Making Business in Bangladesh: Macys - Case Study Example

Introduction Developing countries are characterized by poverty and the poor people who live in these areas. However, amidst all the financial problems that these people may have, they are still considered as potential customers for businessmen who want to expand their business in the developing part of the world. Despite the challenge, carving a niche in such a non-traditional business environment is possible- if done correctly. It must be noted that developing countries are pockmarked not only with poor people, but also with legal systems that are in dire need of development, poor communication facilities and high rates of crime (such as “theft, vandalism and physical violence”) (Anderson et al.). Businessmen may also be faced with the problem of looking for employees who are skilled enough to do the work needed. These are just examples of what businessmen should take into consideration before even attempting to tap into a developing country. I have chosen Bangladesh as the subject developing country for this research paper. As a developing country, it may seem, on its face, that Bangladesh is not usually considered as a profitable country to do business in. However, if we were to omit the financial condition of the Bangladeshis and focus instead on the resources of the country, the situation would be different. Bangladesh is home to an abundant source of agricultural products, particularly coal and gas, as well as other raw materials such as “lime stone, silicone sand and hard rock,” all of which are used in a variety of industries. At the moment, the country is focused on the garments and textile industry, particularly in the export of cotton materials. Other industries that Bangladesh is involved in include the “tea processing, paper newsprint, cement, chemical fertilizers, sugar and light engineering” (Bangladesh.com). Since the country is already focused on the exporting of garments to foreign countries all over the world, I have decided to pick Macy’s as a company which targets Bangladesh as a new business hub for its operations. Macy’s is known all over the world for providing its consumers with clothing items, accessories, home decor and bath products, but it is more popular with providing clothing for men, women and children.It is for this fact that I have chosen Macy’s as my choice company for this research paper. The country is, at the moment, already heavily competing with other garments producers such as China, because aside from the cheap labor available, the production of garments do not require the worker to be literate, let alone with an academic degree (Bajaj). Findings In the previous paragraph, pointed out that Bangladesh is already engaged in quite a number of business industries and the country is also rich in natural and agricultural resources. What with all their resource wealth, the country would have been a developed country by now. However, this is obviously not the case because the Bangladeshis fail to utilize what they have properly. Because of the lack of technology and communication systems available, utilization of resources is indeed a challenge. This fact also triggers in an investment drought, where businessmen are afraid to invest in such a country, because they may end up spending more than what they get in return. Before embarking on a business project, businessmen have to first determine the “core competencies and strengths” of the area where they plan to do business in. To do this, there is a need for companies to seek help from government agencies and other organizations or groups in their target area so they can learn more about the people who live in the same (Engel). Indeed, a smart business move would be to first conduct a thorough study of the business location, the people who are expected to work in the company and the target consumers. In the following sections, I shall point out the factors that contribute to the business environment of a place, and how these factors affect the success of a business. Culture Bangladesh is a country that is rich in a variety of cultures that have all blended together to form one unique whole. This is because of the influence of the other countries surrounding it (such as India, Sri Lanka, and other countries in the Middle East such as Saudi Arabia and those of the far east, such as China). Because of its location, the Bangladeshi culture is a mix of “Hindu, Jainist, Buddhist and Islamic influences” (Communicaid). According to Mitschow (qtd. in Ivanov 13), there are a certain set of “business ethics” that are unwritten but should be incorporated into every business endeavor. Such ethics involve principles and policies that businesses should do or not do. For instance, it is expected of businesses to practice corporate social responsibility (especially for the larger companies). Should Macy’s decide to enter Bangladesh and make use of the country as their garments supplier, they should adapt to the culture of the latter and should observe local laws. The company should also be sensitive to the local people of the place that they plan to set up business in, and should also be prepared to resolve any issues that may arise in case of conflict. When it comes to the consumers, the company should ensure that the products that it offers and its services are suited to meet the tastes of the local culture. For