Business Ethics: Case of Gucci
Project management in any company needs effective planning and execution. Gucci is managing rapid expansion in the global market under effective managerial techniques and business planning. The company is involved in key managerial processes and implemented a labor model under which employment and recruitment has become easy. Effective workplace requirements involve employees into better working conditions while focusing on mutual cooperation with stakeholders. Company is using responsible workers to accomplish its targets. For example, labor dispatch arrangement service is aligned on managing costs and contractual responsibilities by Gucci in Chinese city Shanghai. This research report focuses on key business considerations by Gucci in China. Company analysis explores its background, history, core values and ethical culture.
This report also includes major stakeholders of Gucci that are involved in project completion process. A stakeholder map is created to know about the action plan and engagement of employees. Gucci has economic, legal, ethical corporate social responsibilities. CSR serves the company in ethical way because it has a specific place to monitor corporate affairs. The report is divided into five main parts, first is about company analysis, its background and history. The second part is about stakeholders’ analysis that has shown stakeholders map. The third part discusses CSR analysis like responsibilities to shareholders. The fourth part is about issues and problems, for instance ethical problems in Gucci, causes and its symptoms, key stakeholders involved and consequences. In the last part, evaluation of company is carried out by specific actions that managers can take.
Part one-Company Analysis
Guccio Gucci was a fashion designer and businessman from Italy; he founded The Fashion House of Gucci in 1921. The House of Gucci, also known as Gucci is a luxury fashion and leather products brand in Italy, and as well as around the world, it is a branch of Gucci Group, Kerning, a French investment company, owns it. In 2008 Gucci generated revenue of 4.2 billion Euros worldwide. Also, Gucci was ranked at 41st position in the Top 100 Brands worldwide in 2009. Gucci is still the most significant fashion brand in Italy (Annual Report, M. 2019).
Gucci has presented high quality, leading designer goods to its consumers successfully, unlike several other brands in the market. Throughout these years, the brand has attained overwhelming success levels with each new product released. By 2005, it has started 207 outlets around the globe(Czerniachowicz, 2017). Further to this, Gucci derived 278 company-operated outlets by the end of 2009, with wholesale its merchandizes through large superstores and franchisees. Gucci was valued at 12.1 billion US dollars in 2013. In May 2015, Gucci was ranked 38th in the Most Valuable Brands list of the world by Forbes with a worth of 12.4 billion USD.
Gucci is an international organization with more than 270 company-operated outlets around the world, providing consumers of the best products, and making revenue of billions of dollars every year. It has even noble, luxury, and iconic brand figures in the china region, where its sales are boosted by 35% at the beginning of 2011. Gucci has shown its aim to speed up its process of establishing new outlets in China. Lately, though, the organization came under colossal criticism when five of its ex-employees from its Shenzhen store disclosed online information about the cruel working environment and mistreatment of labor in the organization(Zanda, 2016).
1.2 Company Core values
The organization aims to turn into the leading brand in the luxury market at the global level. Gucci expresses their company as responsible and cool, and signify them on their fashion and styles. All of these concepts are inter-related; being responsible can also be cool. For Gucci, social responsibly is an integral part of their international strategy. They do business with a comprehensive, yet sensible approach. It is their fundamental responsibility to maintain their position of a luxury brand to promote and pioneer sustainability(Czerniachowicz, 2017).
The Gucci standards are profoundly rooted within moral values, and literally, the organization started to effort on sustainability policy in 2004. Quality should be the supreme priority; also, sustainability for the environment and the society developed as a part of quality policy. Gucci’s stakeholders support the sustainability policy for the betterment of the company.
Gucci introduced 100% eco-friendly packaging in June 2010. And within a short time, Gucci launched a collection of environment-friendly goggles which were made by recycled metal and biodegradable plastic. They also used biodegradable material in their shoe collection with new designs and eco-friendly packaging(Annual Report, M. 2019).
