Reference no: EM133189788

On April 24, 2013, an eight-story building collapsed in the Savar district of Dhaka, Bangladesh; the building housed garment factories manufacturing clothing for many Western labels, including the well-known Canadian label, Joe Fresh. Threats of boycotting Joe Fresh1 -unless action was taken-started to appear swiftly. This was the first bump in the road for the incredibly successful clothing line, parented under Loblaws, Inc. Was it time to evaluate the merits of social responsibility to match the business strategy and the fast expansion of the brand?

Launched in 2006, the Joe Fresh clothing line was wildly successful within months, meeting and exceeding sales targets all over the country. The company began rapidly expanding its product line beginning in 2007. With stores located within Loblaws, although carrying a very distinct brand name, Joe Fresh was built on the foundation of two key principles: design and value. By 2009, the brand had expanded to include sleepwear, children's clothing, swimwear, sunglasses, and makeup. "Joe Fresh Beauty" offered beauty products at reasonable prices.

By 2011, Joe Fresh began to make aggressive moves into the U.S. market, with eventual plans for international expansion. Once again, the clothing line opted to build market presence by operating as a brand within an already popular establishment, in this case, the JC Penney stores. By March of 2013, Joe Fresh had opened nearly 700 locations across the United States through JC Penney and was in the middle of devising plans for entry into the European market.

As a part of their mission to keep costs down and the products affordable, consistently with almost all clothing firms, Joe Fresh had been outsourcing its manufacturing to China to take advantage of lower production costs. Recently, though, high inflation and rising labour costs in China had driven them to manufacture the bulk of their products in other Southeast Asian countries, such as India and Bangladesh.

When the roof of a large section of the building collapsed, instantly killing hundreds of workers, and trapping hundreds more inside, many of these decisions were called back for reconsideration. As rescue attempts took place over the following days, the death toll quickly climbed to over 1,120 and twice as many injured, making it the deadliest industrial accident in Bangladesh's history.

There had been several recent building permit violations, including the unauthorized construction of additional floors on the top. Moreover, the foundations of the building were not designed to withstand the use of heavy, vibrating machinery. The entire building was built illegally without a permit and was not up to standard with numerous design and construction flaws; building inspectors had discovered several cracks the day before the accident, but their warnings to evacuate the building fell on deaf ears-supervisors urged their employees to come to work the next day or risk losing a month's pay.

Joe Fresh had approved sourcing much of the manufacturing of its clothing to Bangladesh in the interests of keeping costs low and staying competitive within the industry but had not anticipated the possibility of such a catastrophic event. The tragic collapse of the Savar building was, by far, the biggest challenge the company had ever faced, and Joe Fresh needed to take action in order to both be socially responsible and preserve its brand image. While Loblaws had specific policies in place for supply chain ethics and vendor requirements, Joe Fresh had never marketed ethical sourcing as one of its selling points. Not only did the public need to be satisfied, but the brand also needed to be certain it was geared toward the right direction for the future. How could Joe Fresh expect to continue to build on past success and expand into the European markets without taking action to prevent such a tragic accident from occurring again in the company's future? Visionary leadership and swift action where required.

How can Joe Fresh maintain a "line of sight" while deciding how to move forward with their working relationship with Loblaw?

What factors might limit Joe Fresh's ability to switch strategic groups?

Imagine Loblaw and Joe Fresh parted ways, discuss three (3) tactics that can be used by Joe Fresh to sustain their competitive advantage without Loblaw outlets and distribution network as a resource