instance, Macy’s should not only offer the same kind of items that it sells in its stores abroad. The management of Macy’s may also consider offering products that suit Asian (particularly Bangladeshi tastes). Instead of simply selling western- suited furniture for example, the company can also offer furniture that is especially suited to withstand the monsoon weather of the country. Cultural Attitudes Toward Women and Children Earlier in this paper, I had mentioned that before businessmen should even attempt to embark on a business project in a foreign country, they should take into consideration the culture of their target market. Bangladesh is obviously not an exception and it should be mentioned that despite modern developments and modern ways of thinking, Bangladesh is still primarily a patriarchal community. Most of the decisions that run the country are made by the males, while the women and the children take a backseat (Communicaid). The country, like most (if not all) Asian countries value their families and tend to make most of their decisions family-centered. The women, in particular, base their decisions on their husbands’, and they also tend to depend entirely on the men (Chowdhury qtd. in Ball and Wahedi 367). For the typical businessman, this would entail making decisions that they feel that the man of the family would approve. Companies should look into offering products and services that will not be or will be difficult to refuse by men. The same holds true for labor. For Macy’s for instance, the company should ensure that the women are not overworked to the point that they begin to ignore the needs of their family, especially of their children. The company should also ensure that their workers (especially the females) are provided with benefits in addition to measures to be taken by the company that will look after the well-being and health of these women. Education Level of Workers in the Country Unfortunately, the majority of Bangladeshis are not far up the education ladder. In fact, only 39 % of Bangladeshis are able to read and write (Chowdbury qtd. in Ardt et al. 3). But other reports claim that the literacy level is actually 55 % (Bajaj). Nevertheless, despite the discrepancies in the reports of literacy levels, it is clear that the literacy rate of a majority of Bangladeshis is far behind as compared to their western counterparts. This is something that businessmen should also consider because it means that they have to invest a substantial amount of resources in order to address this problem. It has been said by Chowdbury (qtd. in Ardt et al. 3), sustainable development would not be possible because education serves as the supporting bone to every project. It also encourages people to be independent, which companies need. Should Macy’s plan to invest in a developing country such as Bangladesh, then it should be wary that its employees may not be literate and there may be a need for the company to either train their employees, or they may have a difficult time in recruitment. The company should also take the educational level of the people of the country if they plan to target consumers. Obviously, a company cannot produce products and services meant for literate customers to customers who are illiterate. A company such as Macy’s should invest in research studies to determine what they can offer that their consumers will patronize for sure. Values and Attitudes The Bangladeshis exhibit the typical Asian attitude towards their fellow men. One of the prominent but expected attitudes that they possess is the level of respect that they have for their elders. The elders are treated with utmost respect. In fact, during meal times, it is not unusual for Bangladeshis to first wait for the eldest person at the table to begin eating before they all start to eat (Communicaid). This point is reiterated by White (qtd. in Ball and Wahedi 367) who stated that the elders play a main role in running a household. From this, it is clear that the elders have a say in making major decisions. Businessmen should therefore take this factor into consideration when doing business. It seems that whatever the elders say have a strong influence on the younger generation. It can therefore be inferred that businessmen may have to first impress the elders of the area that they plan to tap into, before expanding their market to their younger customers. Should Macy’s decide to establish a factory or office headquarters in an area in Bangladesh, for instance, it would be to the management’s benefit to first seek the advice and permission of the elders within that area. Obviously, the elders have the power and authority to influence their younger peers. If the company is able to convince the elders first, then convincing the rest of the people in the community would not be too difficult. Religious Customs Since Bangladesh is a melting pot of various individuals who may have different religious beliefs, there is a need for businessmen to consider the national holidays that may take place frequently (like Ramadan and Eid for Muslim Bangladeshis). In the first paragraph of this section on culture, I mentioned that Bangladesh is a country that is home to all sorts of religions because of the influences of all the countries surrounding the former. There is thus a need for businessmen to consider the religion of their target market, and whether this has an effect