From sweatshops to corporate social responsibility

From the beginning the owners of MAS Holdings rejected every element of the sweatshop model that prevails in much of the Asian textile industry.

by Jonathan Story
Last Updated: 23 Jul 2013

Unlike many companies of the sector in Sri Lanka, the Amalean brothers who headed the company offered their workers exceptional working conditions compared to the average low-cost Asian manufacturers. But to what extent is corporate social responsibility compatible with increasing competition in a post textile quota era. What kind of differentiation enables companies to compete with China's scale and production efficiency?

Leadership, corporate culture, joint ventures and alliances, integrating Japanese manufacturing standards; those are some of the areas looked at in this case study by Noshua Watson, INSEAD PhD candidate, under the supervision of Jonathan Story, professor of international political economy at INSEAD and Shell Fellow of Economic Transformation.

MAS Holdings' US$570 million intimate apparel business supplies the biggest brands in lingerie and sportswear: Victoria's Secret, Gap, Inc, Nike, Marks and Spenser, Speedo or Triumph. It is one of Sri Lanka's largest apparel manufacturers, employing more than 34,000 people in 21 factories across 10 countries. Each year, MAS manufactures 44 million bras.

Rather then forcing the 92% female workforce to relocate to the city away from their families, MAS built its plants in the rural villages. Medical service and canteen for meals are available for staff, as well as internal training programs. The company has even won American awards for excellence in Corporate Social Responsibility.

Taking into consideration the fact that higher value-added activities in the apparel industry are design, marketing and developing new materials, MAS developed its own brand to move forward in the value chain, called "Go Beyond". The phrase does not just emphasise the CSR dimension of MAS, but also the idea of going "beyond" conventional strategies to integrate the market and political dimensions of global business in corporate policy.

On the market side, the author raises a range of issues facing MAS: the competitors, the mechanisms in the global system favouring best practice, exchange rate alignments, labour costs versus productivity, the importance of branding to the big names and of course, the end of the quotas in the WTO.

From a political standpoint, this case also shows how MAS is embedded in the Sri Lankan context. How did this context shape the company and the MAS leadership? MAS' treatment of women has always been part of the corporate ethos for good business reasons (the way to compete on global markets is not only via labour costs but via productivity).

The "Go Beyond" policy is using CSR to differentiate the company to enable access to the US and EU markets. In this respect, the weight of the "Stop-China" lobby in Washington is very strong--and of course one of its main arguments relates to stories of labour abuses in China-based operations. Sri Lanka is a small player in this global battle, but it is playing to its strengths: it's a democracy, and MAS seeks to brand Sri Lanka as a "sweatshop-free zone" to gain the support of the big brand names worried about public perceptions and fashioned by the NGOs which monitor them.

MAS's constant concern focuses on a key point: does the final customer who buys the bra mind whether it has been made in a sweatshop or not, or is he/she just looking at price?

INSEAD 2006

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