Crisis at Footwear International 5 pages

Crisis at Footwear International

Case Summary

A multinational shoe manufacturing company has been accused of deliberately designing a shoe with an insole that is offensive to Muslims. Footwear International consists of a number of companies that are semi-autonomous with regard to operations, and are governed by boards of directors that include local business community members. The Footwear International company in Bangladesh experienced severe criticism from local activist student groups who interpreted the design of an insole to include the name of Allah. Further, the students charged the manufacturing company of being owned and financed by Jews, and somehow linked the entire episode to Salman Rushdie. The designer of the shoe — a devout Bengali Muslim who does not speak or read Arabic — declared that the pattern integrated into the insole design was inspired by Chinese temple bells that she purchased. Further, the insole design had been considered and approved for inclusion in the manufacturing by the designer’s supervisor.

Issues. The primary issues related to the footwear design crisis in Bangladesh are as follows:

The student protest escalated into a criminal charge under Section 295 of the Bangladesh Criminal Code which considers “deliberate and malicious acts intended to outrage religious feelings of any class by insulting its religion or religious believers unlawful.”

The students’ proclamation accuses Jews of being behind the purposeful and audacious act, thereby rendering the situation ineligible for any compromise.

Inflammatory remarks by the student groups appear to be focused on turning public sentiment against Footwear International by irrationally linking the presumed offense to Muslims in Afghanistan and Palestine who have given their lives in what radical Muslims perceive to be a defense of the sanctity of Islam.

Footwear International is one of the few multinational companies in Bangladesh with a long history of providing jobs in the country and the prospect of significantly growing its market share, which will provide a strong boost to the manufacturing industry and economic stability of Bangladesh.

The managers of the production, marketing, and sales departments of Footwear International and the managing director of the company are the only foreigners working for the company at its Bangladesh presence.

Impact of the Incident Business Environment

Although the case study does not provide information beyond the initial events that led to — and are contributing to — a cultural crisis surrounding the manufacture of Footwear International products in Bangladesh, substantive potential for the incident to escalate exists. The Prime Minister had apparently accepted the accusations published in the fundamentalist newspaper — the Meillat — at face value and, showing careless disregard for the newspaper’s ties to an opposition political party, labeled the incident an “unforgivable crime.”

The rapid escalation of the crisis, coupled with the flagrant and irrational acceptance of improbable associations being formulated by the student activist groups, the fundamentalist newspaper, and the prominent citizens in the country, provides a platform for banning Footwear International’s products. Should such a ban occur, the potential for shutting down the operations of the tannery and the shoe manufacturing plants is substantial. Other countries that have shown extreme nationalism and have cut ties with multinational firms have suffered egregious economic damage as a result. An important aspect of this incident is that a great number of Bangladesh citizens are employed by Footwear International whose jobs will be jeopardized or terminated if the incident is permitted to escalate to the point of driving the company out of business in Bangladesh. It is not simply a matter of carrying on without the foreign directors and managing director because the foreign investment that realized the development of Footwear International in Bangladesh could well pull its support.

Opportunities & Threats

The opportunities for Footwear International include a way forward that enables the company to articulate the benefits that the company brings to Bangladesh. This is important because the company’s detractors are not discussing the many benefits created by having a foreign investment in Bangladesh of the size and caliber of Footwear International. The company has an opportunity to continue to educate its workers and local “partners” about the benefits of utilizing foreign investment to develop jobs and businesses, and then to insist that the labor and much of the management is carried out by local people.

The threats to Footwear International include the dissolution of the company, with the possibility of not being able to recoup any of the investors’ monies — particularly funds that have been used to develop the physical plant and improvements to the land on which the tannery and the shoe manufacturing plant are sited. Further, the Officers and Directors of Footwear International in Bangladesh potentially face criminal charges for actions they did not take and for which they have been falsely accused.