Gucci is focusing on improved performance in the quality on which most demanding consumers put the most significance. The performance compares to the situation where Gucci needs to look for superior quality and needs to continue giving such designs that are worthy to customers with sound knowledge as this brands’ consumers, including film stars and elite families from Europe. It further focuses on the smartest consumers, who are happy to pay for the supreme quality in the most important markets. This relates to the situation where Gucci’s target buyers, including the wealthy European new-born and the developing U. S. rich people(Księżak, 2017).
1.3 Company ethical culture
Good sustainability and behavior are the basis for a business group to work. Trust is an essential element of business sustainability. And the capability to express the everyday commitment to a responsible organization administration is an integral part of such trust (Demir, M. A., &Sepli, A. 2017). Since 1996, when the Gucci developed its first ethics rules and regulations, it made a significant improvement in persistently reinforcing the ethical promise of Gucci management. Landmark including printing Code of Ethics and circulation to every employee of the group in 2005 and then again in 2009, and establishment of Sustainability Department(Księżak, 2017).
Each time the business operates, the Ethics code presents the chance to reaffirm the faith, and the ethical rules and regulations should be precedent. Designed by the categories of stakeholders, the ethics code provides the reference points that can guide every person’s actions. The laws include respect for workers, gender equality in all the professional life aspects, dealing with all kinds of fraud and corruption. Also fighting child labor, compliance of the basic rules and regulations of the International Labour Organization, the safety of the environment, understanding to all stakeholders, and organizing the employees with other societies.
Following the ethical behavior guarantees permanence in business under any circumstances. Sustainable and prosperous progress in the global market depends on the level of trust of the buyers, workers, stakeholders, and social and commercial partners. But, these variations can be designed by some powerful but straightforward shared principles, which should guide our work in the spirit of common sense and responsibility(Yasin, Chan, Reidpath&Allotey, 2012). The ethics code provided to all employees includes performing with trust and integrity, compliance of the applicable regulations and law, respecting the rights and dignity of every person, work with care for the environment, using the organization’s resources and goods with the concern of the business and its stakeholders (Lee, H., Leeminyoung, & Bae, E.-K. 2019).
Part Two- Stakeholders Analysis
2.1 Company stakeholders
Gucci has four main stakeholders. Freeman discussed that stakeholders are the particular group or individuals who can affect by the firm’s achievement of objectives. This provides that it is important to find out the groups that are affected by any abuses etc.key stakeholders of Gucci are individuals who stake its expansion plans in China, employees, no matter if they are resigned or not, and existing employees(Annual Report, M. 2019). Chinese government is also stakeholder of Gucci and it is the responsibility of government to ensure that rights of workers are enforced in its territory. Fourth stakeholder is a foreign government that is likely to be headquartered in the similar territory. Foreign governments have stake and they can also take actions to reduce labor abuse in China because laws are formulated regarding abuse and anti-bribery treaties.
Stakeholders of a company are very significant for its performance and completion of objectives. The stakeholders can either positively or negatively influence the project performance. The stakeholders are involved in project scope statement, plan development and identify constraints that can hinder the development process. They also approve changes or modifications in projects under change control board(O’Kane & Cunningham, 2014). The identification of requirements is carried out by stakeholders and they participate to manage risk. It is also possible that stakeholders can become risk response owners.
- Stakeholders for company Gucci can manage abusive practices as employees because they can harm the objective of company.
- China’s capitalism is increasing so human resource management can involve institutional arrangements regarding this abusive act in company.
- Employees can vice the grievances of victim so get more attention and investigate issues. They can also express the opinions to help enhance bargaining power through employers.
- Chinese government as the stakeholder can revise its approach to monitor the labor force. In China, workers are under-protected due to organizational work, while trade unions are working to stand up for the rights of employees (Mclaughlin, S. 2018).
2.2. Stakeholders Map
The stakeholders map is created below to describe relationships with the organization. The first step in this regard is the engagement of strategy. This process will set a vision and ambition to engage in future direction(Borodai, 2017). The second step is about stakeholders mapping and it works defining a criteria that can identify and prioritize stakeholders for the better mechanisms of stakeholders. In the third step, a focus on long term goals will be made which is called preparation that will determine the logistics according to rules(Annual Report, M. 2019). The fourth step is engagement that ensures stakeholders and contributors to mitigate any kind of tension and then set the priorities for solution(Yasin, Chan, Reidpath&Allotey, 2012). The last step is action plan. In this figure it can be seen that under action plan the opportunities are identified that can determine goals, actions and strategies that will help in follow up process and enhance engagement for future.
