Footwear International : Business Technical

• FOOTWEAR INTERNATIONAL
• BANGLADESH
• Bangladesh
• FOOTWEAR BANGLADESH
• THE INCIDENT
• THE INCIDENT
• CASE QUESTIONS

You are in John Carson's position. Analyze the situation facing Footwear, and prepare a detailed plan of action to deal with your immediate responsibilities as well as the entire situation and a long-term plan.

On Thursday, June 22, 1989, John Carlson was shown a copy of that day's Mel/tat, a well-known opposition newspaper with pro-Libyan leanings. Under the headline “Footwear's Unpardonable Audacity the writer suggested that the design on the insole of one model of sandal produced by the company included the Arabic spelling of the word Al/a/i (see Exhibit C2-2.. The story

that the design had been based on a set of Chinese temple bells that the designer had purchased in the local market. Pleased by the appearance of the bells, she had used them as the basis for a stylized design, which she submitted to her supervisor for consideration and approval (see Exhibit C2 - 3..

All the employees in the development and marketing department were Muslims. The supervisor reported that the woman who had produced the offending design was a devout Bengali Muslim who spoke and read no Arabic. The same was true of almost all the employees in the department. The supervisor confirmed to Carlson that numerous people in the department had seen the new design prior to its approval, and no one had seen any problem or raised any objection to it. Following the conversation, Carlson compared the design to the word Allah, which he had arranged to have written in Arabic (see Exhibit C2-4..

Carlson was perplexed by the article and its timing. The sandals in question were not new to the market and had not been subject to prior complaints. As he reread the translation of the Meillat article, he wondered why the Jewish reference had been made While he was reviewing the situation, Carlson was interrupted by his secretary. In an excited voice, she informed him that the prime minister was being quoted as calling the sandal incident an “unforgivable crime.” The seriousness of the incident seemed to be escalating rapidly, and Carlson wondered what he should do to try to minimize the damage.

On Thursday, June 22, 1989, John Carlson was shown a copy of that day's Mel/tat, a well-known opposition newspaper with pro-Libyan leanings. Under the headline “Footwear's Unpardonable Audacity the writer suggested that the design on the insole of one model of sandal produced by the company included the Arabic spelling of the word Al/a/i (see Exhibit C2-2.. The story that the design had been based on a set of Chinese temple bells that the designer had purchased in the local market. Pleased by the appearance of the bells, she had used them as the basis for a stylized design, which she submitted to her supervisor for consideration and approval (see Exhibit C2 - 3..

All the employees in the development and marketing department were Muslims. The supervisor reported that the woman who had produced the offending design was a devout Bengali Muslim who spoke and read no Arabic. The same was true of almost all the employees in the department. The supervisor confirmed to Carlson that numerous people in the department had seen the new design prior to its approval, and no one had seen any problem or raised any objection to it. Following the conversation, Carlson compared the design to the word Allah, which he had arranged to have written in Arabic (see Exhibit C2-4..

Carlson was perplexed by the article and its timing. The sandals in question were not new to the market and had not been subject to prior complaints. As he reread the translation of the Meillat article, he wondered why the Jewish reference had been made

Footwear became active in what was then East Bengal in the 1930s. In 1962, the first major investment took place with the construction of a footwear manufacturing facility at Tongi, an industrial town located 30 kilometers north of Dhaka. During the following years, the company expanded its presence in both conventional and unconventional ways. In 1971, the then managing director became a freedom fighter, while continuing to oversee operations. He subsequently became the only foreigner to be decorated by the government with the “Bir Protik” in

recognition of both his and the company's contribution to the independence of Bangladesh.

In 1985, Footwear Bangladesh went public and

two years later spearheaded the largest private-sector foreign investment in the country, a tannery and

footwear factory at Dhamrai. The new tannery produced leather for local Footwear needs and the export market, and the factory produced a variety of footwear for the local market.

By 1988, Footwear Bangladesh employed 1,800 employees and sold through 81 stores and 54 agencies. The company introduced approximately 300 new products a year to the market using their in- house design and development capability. Footwear managers were particularly proud of the capability of the personnel in these departments, all of whom were Bangladeshi.

