time
improving the quality of product are
very important; such as let the market knows how different they
are from others apparel
companies that keep working with sweatshops, focusing on the
ethic world. Every day more and
more people are becoming aware of how important it is to be
ethic in business and in every part
of their lives.
The students are more likely to avoid the sweatshops , they are
creating an anti-sweatshop
work environment2, once their target consumers are aware of what
is happening with others
apparel companies , Alta Garcia should find a way to let the
other buyers know, the sports jerseys
consumers, the moms or house wives that buy apparels for their
husband or child.
4. Alta Gracia serves a niche market, colleges, where there is
higher awareness of ethical
issues in apparel production. Do you think the strategy would
work if the company tried to
sell to the mass market through retailers such as Walmart?
I do believe that nowadays the strategy would work. The
consumers of a mass market are
becoming every day more conscious about ethic problems and are
trying to pursue better habits
and purchases, trying to protect the environment and also the
human rights. The sales tend to
increase, once the products price does not affect the consumers
budget. Also, I think it is
necessary to state with a sign on the product, letting them know
that those products are producedin a good environment, protecting
the workers and everything else.
Niche marketing can be defined as Where a business targets a
smaller segment of a larger
market, where customers have specific needs and wants. First of
all, Knights Apparel target the
students as their niche, and then all the sports fans. Targeting
a product at a niche segment has
some advantages for the company like less competition and clear
focus; it is also easy to build up
specialist skill and knowledge; and the most important,
customers tend to be more loyal.
2https://thebutlercollegian.com/2010/09/bookstore-welcomes-clothing-line/
-
5/28/2018 MGMT - 7600 case 1
3/4
Introducing the product into a mass market, it is possible to
face lack of economies of
scale, which you will encounter a lot of products with lower
unit costs that arise from operating at
high production volumes. Also, the company can find issues on
depending on a single product or
market and the competition will be larger as well. Mass market
creates more individual groups
and this relies on better possibilities of consumer purchasing,
bringing more option on the
purchasing goods scenario. There are a huge variety of buyers
actively shopping for the best
item, and those will probably hold the on their loyalty within
the preservation of usual standards.
In my opinion the strategy would work in this market as well,
since you can show to the
mass that there is a differentiated product comparing to others
and that the same time the price is
not affected.
5. Is it ethical for apparel companies to move production around
the world in pursuit of the
lowest possible labor costs, even if that means paying wage
rates that are below a living
wage? What if the alternative is not to produce at all?
I do believe it is ethical and totally valid to find a country
that the company is able to produce
for less costs. But at the same time, I think it is not ethical
or fair if those low costs mean paying
rates below the living wage. So, if a company wants to reduce
its costs finding a country with lowtaxes, low labor costs, they
should at least try to collaborate with the population,
community
involved and the workers giving them a decent life with a decent
wage; and at the same time
guarantee a safe place to work, legal rights, and human rights
for the employees. As we can find
in the Alta Garcia website, Every Alta Gracia product carries a
WRC tag confirming the product
was sewn by workers who are paid a living wage, have a union to
represent them, and are
treated fairly when they come to work.And this has a huge
importance nowadays for the
consumers.
Knights Apparel, with the Alta Garcia was pioneer in pay a
living wage and demonstrates full
respect for workers rights and once a company follows the same
purpose, it is then valid to move
to other places pursuing the lowest possible labor costs.
6. To what extent does the Alta Gracia experiment suggest that
good ethics are also good
business practice?
Joseph Bozich, the C.E.O. of Knights, have always been
optimistic about having an ethic
company along with a profit company. He said for a New York
Times article: Were hoping to
prove that doing good can be good business, that theyre not
mutually exclusive.3
It is possible to observe in the section below taken from the
companys website that their
strategy is definitely working, and could have many reasons to
do that. But in my opinion, the
main reason for being so successful is because the company is
pursuing good ethicsindependent of market or prices.
When we launched, The New York Times called our business model a
high -minded
experiment and now, a year later, we can say w ith confidence,
that doing good is good business.
And that yes, students DO support the brand because it is
socially responsible. We launched at
250 stores, and now, just over a year later, were supplying over
400 college and university
3http://www.nytimes.com/2010/07/18/business/global/18shirt.html?_r=0
-
5/28/2018 MGMT - 7600 case 1
4/4
bookstores with living wage/union made t-shirts and sweatshirts.
We have learned that when
students are aware of Alta Gracia at their school, they buy Alta
Gracia.4
Jim Wilkerson, Duke Universitys director of licensing and a
leader of American universities
fair-labor movement said on the NY Times article5: What really
counts is not what happens with
this factory over the next six months, Mr. Wilkerson says. Its
what happens six years or 10
years from now. We want badly for this to live on. And not just
him, but a lot of people also want
this to keep happening. Consumers have responded favorably to
Alta Gracia merchandise.
Available in over 400 college bookstores nationally, the
garments are of equal or better quality as
the most popular established brands and priced comparably.
Bookstores report that Alta Gracia
merchandise sells as briskly as competing brands and the margins
on sales are equivalent. This
is just one more example that the companys strategy can work and
this should be performed for
more brands national wise, developing communities and bringing
dream and profits together.
4 Alta Gracia One Year Later: Doing Good IS Good Business -
10.21.2011 at
http://www.knightsapparel.com/news/entry/alta_gracia_one_year_later_doing_good_is_good_business5http://www.nytimes.com/2010/07/18/business/global/18shirt.html?_r=0