on their purchasing decisions and purchasing habits. Individuals dealing with the people of Bangladesh should also be sensitive to their religion and should be careful to not poke fun at anything that could offend his/her national pride (Kwintessential). For the most part however, Bangladesh is home to more Muslims than any other religion in the country. Aside from Indonesia, it has been said that Bangladesh is comprised of the second largest Muslim population in the world. But unlike some Muslim countries, Bangladesh welcomes other religious beliefs and does not impose rules to segregate one religion from the next (Journey Mart). This being said, Macy’s should be very sensitive to the needs and wants of the Muslims who comprise the majority of the Bangladeshi community. To respect religious beliefs for instance, Macy’s should be careful not to make their workers produce outfits which may be offensive to the Muslim point of view, nor should the company openly sell seductive clothing which they know might offend the locals because of their beliefs. Physical environment. Bangladesh is comprised of around 143,998 square kilometers of land area and is immediately surrounded by India and Burma. Its geographical position and its topography makes it highly exposed to the change brought about by the climate, which includes flooding. This is a problem for many businessmen because most of the parts of the country are flooded several times a year, which also leads to soil erosion and makes the flooding problem worse. The fact that Bangladesh is also so densely populated does not make the flooding problem better because of the generation of enormous volumes of garbage. Nevertheless, Bangladesh is still rich natural resources such as gas and could be profitable if only companies would be willing to invest (D & B Country Report 37). Despite the problems mentioned, investors in the country, such as Macy’s, could enjoy duty-free access to India and other countries that are members of the South Asian Free Trade Area (SAFTA) (Bangladesh Investment Handbook). For a company like Macy’s that relies on import and export of goods for its business, this is an advantage and the company could establish business relationships from countries such as India and Pakistan. But this is not all. The country is one of the few in the world that can have access (tariff-free) to Canada, Australia, Japan and the European Union- a situation very conducive for businessmen to invest. It helps that Bangladesh also boasts of low energy costs. Using “green compressed natural gas” is less costly in this country compared to others, by at least 20 % (Bangladesh Investment Handbook). From this, it is clear that Bangladesh could be a gold mine for businessmen if only they were brave enough to take the first step in investing. Companies such as Macy’s would be able to incur huge savings because of tariff-free transactions- a benefit that Bangladesh enjoys, unlike others. Labor Conditions In the introduction of this paper, Anderson et al. mentioned that developing countries have the problem of having a pool of unskilled workers and this is one of the major challenges faced by any company, or by one intending to put up a company. As a developing country, this is a problem for Bangladesh. But at the same time, the Bangladeshi workforce is also one to be reckoned with as labor costs in other developing countries have risen. In China for instance, the rise in costs to be paid to the Chinese workers has resulted in many businessmen having to turn to cheaper alternatives, such as Bangladesh. In a factory in China for instance, the salaries of Chinese workers (who work in factories) now range to $400 to $500 a month per employee. On the other hand, Bangladeshi factory workers only charge around $70 to $100 a month (Anbarasan). Undeniably, cheap labor has been one of the reasons why international companies such as Wal-Mart, Marks & Spencer, Carrefour and JC Penney have tapped into the Bangladeshi workforce as a major source for the clothes that these companies sell to their consumers all around the world (Anbarasan). Clearly, the fact that such international companies patronize Bangladeshi goods and services is a positive development for the country, economically-speaking. Because of this, 3.5 million Bangladeshis are employed in factories (Anbarasan), which is always better than unemployment. However, success stories do not come without problems. The following subsections shall illustrate the challenges that would be faced by any businessman seeking to do business in the area. These businessmen have to consider the safety conditions in a working environment, the labor laws that directly and indirectly affect employment and any business activity, and the abundance or the lack of workers to do the work required to be done. Safety and Fairness While the foreigners continue to make use of Bangladesh’s cheap labor and use their garments factory for their stores abroad, the workers complain about poor labor conditions. One of the major issues to address is the safety of these workers, especially in light of the devastating fire that took place in a local factory in November 2012. In that fire, one hundred workers died, and it was reported that three factory supervisors were arrested because it was alleged that they were the ones who ordered that the workers should remain in the building (BBC News