PESTLE, PORTER, SWOT, VRIN, Value Chain Analysis for Flipkart & Walmart
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Lecture8b1.pptxSM9632 Contemporary Issues in International Business
Lecture 8a: Modern-day Slavery and IB
Dr Ziad Elsahn
1
What is Modern-day Slavery?
The reasons behind the prevalence of Modern slavery.
Its relation to IB: Global Value (supply) Chains
How to combat Modern-day slavery
Who’s responsible for tackling this phenomena.
What are we doing here today?
This lecture is related to Q4 in your assessment. It will further your understanding on what is responsible FDI and its impact on local economies.
How is this lecture related to your assessment?
What is Modern-day Slavery?
“Modern slavery is an umbrella term that includes slavery and slavery-like practices, forced labor, bonded labor, involuntary servitude, human trafficking, and other forms of exploitation (ILO, Walk Free Foundation & IOM, 2017)” (Michailova & Stringer, 2018, p. 7)
“Modern slavery is founded on the commodification and dehumanization of labor—people are forced to work under the threat of violence, for little or no pay, and are treated as a commodity by their employer, with restrictions placed on their freedom of movement. The economic benefits obtained through such exploitation is a key reason why slavery continues to flourish. While the legal ownership of a slave is prohibited under international law, enslavement can be contractual in nature, with the exploiter controlling the individual through, for example, physical and psychological means.” (Michailova & Stringer, 2018, p. 7)
In 2016, 16 Million victims of forced labor in the private economy (ILO et al., 2017).
What is Modern Slavery?
“An essential part of an iPhone battery is the mineral cobalt, which is mined by “workers” from the Democratic Republic of Congo. The quotation marks are not accidental—would you call people who scrape and sift mud for over 12 hours a day, for just $1-2 a day, “workers”? We call them slaves. These slaves, some as young as 7 years old, work in intense heat without any protective gear. They have no shelter on the exposed mountain tops, are often beaten by security guards, and are forced to pay “fines” by police and other officials. Congo Dongfang Mining International, a wholly owned subsidiary of Zhejiang Huayou Ltd. (ZHL), is the largest buyer of cobalt in the area.
ZHL supplies multinational corporations (MNCs) such as Apple, Microsoft, and Samsung. According to Amnesty International and African Research Watch (Afrewatch) in their 2016 report entitled “This is What We Die For” none of the MNCs could fully verify where the cobalt in their products comes from because of the complex nature of the supply chain.” (Michailova & Stringer, 2018, p. 7)
Source: Daniel (11) carries a bag of cobalt on his back. He works in a mine ferrying sacks of cobalt to a depot. Image by Sebastian Meyer. Democratic Republic of Congo, 2018. Photographing Congo's Cobalt Empire (Pulitzer Center )
Source: Cobalt buyer Xu Bin Liu, 30, from Hebei province in China, tests the purity of cobalt he’s buying at the Musompo market on the outskirts of Kolwezi. Image by Sebastian Meyer. Democratic Republic of Congo, 2018.Photographing Congo's Cobalt Empire (Pulitzer Center )
Cobalt Mining In DRC
““Workers” in Bangladesh make school uniforms and clothes for Tesco, Asda, Aldi, and other MNCs. Many workers are, in fact, slaves—again, how else would one describe people who work 12-hour shifts, about 74 hours a week, and are paid only 25 pence ($0.36) an hour? They live in abject conditions. Aldi has committed to a full investigation into the allegations. A Tesco spokeswoman stated: “We work closely with our suppliers to ensure good working conditions and we know they pay above market averages. We will continue to work with suppliers to improve wages and would take firm action against any kind of abuse or under-payment” (cited in Bright, 2017).” (Michailova & Stringer, 2018, p. 7)
Clothing Industry
More prevalent in developing countries but it also exists in developed countries.
The US is considered as a destination country for forced labor in the hospitality, manufacturing and healthcare sector.
In 2016, first conviction of human trafficking in NZ
Claims about exploitation of migrant workers in the UK and Italy in the agricultural sectors which supply MNEs (Michailova & Stringer, 2018).
Only in developing Countries?
Source: Global slavery index Report 2018
Source: Global Slavery Index 2018
Weak institutions: corruption, lack of labour protection laws, internal national conflicts, autocratic regimes, governance issues, lack of basic needs.
Lack of awareness
Reasons behind the prevalence of Modern slavery
Source: Chartered Institute of Procurement and Supply
Lack of awareness among consumers: Distanciation and decoupling between production and consumption.
Lack of coordination among nation states and lack of enforcement capacity by supra-national institutions.
Global supply chains
Reasons behind the prevalence of Modern slavery
Slavery have existed for a long time, but new forms of slavery-like practices have emerged and became prevalent due to the globalisation of production.
MNEs face diverse, complex but also weaker institutional environments due to differences between national institutional arrangements and disconnection with transnational institutions.
MNEs are well positioned to exploit these differences between institutions; unlike local companies they don’t have to follow the rules of the game, but they can choose the game and sometimes even change the rules.
Because MNEs operate in fragmented and changing institutional contexts, they can be flexible and dynamic in designing and slicing-up their supply chains in a way that maximise their profits and allow them to evade stringent regulations.
“MNC supply chains typically span multiple countries and involve several layers – not only individual companies, but entire clusters and industries. Thus, “slavery can be found in any part of the chain and in any country” (Lake et al., 2016: 6), especially in supply chains which have ubiquitous subcontracting networks.” (Michailova & Stringer, 2018, p. 8)
“This is not to say that MNCs necessarily condone slavery in their supply chains, but to argue that when cost pressures are passed down the chain, subcontractors are likely to be inclined to underprice (or not pay at all for) labor.” (Michailova & Stringer, 2018, p.8)
Modern Slavery and IB: How they are related?
Global Value Chains
In the 1970s and 1980s, intra-firm trade through FDI was prevalent depending mostly on trade among subsidiaries of MNEs (Dunning & Lundan, 2008).
From the 1990s, international transactions started to shift from FDI in WOS to subcontracting and JVs (Dunning & Lundan, 2008).
The concept of Global Value (Production) Chains capture the “complex and dynamic economic networks made up of inter-firm and intra-firm relationships.” (Gereffi, 2014).
In global value chains, power can be held by lead firms or suppliers
Two broad types of Chains: Producer-driven chains, in which power is held by final-product manufacturers through capital and technology and Buyer-driven chains in which retailers and marketers exert more power through branding and marketing.
The promise of Global Value Chains
The smiling Curve: who captures the most value.
Many governments attempt to join and embed their local companies in GVC, in the hope of achieving economic and social upgrading.
But….
Upgrading
Upgrading depends on the current institutional arrangements in place and the governance structure of the GVC.
In some indsutries, companies might be captives unable to upgrade.
And even worse with the lack of institutional protection, pressures on suppliers by lead firms might lead to adopt inhumane work conditions to lower their costs.
Shared responsibility, but not equally shared!
Are Western Consumers Willing to Pay More for Apparel?
Consumers have a role, but how can they make an informed ethical decision with the lack of information on the supply chains of MNEs?
Collaboration between MNEs, NGOs and governments
“Following the identification of human rights abuses in the cobalt supply chain from the Democratic Republic of Congo, and subsequent efforts undertaken by Apple, Amnesty International considers Apple to be a leader in addressing human rights abuses in this area.” (Michailova & Stringer, 2018)
Role of governments and supra-national institutions: The UK modern slavery act 2015
Role of technology: Blockchain?
Who’s responsibility it is?
Assessment session
Next week