Figure 1 Stakeholders Map
The current process presents a structure of stakeholder mapping. It is a unique approach to settle down the key issues and conflicts. With this process, any central relationships or immediate processing can be considered in the organization. The stakeholder map is a key approach to devise an action plan that will work in the future(O’Kane & Cunningham, 2014). For Gucci, this action plan will determine what Gucci is trying to achieve and how in different stakeholders, it is working to acquire competency (Parker, J. 2017). The stakeholders are also significant to infecund the interest of company but they will work in collaboration because all the objective of company are also linked with these stakeholders. The creation of a map is considerable to learn new dimension of workplace projects.
Part Three- Gucci’s Corporate Social Responsibility (CSR) Analysis
Corporate social responsibility (CSR) is a self-adjusting business in which an organization is responsible for social accountability. All stakeholders are also involved in this accountability. CSR business follows all traditions and moralities of the society and implements such methods that are beneficial for social rules. CSR is also named Corporate Citizenship. This type of company has to follow all social, economic, and environmental solutions. The primary purpose of CSR is to construct such methods that support the ethical, philanthropy, economic, and lawful aspects of society(Yasin, Chan, Reidpath&Allotey, 2012).
- CSR is a comprehensive thought which can be adapted to different companies and organizations in various ways as the CSR business is beneficial for society as it is essential for social aspects.
- As the CSR progress increases gradually, and the world-famous brand whose name is Gucci is becoming more accountable because of its unethical behavior which it conducted towards its employees.
- CSR policy is a bit difficult to meet Gucci because it enjoys a secure social value, and the bulk of tags, in this condition difficult for Gucci to fulfill all requirements of CSR.
- Gucci sub-brands present CSR practices in front of its domestic and international stakeholders.
Gucci was facing the scandal of unethical practices that prove a setback for its reputation after that Gucci assigned some business driving methods by following the rules and regulations of CSR and laid a foundation of its company on true and fair dealing toward its employees in which it promises to provide a legal working environment, by giving promotion resources, protection of human rights mentioned and strictly implemented into the company running affairs through its managers and stakeholders. Gucci also made a promise to provide the facility of promotion, proving working rights to workers, and make a trade union contract by following the safeguard rules of the workers into the administrative system of Gucci. Gucci denies on the conduction of child labor. All employees will get equal career development opportunities and similar treatment facilities. Gucci strictly develops a health and safety standard by preventing epidemics and some industrial disease. Gucci also takes the initiative to promote the growth of craftsmanship and steps for the development of regional, federal, and other global communities. Philanthropic acts are also being introduced in these efforts. Non-profitable initiatives conducted by adopting this policy(Yasin, Chan, Reidpath&Allotey, 2012).
This company also committed to reducing environmental pollution and protecting the ecosystem and made the promise on the prevention of waste materials of the company. The organization introduces a communicative method between workers and managers and other stakeholders. True and transportation dealings with the stakeholders in which any decision conducted on the collaboration of all partners and stakeholders, all dealing with public and other organization’s being enforced by the agreement of the stakeholders(Wymeersch, 2003). Gucci also put steps to monitor economic growth by creating an economically viable supply chain. Gucci legalizes all promotion elements, which are helpful in the growth of the workers and assure the workers every possible cooperative deal for their betterment and development. These above steps prove helpful for economic growth and company progress. Gucci has its contribution to the growth of China’s economy. The basic purpose of CSR is not to create luxury consumers, whereas its priority to increase consumers in the future. CSR policies impact the company’s reputation to obtain the capital. The world’s reputed MNC also follows the CSR policy. To contribute its part to economic growth.
After the ethical scandal, Gucci’s has a fluctuating reputation. It is unethical to behave under discussion in the business world. The company has lost its trust; at this time, the stakeholders and managers were making different variations in the company policy. The company decided to follow the CSR policy to stand its repute against the ethical standard. The CSR protects the workers and provides them rights.