Annual sales in excess of 10 million pairs of footwear gave the company 15 percent of the national market in 1988. Revenues exceeded $30 million and alter-tax profit was approximately $1 million. Financially, the company was considered a medium contributor within the Footwear organization. With a population approaching 110 million, and per capita consumption of one pair of shoes every two years, Bangladesh was perceived as offering Footwear enormous potential for growth both through consumer education and competitive pressure.

The managing director of Footwear Bangladesh ;-vas John Carlson, one of only four foreigners working for the company. The others were the managers of production, marketing, and sales. All had extensive and varied experience within the Footwear organization.

The population of Bangladesh is 85 percent Muslim, and Islam was made the official state religion in 1988. Approximately 95 percent of the population speaks Bengali, with most of the remainder speaking tribal dialects.

Bangladesh has had a turbulent history in the 20th century. Most of the country was part of the British-ruled East Bengal until 1947. In that year, it joined with Assam to become East Pakistan, a province of the newly created country of Pakistan. East Pakistan was separated from the four provinces of West Pakistan by 1,600 kilometers of Indian territory, and although the East was more populous, the national capital was established in West Pakistan. Over the following years, widespread discontent built in the East whose people felt that they received a disproportionately small amount of development funding and were under-represented in government.

Following a period of unrest starting in 1969, the Awami League, the leading political party in East Pakistan, won an overwhelming victory in local elections held in 1970. The victory promised to give the league, which was pro-independence, control in the National Assembly. To prevent that happening, the national government suspended the convening of

the Assembly indefinitely. On March 26, 1971, the Awami League proclaimed the independence of the People's Republic of Bangladesh, and civil war quickly followed. In the ensuing conflict, hundreds of thousands of refugees fled to safety across the border in India. In December, India, which supported the independence of Bangladesh, declared var, and 12 days later Pakistan surrendered. Bangladesh had won its independence, and the capital of the new country was established at Dhaka. In the years immediately following independence, industrial output declined in major industries as a result of the departure of many of the largely non-Bengali financier and managerial class.

Throughout the subsequent years, political stability proved elusive for Bangladesh. Although elections were held, stability was threatened by the terrorist tactics resorted to by opposition groups from both political extremes. Coups and countercoups, assassinations, and suspension of civil liberties became regular occurrences.

Since 1983, Bangladesh had been ruled by the self-proclaimed President General H. M. Ershad. Despite demonstrations in 1987 that led to a state of emergency being declared, Ers'had managed to retain power in elections held the following year The country remains politically volatile, however. Dozens of political parties continually maneuver for position, and alliances and coalitions are the order of the day. The principal opposition party is the Awami League, an alliance of eight political parties. Many of the parties are closely linked with so-called opposition newspapers, which promote their political positions. Strikes and demonstrations are frequent and often result from cooperation among opposition political parties, student groups, and unions.

With a population approaching 110 million in an area of 143,998 square kilometers (see Exhibit C2-1., Bangladesh is the most densely populated country in the world. It is also among the most impoverished, with a 1987 per capita gross national product of $160 and a high reliance on foreign aid. More than 41. percent of the gross domestic product is generated by agriculture, and more than 60 percent of its economically active population works in the agriculture sector. Although the land in Bangladesh is fertile, the country has a tropical monsoon climate and suffers from the ravages of periodic cyclones. In 1988, the country experienced the worst floods in recorded history.

Footwear International is a multinational manufacturer and marketer of footwear. Operations span the globe and include more than 83 companies in 70 countries. These include shoe factories, tanneries, engineering plants producing shoe machinery and moulds, product development studios, hosiery factories, quality control laboratories, and approximately 6,300 retail stores and 50,000 independent retailers.

Footwear employs more than 67,000 people and produces and sells in excess of 270 million pairs of shoes every year. The head office acts as a service center and is staffed with specialists drawn from all over the world. These specialists, in areas such as marketing, retailing, product development, communications, store design, electronic data processing, and business administration, travel for much of the

year to share their expertise with the various companies. Training and technical education, offered through company-run colleges and the training facility at headquarters, provide the latest skills to employees from around the world.

Although Footwear requires standardization in technology and the design of facilities, it also encourages a high degree of decentralization and autonoiny in its operations. The companies are virtually self-governing, which means their allegiance belongs to the countries in which they operate. Each is answerable to a board of directors that includes representatives front the local business community. The concept of “partnership” at the local level has made the company welcome internationally and has allowed it to operate successfully in countries where other multinationals have been unable to survive.