Business). According to news reports, the building where the fire took place was a venue for disaster with its “sealed exits, blocked stairwells, lack of fire-fighting equipment or fire alarms, failure to post exit signs or light stairwells, poor wiring and lack of evacuation plans” (Nolen and Boy). From such news, it can be inferred that this is not the only factory that does not care for the safety of its workers. What with the laborers complaining of the poor labor conditions, one can only imagine just how lives are put at risk because of the lack of government regulations and rules and the lack of implementation of the same. Businessmen who intend to put up a business in the country should keep such things in mind- that they should always see to it that their laborers are not only safe, but are happy as well. In the long run, less costs will be incurred. It seems that the foreign companies are blinded by cheap labor to the extent that they fail to see the value in their human resource pool. There are rallies and strikes because of the lack of care on the part of these employers. To Labor Laws While businessmen may think positively about the low wages paid to the Bangladeshi workers, the workers themselves are not happy with their current labor conditions and what they are paid for their work. It was reported that there has been an increase in labor protests among the Bangladeshi workforce because of the poor work conditions and insufficient wages. The workers themselves, who take part in such protests have stated that workers in factories “are among the lowest paid in the world” especially in the garments and textiles industry (Anbarasan). The legal system of Bangladesh is based on English law and while the latter is supposedly clear and consistent, its application on Bangladeshi soil is anything but. The legal system is “extremely slow and expensive,” and corruption in the country is also rampant, especially in the courts (D & B Country Report 38). I feel that such legal problems are in need of legislative action. Stricter rules and regulations must be implemented if the Bangladesh government intends to attract investors to their shores at all. The fact that the legal system is slow and expensive means that the enforcement of contracts is of no easy task. This is unfortunate because contracts make up all business transactions and a typical foreign businessman would not feel encouraged by a business environment that hampers the consummation and fulfillment of such contracts. Labor conditions are obviously included in such problems. If the employer and employee alike are not able to get their side of the bargain under a contract and the government does not aid them in this process, then it is expected that businessmen would not even bother to hire Bangladeshi workers. At the same time, the employees would not also bother to take on jobs which they feel is indirectly proportionate to the work that they put in. Before embarking on their business endeavor in such a developing country, Macy’s should first see to it that they follow all the labor rules according to Bangladeshi law. While this is quite obvious, not all foreign companies can boast of strict compliance with such laws. What a new company wanting to do business in a foreign country should work on is to establish ties with the local government of the said foreign country. This way, penetrating the market would not be too difficult. With the government’s support, business operations can be conducted faster. Further, Macy’s should also see to it that they are able to satisfy their employees in terms of the conditions and benefits offered to them. Once the government sees the sincerity in the company’s efforts to provide employment and help the local employees, then it would also encourage the government to aid the company in establishing itself in the local community. Availability of Skilled and Unskilled Workers According to Keller (qtd. in Tybout 15), it is not unusual to expect that the majority of workers are individuals who have only finished primary education. Most of the workers who apply for a job barely finished secondary education, or have never had the same at all. Because of this, there is obviously a lack of skilled workers to take on more difficult jobs, and this affects the kind of products and services produced or offered by a company. For instance, if Bangladesh were to have few or no technicians and scientists, this would affect “the mix of goods manufactured and the factor proportions used to produce them.” Researchers believe that despite the “developing” stage that a developing country may be in, it is possible for it to move to the next level, depending on how well the subject country and its people are able to adapt to modern technology. Countries such as China, Korea and Taiwan were able to cope with the increasing number of investors in their countries because of their ability to accept and absorb newly acquired knowledge about technology. When this happened, these countries were able to experience “accelerated growth” (Naude et al. 3). Bangladesh can exhibit the same kind of growth if its people would also be open to new forms of technology. But what is even more important than this would be the kind of training that can be offered to the locals so they can familiarize themselves with the technology. It must be remembered that not a lot of Bangladeshis are able to finish