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32 P ART I Strategic Human Resource Management CASE STUDY CAN KNIGHTS APPAREL SATISFY ALL OF ITS STAKEHOLDERS AND SURVIVE?

Seminar One Case Study: “Can Knights Apparel Satisfy all of its Stakeholders and Survive?” (pages 32-33)
(Submit to Assignment Link) Day Six
Students will complete the assigned case study as a way to increase learning through application of course material in complex, real world situations. To complete the case study the student will:

• Identify and define the central dilemma presented in the case
• Select and gather pertinent areas of consideration, and identify critical data and stakeholders (if you need to make assumptions about any of the facts in the case, be sure to specify these assumptions in your analysis)
• Gather additional information and research as necessary
• Identify and investigate all appropriate possibilities to resolve the central issues, and present at least three different options
• Select and present the best solution and include support for the decision that recognizes positions of all the stakeholders
• Describe how to implement the best solution and include strategies to address the known challenges. Also include the likely implications of the selected solution.
32 PART I Strategic Human Resource Management CASE STUDY CAN KNIGHTS APPAREL SATISFY ALL OF ITS STAKEHOLDERS AND SURVIVE? 53 Imagine how changed your life would be if you woke up one day and could no longer see the vibrant blue sky or your child's face; your once colorful world had been taken from you and turned to darkness. That is exactly what happened to Joe Bozich, CEO of Knights Apparel, when he suddenly lost his vision due to the unexpected onset of multiple sclerosis. Certainly, the founder of the leading supplier of college-logo apparel was disturbed by his situation. In response to his experi- ence, Bozich reflected, "While we had the resources for medical help, I thought of all the families that didn't. I started thinking that I wanted to do something more important with my busi- ness than worry just about winning market share. That seemed kind of empty after what I've been through. I wanted to find a way to use my business to impact people that it touched on a daily basis." Fortunately, Bozich's vision made a full recovery. And the experience left him with an urge to evaluate what was really important and what he believed to be right Knights Apparel is a privately held company based in Spartanburg, South Carolina, and contracts with 30 factories worldwide. Its apparel deals with scores of universities that have allowed it to surpass Nike as the number-one college supplier of college-logo apparel. When Joe Bozich met with Scott Nova, the Executive Director of the Worker Rights Consortium, a group of 186 universities that press factories making college logo apparel to treat work- ers fairly, his goal was to address stamping out worker abuses and fair treatment in apparel factories. He even decided to open a model factory. At Nova's urging, Bozich chose the de- pressed Dominican Republic community of Alta Gracia to set his example. Gathering Information Alta Gracia had been home to a Korean-owned factory that made baseball caps for Nike and Reebok. When that factory closed in 2007,1,200 employees were displaced. Cooperating closely with the Workers Rights Consortium, Bozich reopened the Alta Gracia factory with the explicit goal of paying workers a premium wage. Although risky in many ways, this was also experimental in that it acted as a response to appeals from myriad university officials and student activists that the gar- ment industry stop using poverty-wage sweatshops. The Alta Gracia factory has 120 employees. Most apparel factories worldwide still pay the minimum wage or only a fraction above, which is barely enough to lift families out of poverty. For example, the minimum wage is 15 cents an hour in Bangladesh and around 85 cents in many cities in China. The minimum wage is around $147 a month (85 cents an hour) in the Dominican Republic's free trade zone, where most of its apparel factories are located. The Alta Gracia factory pays $2.83 an hour. Developing Agendas Bozich invested $500,000 in renovations to overhaul the fac- tory with pricey new equipment and furniture. He brought in bright lighting, five sewing lines, and pricey ergonomic chairs, which many seamstresses thought were for the managers. The Alta Gracia factory has gone further than its competitors by embracing higher wages and unionization. In a community where the minimum wage is not sufficient to support a family, Knights Apparel is a pioneer because it pays a "living wage." In this case, the Alta Gracia factory has pledged to pay employees nearly three and half times the average wage of the country's apparel workers. Implementing Agendas Knights Apparel faces many hurdles as a result of reopening the Alta Gracia factory. There is a question of whether students, alumni, and sports fans will be willing to pay $18 for the fac- tory's T-shirts, the same price as premium brands like Nike and Adidas, to sustain the plant and its generous wages. Knights Apparel's biggest problem, however, is-self imposed: How will it compete with other apparel makers such as Nike and Adidas when its wages are so much higher? While there are consum- ers who really care and will buy apparel at a premium price, there are also those who say they care but then just want value. According to Bozich, the factory's cost will be $4.80 a T-shirt—80 cents (or 20 percent) more than if it paid minimum wage. Knights Apparel will absorb a lower-than-usual profit margin, he said, without asking retailers to pay more at whole- sale, and plans to sell the T-shirts for $8 wholesale, with most retailers marking them up to $18. Marketing and branding will be the key elements for suc- cess of the Alta Gracia factory. Therefore, it helps that Knights Apparel has'irany universities backing the project Duke placed a large order, ran full-page ads in the campus newspaper, put postcards in student mailboxes, and placed promotional signs on light poles. Giant college bookstore operators Barnes & Noble and Follett sold Alta Gracia's T-shirts and sweats at bookstores on campuses. Also, to promote its gear, Knights Ap- parel prepared a video to be shown at bookstores and a Web
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This question was asked on Jan 05, 2013.

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