Management is responsible for the enforcement of Corporate Sustainability Responsibilities and has a right to apply on all sub-branches of the parent company. Gucci directly running different stores were also inhuman activities are taking practices after that company enforced different policies under CSR strategy to protect the workers from the salivary behavior of the owner and manager. The managers should enforce these methods in such a manner that they are involved in the internal and external managerial functions and other corporation committees. The managers should integrate this policy into the strategic ambitions of the company. The CSR strategy will be implemented in all sectors of Gucci, whether they belong to leather or jewelry or concern with different other products of the company. Special training conducted to the managers, stakeholders to follow the rules of CSR. In 2007 the implementation responsibility pushed to the HR department, at the start one person is performing all CSR functions and reporting to the HR department, after that when management realize about the comprehensive involvement of CSR into the managerial functions then the company establishes a bench who will perform CSR activities and make decisions according to it. Gucci hired CSR managers; this condition proves a cause of the unwillingness of the stakeholders because they are used to unethical behavior, and that is totally against their habits; after that, they accept it only on this condition that the company establishes its worth around the global environment. Gucci establishes a training program for middle management. This remarkable change causes change to internal managerial functions, employee’s behavior, and external suppliers(Wymeersch, 2003). The CSR policy proved helpful to maintain the Gucci standard; the reputation of the Gucci had become worse due to the unethical Sandal and inhuman behavior to the workers when the company followed the rules of CSR the organization became successful in regaining its level. Now the workers are starting to show their interest, and in purchasing their products, workers are the real asset of any company without workers it is not possible to manufacture the goods and appreciatively run of the company. Initially, the managers and stakeholders go against the CSR strategy, but afterward, when the company meets its priority goals, the trust of stakeholders satisfies the managers.
Part Four- Problems/issues Analysis
4.1 Gucci ethical issues toward its employees
Gucci Shenzhen in China is a multicultural organization around the world. This organization serves its customers by contributing to elite products. This company operates 270 stores to whom the company is running directly. This company forms billions of dollars in revenue in a year. Its superior brand created its unbeatable image, which caused a 35.6% increment in its revenue; thus, it takes intent to increase the process of stores opening into the land of China(Rakhmanov, 2019). Currently, this company suffers a loss due to fire mishaps which occurred in its most familiar store. The company has to face too much damage. This incident occurred due to the miss of treating the employees. This company was practicing unethical behave to its workers by implementing some strict instructions(Borodai, 2017). All instructions are performed for the workforce; pregnant women cannot be applied for management. If any product is missing or stolen by anyone who has to pay the employees, even these products are protected by insurance.
Gucci constituted a bill on 8 October 2011 from the top management team(Yasin, Chan, Reidpath&Allotey, 2012). According to this letter, if any employee conducted any epidemic disease, it will not be tolerated during working hours. The lunch timing and in the situation of thirst and toilet timing entirely restricted, working hours, which was usually mentioned incorrectly, and forcefully conducted overtime which is unpaid after that. Gucci introduced a system of working that full day of working and the next day off officially. By the rules, workers can perform the duty of 10 hours in a day, after complaining to the workers, the company manufactured a false electronic record that counts the working hours in a less quantity. These rules are against humanity and called ethical problems.
Gucci specified such persons who mostly spend their time on the internet during working hours and consider all of them a sweatshop for the company besides this, and some MCN, s owners who failed to meet the organizational tasks they all fired. Later, Gucci’s headquarter, situated in China, and stated that Gucci would not tolerate such persons on conducting any negligence and carelessness(Wymeersch, 2003). The company will be carried on inquiry and replacement of store managers and assistant store managers.
Gucci also introduced a labor dispatch system for the newly appointed employees. Different rules and regulations have been represented. In this method, the leasing company made a contract with the workforce, and these leasing organizations send the workers to different other companies to work. According to this system, this contract exits the leasing company and dispatched workers. However, the agreement is conducted between the workers and the companies where they have to perform the work(Setiyaningrum, A. 2015).
Whatever company is hiring this workforce will pay their wages, whereas the social protection allowances and dismissals compensation bill will handle by the leasing company.