secondary school, and this fact could delay development. It would therefore be of an advantage for a company to first assess the educational level of their potential workforce, and how they can invest their resources in order to cope with the problem. While training employees is a challenge, it is not impossible. And with the majority of Bangladeshis eager to work and learn, there is a likely chance that the Bangladeshi workforce would be a worthwhile investment. A company like Macy’s should thus see to it that their potential employees undergo intensive training before being actually being made to work. What with the increasing developments of technology, the management of the company should reform their training modules to include working with new forms of technology. This way, a developing country such as Bangladesh, would also experience “accelerated growth.” Conclusions and Recommendations From the information gathered, it is clear that Bangladesh could be a good place to invest in. Money can be found amidst the masses, as long as the foreign company looks past the country’s legal problems, unfavorable physical environment, frequent flooding and lack of infrastructure. It all depends on how the company decides to allocate its resources in order to get the most out of their investment. From my research, one of the biggest problems to be faced by a company such as Macy’s would be the lack of education that characterizes most Bangladeshis. The labor is indeed cheap, but the employees are stuck doing a job which is limited to the conveyor belt. Most of them are factory workers and businessmen may have to provide employees of their own to do white collar work. Clearly, Macy’s should not expect to hire a lot of Bangladeshis to do white collar work. The low literacy rate of Bangladeshis also entail that businessmen have to invest a significant amount of their resources on training their workers so they can cope with the job requirements. Fortunately, since Macy’s deals with garments, literate workers are not really necessary, therefore making Bangladesh a promising business hub for garments supply. When it comes to providing for consumers on the other hand, Should Macy’s push forth with a plan to establish a factory or office in the country, the company should also invest in infrastructure to make sure that their workers are always safe. The recent 2012 factory fire that claimed the lives of around a hundred Bangladeshi laborers was an example of a negligent employer. Coincidentally, the factory was involved in the supply of garments to foreign employers such as Wal-Mart. Macy’s should therefore see to it that it would offer its employees with better and safer conditions. To prevent employer-employee problems and to provide satisfactory labor conditions, I feel that the government should intervene and impose stricter rules and regulations on foreign investors before they even attempt to invest. Such rules and regulations should cover increases in salaries, safer working conditions, equality among employees and the condition of providing adequate training and education for the employees by the employer. Macy’s, as a foreign company, aiming to establish business in the country, should coordinate with such government organizations and agencies to ensure that they are establishing their business according to the laws of the land and with the approval of the local government and its community. By doing this, both employee and employer win, as such improvements bring growth and development. Less costs are incurred in the long run as well. From the surface level, it seems that investing in such a developing country and its people is a lot of work. There is also a need for businessmen to understand the way of life of the locals, their culture and religion which has a direct effect on how the business shall be conducted. However, such factors are a small price to pay for the benefits that businessmen can acquire from a developing country that is rich in agricultural and natural resources in addition to a competent labor force. By investing in Bangladesh, Macy’s can help improve the lives of everyone in this country by providing jobs, products and services to an unfamiliar consumer market. This should be the ultimate goal of every business, for developed countries and even more so for developing countries. References Anbarasan, Ethirajan. “Bangladesh Clothing Industry Struggles with Less Pliable Workforce.” BBC News. 17 July 2012. Web. 1 December 2012. < http://www.bbc.co.uk/news/business-18719078> Anbarasan, Ethirajan. “Chinese Factories Turn to Bangladesh as Labour Costs Rise.” BBC News Business. 29 August 2012. 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Kwintessential. “Bangladesh- Language, Culture, Customs and Etiquette.” Web. 1 December 2012. < http://www.kwintessential.co.uk/resources/global-etiquette/bangladesh.html> Naude, Wim, Szirmai, Adam and Goedhuys, Micheline. “Innovation and Entrepreneurship in Developing Countries.” Policy Brief. United Nations University. 2011: 1-8. Web. 1 December 2012. Nolen, Stephanie and Boy, Pinaki. “Bangladesh Factory where 110 Died in Fire was Repeatedly Cited by Safety Auditors.” The Globe and Mail. 27 November 2012. Web. 1 December 2012. Tybout, James. “Manufacturing Firms in Developing Countries: How Well do they Do and Why?”Journal of Economic Literature. 2000: 11-44. Web. 1 December 2012. Read More