Root Causes of Threats

The primary root causes of threats are discussed below and are listed here by way of introduction:

Government-sponsored nationalization of industries that is only gradually giving way to market competition;

Bangladesh is dominated by Muslims at a time when fundamental and radical Islamists are making their presence increasingly known, and who are frequently associated with terrorist activity.

Following the war for independence in 1971, Bangladesh began to nationalize most of its industrial sector, which resulted in widespread economic stagnation and inefficiencies (“State Department,” 2010). Private sector participation in the market economy began to influence economic development in late in 1975 (“State Department,” 2010). Major portions of the banking and jute production sectors still remain under governmental control (“State Department,” 2010). The privatization hold on industrial development, with its attendant inefficiencies, continues to be threat to economic development in Bangladesh (“State Department,” 2010). The country’s economic growth is also impacted by population growth, limited capital, and a continued resistance to development of Bangladesh’s rich natural resources (“State Department,” 2010). By the mid-1980s, limited signs of progress were being seen as Bangladesh’s economic policies were directed at denationalizing public industries, instituting more budgetary discipline, and encouraging both private investment and private enterprise (“State Department,” 2010). These turn-arounds were seen just prior to the incident in 1989 at Footwear International (“State Department,” 2010).

Diversity is not deep in Bangladesh, a situation which can contribute to conflict between the majority and the minority groups as the majority strives to eradicate any diversity that is viewed as a threat to their beliefs, their changes for any level of prosperity, or their power (“State Department,” 2010). Ethnic groups in Bangladesh consist of a 98% Bengali majority and 2% of non-Bengali Muslims and tribal groups (“State Department,” 2010). The religions practiced in Bangladesh include Islam (with 83% of the county considers themselves to be Muslim, Hindu — which stands at about 16% — Christians, who make up 0.3%, and Buddhists who add about 0.6% to the overall mix (“State Department,” 2010).

Mitigating Strategies

Research has been undertaken recently with an aim toward in-depth study of economic development in countries that have been characterized by political volatility and instability (Husain, 2009). One variable that comes under scrutiny is the impact and the opportunity provided by periods of stable, albeit, authoritarian regimes with regard to national reform and long-term economic performance (Husain, 2009). Another variable that may have important long-term impacts is the existence of an association with democratic world powers (Husain, 2009).

While it is important to avoid making spurious correlations between economic growth and authoritarian regimes, there is evidence that countries do experience a penalty in the aftermath of non-democratic regimes (Husain, 2009). These penalties often take the form of severe economic disruption, a complete lack of accountability, breakdowns in important institutions, and irrational policy reversals (Husain, 2009). Though it may seem entirely skewed, there is considerable “evidence” that “an orderly transition of power at regular intervals through a predictable democratic process is the least damaging means of keeping the economy moving on an even keel” (Husain, 2009). Certainly, the political realm is beyond the realm of influence of the managing director of Footwear International, but this does not preclude making efforts to align the company with the more democratic entities in Bangladesh, some of whom will, in fact, be Muslim.

An informed Prime Minister could be a “friend to the company” if the official position could be reversed to favor Footwear International. The managing director could seize the opportunity to capitalize on networks developed in Bangladesh over the years, asking for protocol to support communication with those who lead the country. It is a time to reach out to those who have a clear understanding of the importance of encouraging foreign investment in the country — particularly after the departure of the a major portion of the corpus of non-Bengali financier and managerial class in the post war for independence years — and to point to the mutually beneficial and respectful relationship that has characterized the development years for Footwear International in Bangladesh.

References

Bangladesh. (2011). CIA World Fact Book. Retrieved https://www.cia.gov/library / publications/the-world-factbook/geos/bg.html

People’s Republic of Bangladesh. (2010). Department of State. Retrieved http://www.state.gov/r/pa/ei/bgn/3452.htm

Husain, I. (2009, Fall / Winter). Pakistan & Afghanistan: Domestic Pressures and Regional Threats: The Role of Politics in Pakistan’s Economy. Journal of International Affairs, 63 (1), 1-18. Retrieved http://jia.sipa.columbia.edu/role-politics-pakistans-economy-0


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