Question

In april of 2013, the rana plaza building in bangladesh collapses, killing over 1100 people and injuring many more. Ay least 5 garments factories were located in the upper floors of this building, supplying international brands, such as JC penny, The Children's place and Walmart.

(a) According to above scnerio the multinational corporations have quality risk, price risk, progress risk associated with global sourcing of garments. Question1. what strategies would you recommended to migtate each of the risks outlined in part a.

Answer 1

Strategies to mitigate the risks mentioned;
(A) Price Risk-To avoid the price risk associated with sourcing garments globally, company can;
-conduct a proper research on the market tastes and demands, so as to avoid losses led by any frequent fluctuations in the prices and demand.
-keep in mind the existing policies and attitude of government towards the MNCs, because there can be a case when the newly elected government in an attempt to flourish their local garment industry imposes heavy taxes on the foreign companies, leading to heavy losses in revenues and reduced profitability.

(B) Progress Risk- As mentioned in the Bangladesh example that the factories also suffered due to the collapse of building, to mitigate the risk associated with progress (which is hampered due to heavy losses) they can;
- conduct proper study regarding the safety and suitability of area in which they plan to locate their factory (shouldn’t be prone to disasters like earthquake, floods).
- use insurance companies services to insure their factory and units so as to avoid heavy losses in case of natural calamities and disasters.

(C) Quality Risk- To avoid the quality risk associated with sourcing garments globally, company can;
-train local labors so they learn to work as per the quality requirements of the company and save resources.
-hire quality experts to ensure that the quality is in check because poor quality in global markets will have an impact on the revenues as well as the reputation of the company .

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