- On account of this policy, the workers will get payments that are mentioned in the agreement, and this employment method is included in China’s cultural system.
- The Gucci stores assume this method and around three leasing companies established in Shanghai are involved in an unethical issue.
- According to law, the dispatch method creates a temporary situation for the workers.
- Gucci arranges this system for longer than two years.
- Pregnant females will enjoy the labor protections, and the exhaustive physical work not allowed to such ladies under the Labor Contract Law and rest sessions also will be provided(Borodai, 2017).
This ethical issue was entirely based on the destruction of the worker’s rights and constrained work without payment, inhuman confinements, and other unbearable policies that were part of this strategy. Gucci is not the first MNC who occupied workforce rights; Nike is also involved in such practices in Indonesia.
Local employee most involves factors in ethical issues in respect of factory workers.
Unethical problems are mentioned in the Gucci labor abuses policies like excessive work without payment, unlawful organizational methods around the local companies. This trend of working flourishing day by day in China, when other multinational companies and different foreign brands precede to China, this cultural environment emphasizes them to establish a business in such a condition(Christensen, Kent & Stewart, 2010). But these international firms provide some means to cut down this unethical behavior towards the workers and excuse for this abusive behavior. The fundamental reason behind this unethical practice is the abundance of multinational companies is working in China and does not pay attention to the worker’s rights. In an unfair situation, the company only focuses on earning the economic interest; the rights of workers are killed by management to get the organizational goals. Most miscarriages occur in this abusive environment where the pregnant female mistreated along this has to follow long duty hours into the entirely restricted atmosphere. There were unbearable restrictions exist only to make money under the human’s honor. In western economies, human virtues are included at the priority. Marable laws enforced to save the rights of workers. NGO’s are organized for the wellbeing of the workforce.
This unethical behavior affected the Gucci reputation badly. At this time, all stakeholders trying to control this abusive behavior, stakeholders not only managed these practices, but different variations required in often groups of the company because of the inhuman act also proves a hurdle to develop the expansion of Gucci in China. The management included stakeholders who adopted a justifying and apologize for behavior in front of current and resigned workers. The administration agreed to compensate by providing a systematic administrative system that will improve the working environment, and proves the government of China is also responsible for the rights of the workforce.
Mostly abusive behavior is used in MNCs manufacturing sites and almost not reported in developed countries. Gucci labor dispatch system which is against the Chinese characteristics. MCN can manage ethical problems conveniently. Comprehensive explanations are critically viewed as labor rights. China’s culture also prefers labor rights. The Chinese government, and foreign governments, all MNCs and its stakeholders are responsible for securing the rights of its workforce. Soon, different implementations and steps are making progress in the sense of labor abusive practices(Christensen, Kent & Stewart, 2010).
Part Five-Evaluation of company
Gucci is a multinational company and making progress gradually. The essential priority to maximize profit and minimize the cost of labor. In the maximizing process, it establishes a bill which grasps all the basic rules of the workers. According to this bill, the organization introduces a new working trend for the workers. The workers who caught some epidemic disease will not be spared from work, pregnant women will also not spare they have to perform duty like other followers the rest session also not provided to females at the time of delivery along with this the pregnant females cannot apply for managerial positions, no allowances provided to the workforce, and they are enforced to work without payment. In the form of loss conducting the workers have to compensate for this loss. The law allows the workers for 10 hours working in a day, and Gucci introduced a full working day, and the follower day remains off in which no work and time limitations are mentioned. The admin and managers found themselves involved in these unethical issues because they are crushing the employees by underlying those stricken and inhuman rules. In other words, Gucci and its managers introduced a slavery system for the workers.
Workers dispatch system also introduced by Gucci management in which the workers are forcefully pushed to another company to work. A leasing company is performing the role of a middle man. The contract is created between the leasing company and workers. But the hiring company is responsible for paying this workforce. This system provides a low-cost working environment.
