Article
A Business Model for Bangladesh
The death of over [1100] people in the collapse of Rana Plaza, a building with garment factories in Bangladesh, spurred widespread outrage...[NGOs] calculated that it would cost about $600 million per year to bring all Bangladeshi factories up to Western standards...[which would be] about a 3.3% cost increase for garments...[E]colabeling...[can] lead to price premiums of 10-50%...[One] can expect similar price increases with "safe-workplace labeling". What holds back improvements is thus not...cost concerns, but the ability to ensure compliance...[The] answer...lies in the novel business model pioneered by...Li & Fung...[which is] the key link in the sourcing practices of some of the world's best known companies. This firm...[sources] "better" in places like Bangladesh than their customers can by going there directly...An intermediary...that...[ensured] workplace safety could both bring the benefits of free trade...and improve workplace conditions without punitive compliance costs or brand damage for the buyer.