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Etch-A-Sketch Ethics

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on 27 March 2014

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Transcript of Etch-A-Sketch Ethics

Etch-A-Sketch Ethics
Introduction
Question 1
Ohio Art Company (OAC)
- American company

- Created in 1908

- Producer of one of the top-selling toys of all time

- Most of its manufacturing was based in Bryan (USA)

- More than 100 million of the familiar drawing toy has been sold since its creation

- Employees have a strong lifelong relationship towards the company
Context
- In 1990: Trouble time for the toy's maker

- Loss of profits for 2 years

- In 2000: Strategic decision made to outsource the production to China

- Outsourcing process has been expanding little by little

- Kin Ki: Chinese manufacturer


Why such a decision?
Was it ethical of the Ohio Art Company to move production to China?
The economic and social costs and benefits of this decision.
Question 2: Assuming that the NYT reporting was accurate, it is ethical for the OAC to continue working with KIN KI ?
Steps that the CEO of OAC can take to make sure they do not find the company profiled in the NYT again as an enterprise that benefits from sweatshop labor.
Conclusion
- Nowadays outsourcing is a huge problem for companies

- In most cases, the subcontractor engages in unethical activities

- There is still CSR for the company

- OAC should have some preventive actions

7921IBA International Business
Griffith University
3141 - 27/03/2014



- To keep its cost down because of the competition (Walmart - Toys R us)

- Objective: get the cost down under 10 dollars

- How: Make savings from

--> Lower wages (1500D/month to 75D in China)
--> Lower overhead costs for plant
--> Lower maintenance cost
--> Electricity and payroll
--> Avoiding the costs of health benefits

According to Friedman doctrine, the company is acting in an ethical way.
Objectives:
- make profit to stay competitive
- Obligations for the stakeholders to maintain their business
- Would have gone bankrupt (both cases the impact on the community would have been the same



What would have happened if production had not been moved?

In China, the company behave unethically:

- Awful working conditions
-Overtime salary + tremendous amount of working hours
-They are breaking the chinese law
-Lower wages: under the legal standard
-Basic human rights arent respected (freedom of going on strike)

Moral obligations toward its employees seen as a family --> Community
Interest

--> Apparently the CEO of Etch-A Sketch didnt know about all
the labor problems going there -> True or false?

They were not responsible in their shift -> they are just
outsourcing everything, without paying attention to
what is going on there.

--> Would have done some previous
research or ongoing monitoring


HOWEVER
2 possible cases: Whether

(1) Find alternative ways of reducing the costs : e.g operating costs

(2) Unable to reduce the costs --> not being competitive --> unable to generate profit to continue business --> Go bankrupt

- Mostly teenage migrants

- Work long hours for 40% less than the company claims

- Paid 24 cents/hours -> below the legal minimum wage of 33 cents/hours

- Most do not have pensions, medical benefits or employment contracts

- production start at 7.30am till 10 pm (break for lunch and dinner)
- A workweek of seven 12 hours days = 84 hours a week (the double -> allowed 40 hours a week) while local rules allow for no more than 32 hours of overtime.

- Overtime must be paid 1.5 times the standard hourly wage but the company pays only 1.3 times

- Dormitories: sleep head to toe in tiny rooms

- Basic human rights arent respected ( 2 workers went on strike demanding higher wages and they had been dismissing)
BUT ALSO
- Contractual safeguards

- Threaten to work with Kin Ki's competitors

- Engage in active monitoring of working condition in China

- Directly invest in project to enhance the living/working
environment of Chinese workers


Question 3
Ethics
Etch-A Sketch Ethics

Group Case Study Presentation and Discussion
Phila s2909429
Amel s2930844
Mandeep s2917392
Brydie s2638987
Full transcript