Moreover, the managers of this organization and its Human Resources department kill the worker’s rights by using different means and constituting different policies for the followers and in the promotion of profit of the company. When foreign companies and other familiar brands come to China and object to these unethical issues and introduce some human rights laws which are not pushing back human dignity and provide protection to the workers on its rights, in this situation, Gucci feels the standard of reputation is decreasing day by day on account of its unethical practices which it is conducting to its managers. Then the managers and some store holders adopted apologies for behavior to maintain its progress because, without the workforce, they are helpless to manufacture the products.
At this time, all current workers and newly hired make assurance from the managers to save the rights by providing reasonable wages, fixed working hours, medical and different allowances, facilitate the pregnant females by providing them a sustainable working environment and rest period after their delivery. Gucci and its management try hard to get the release from this scandal. They got a bit of success in this matter, but this organization makes its popularity on slavery behave to its workforce. The worldwide workers’ rights and different NGOs are trying to lawsuits different laws to protect the rights of the workforce and taking steps ahead MNC and other brands find in consuming the fundamental rights of workers through its strict and abusive instructions(Christensen, Kent & Stewart, 2010).
When the Gucci reputation decreased due to the ethical scandal, then Gucci and its management established some policies which are enforced in the whole world to save the rights of workers and fulfill the entire requirement of worker’s laws. The administration decides to implement these sets of laws into all branches and stores may it in developed or developing countries. These ethical rules strongly performed in the Gucci industries. Numerous efforts were made to provide the improving standard to the workers(Czerniachowicz, 2017). These rules will be enforced to all branches and stores, and all laws strictly installed into the management systems. If the workforce belongs to any local area or has a concern for foreign labor will enjoy these rules equally. A written employment contract conducted for the workforce and workers dispatches the system prohibited. Unpaid work also discouraged by the managers, working hours mentioned, wages also term not be minimized, which will work against the law. The managers assure the workers to provide a safe and respective working environment that will be free from harassment, discrimination, and abusive practices.
The addition of some codes is not adequate to get freedom from these slavery scandals. Thus Gucci headquarters in Italy also constitutes some necessary methods to protect labor rights. Entire Gucci’s host countries, especially China, emphasize meeting the world’s ethical standards. The Chinese nation has a reliable power of tolerance. That’s why the Chinese workers were bearing this inhuman treated behavior even near to get harm in different ways. The workforce has less awareness of their rights. At this time, the economic power of China is becoming stronger gradually, although the workers’ dispatch system is becoming complicated to run. It is an important task to provide awareness to the Chinese workers on account of their rights.
- Gucci made some analytical and administrative assumptions; the first is to control all ethical issues which are practicing in China.
- Second, to implement this ethical culture into China needs to provide institutional strength, legalization, and a network to enforce who has the authority to protect the worker’s rights.
- Companies that can communicate as a self-governing trade union put some steps in this matter.
- Gucci and its managers made different practical steps regarding these abusive practices, the managers should provide lawful working hours, and overtime work must be payable, not enforced work conducted from the workers, medical care must be provided to them (Czerniachowicz, 2017).
The national and provincial governments in People Republic China (PRC) should contribute to the implementation of these rules. Foreign brands and companies should support these ethical issues to give more protection to the slavery environment of China.Competition environment should be created from the managers and granted them equal opportunities to be successful, promotions facilities should be provided to the workers, and the effective, cooperative and communicative system should be provided to the workers. Gucci and its managers should implement rules and codes that contain a safeguard environment for the followers. It must be strictly enforced as Gucci applied the salivary trend into China’s nation to make its reputation around the world.
Part Six- Conclusion
Gucci as a luxury brand holds all the necessary managerial practices as well as corporate social responsibility framework that help it acquire obligatory business performance. The association plans of Gucci are to transform into the main brand in the extravagance showcase at the worldwide level. Gucci communicates their organization as dependable and proactive, and imply them on their design and styles. These ideas are inter-related; being capable can likewise be sophisticated to acquire long term growth. For Gucci, social mindfully is a fundamental piece of their global technique. They work with a far reaching, yet reasonable methodology. It is their crucial obligation to keep up their situation of an extravagance brand to advance and pioneer supportability. The report presents a comprehensive structure of leadership and values, yet a need to focus on ethical grounds is clear.
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Innovative management approach towards improvement of employees’ performance at work