The Dark Side of Globalization


One of the repeated topics we talk about in class is globalization and how it helps companies in a variety of different aspects of their business, such as improved products and operations, as well as reducing costs. However, what if globalization impacted a company negatively? That is exactly what happened to JanSport Apparel. JanSport previously supplied Cornell University with all of its branded school attire. Everything was going well, until a group of students, led by the group United Students Against Sweatshops, boycotted the apparel company and demanded that the university cut ties with the clothing company over its factory safety, or lack thereof. VF Corp., which owns JanSport, did not sign the “Accord on Fire and Building Safety in Bandladesh, [which is] a set of standards for improving factory safety in the country.” Of course, VF claims that their factories are safe and has instead joined the Alliance for Bangladesh Worker Safety.

The Alliance has a smaller population than the Accord, only 26 American and Canadian companies as opposed to 150 companies, but they do not necessarily have the same standards. Factory workers in the Accord, for example, “[have] a broader role in factory reviews.” According to the Alliance, though, “[it] has a Board Labor Committee that advises on the group’s efforts, [and] to imply that workers are not at the heart of our initiative is a direct contradiction of the facts.” The Alliance is also a smaller operation than the Accord because the Alliance inspected only 600 of its members’ companies, as opposed to the 1,100 factories inspected by the Accord.

Cornell University is not VF’s only concern. Prior to Cornell terminating their contract with VF, fourteen other universities, including schools with huge populations such as Arizona State, Penn State, and Syracuse have already terminated their contracts with VF due to the incidents that occurred in late 2012 to early 2013. During that time, a garment factory collapsed and killed over 1,100 workers, and another fire killed 112 workers. The incidents put Bangladesh factories on the international news and created an international movement in order to protect the country’s factory workers. Bangladesh factories supply some of the world’s largest clothing companies and is the “second-largest garment exporter in the world.”

This relates directly back to our class discussion. We always talk about the positive impacts of globalization, and there are certainly ways to globalize in an efficient, safe manner. However, with globalization come certain risks. International companies do not have control of their factories anymore. Instead, they are relying on managers in foreign countries to make sure their goods are being made and the manufacturing process is being executed in a safe, reliable manner. Some of these managers, though, do not always make the best decisions regarding their employees, but instead base their decisions on the bottom line and their productivity.

Would you consider boycotting a clothing company if you heard they were treating their factory workers poorly, or another incident in a factory occurred? What should American companies that export their labor do to ensure that their factories are safe and their employees are taken care of? How do you think these incidents would be handled in the U.S.?



The Hunger Games: Apple Edition

Since Apple’s latest press conference, who hasn’t been talking about the iPhone 6? It is easy to say that Apple products are incredibly popular in the U.S., and it is no secret that Apple has been trying to break into other markets abroad, especially Asia. However, few seem to realize the importance Apple has in countries in Asia, not because of their products, but because of the materials that make up their products. In “There’s a Downside to Making Parts for Apple,” Adam Satariano and Peter Burrows give readers a glimpse into the cutthroat negotiations Apple goes through with these companies, and how dependent they are on Apple products. Some companies simply exist because of Apple’s products. For example, 79.6% of Dialog Semiconductor’s, who makes chips within phones, revenue comes from Apple’s revenues. As scary as that sounds, the revenue from Apple is huge; their 79.6% revenue translates into almost $180 million. This seems like a lot of money and the benefits are obviously huge, but the suppliers worry that if Apple switches to a different supplier, as they did with Audience, who makes “mobile audio processors,” they will lose a ton of revenue. In Audience’s case, they not only lost 82% of their revenue from Apple products when Apple decided to use a different company to supply those audio processors, but their shares dropped from $22 to $6. Audience did find a new buyer in Samsung; however, their stocks never reached their heyday of $22 like they did with Apple. TPK Holding, which supplied Apple with the touch controls for the first iPhone, even held an IPO in 2010 because they felt so comfortable and reliable on Apple’s business. However, two years later, Apple decided to change its iPhone design, and began buying the same screens and controls from a rival. TPK Holding’s income fell by 50% in the last year, and its shares fell 73%. All of these companies lost majorly because they thought they could keep Apple around, but they could not.

The suppliers of Apple products are in a dangerous game. Their rises and declines come and go “in large chunks.” Companies often taste the sweet victory of signing a supplier contract with Apple almost immediately. For example, the revenues the companies involved in the iPhone 6 will receive will be huge, especially with a record setting opening weekend. However, there is a scary reality that a lot of these companies, in a few years, could lose Apple’s business, and depending on how reliant they are on Apple, it could be catastrophic.

How do you feel about Apple’s negotiating tactics? Do you think it is smart for these suppliers to go into business with Apple, knowing they could lose a ton of business in the next few years? What do you think the suppliers could do  in order to prevent losing Apple as a client?