THE DISCARDED FACTORY

THE DISCARDED FACTORY CHAPTER NINE Degraded Production in the Age of the Superbrand Our strategic plan in North America is to focus intensely on brand management, marketing and product design as a means to meet the casual clothing wants and needs of consumers. Shifting a significant portion of our manufacturing from the U.S. and Canadian markets to contractors throughout the world will give the company greater flexibility to allocate resources and capital to its brands. These steps are crucial if we are to remain competitive. -John Ermatinger, president of Levi Strauss Americas dMsion, explains the company's decision to shut down twenty-two plants and lay off 13,000 North American workers between November 1997 and February 1999 Many brand-name multinationals, as we have seen, are in the process of transcending the need to identify with their earthbound products. They dream instead about their brands' deep inner meanings - the way they capture the spirit of individuality, athleticism, wilderness or community. ln this context of strut over stuff, marketing departments charged with the managing of brand identities have begun to see their work as something that occurs not in conjunction with factory production but in direct competition with it. "Products are made in the factory," says Waltet Landor, president of the Landor branding agency, "but brands are made in the mind." 1 Peter Schweitzer, president of the advertising giant J. Walter Thompson, reiterates the same thought: "The difference between products and brands is fundamental. A product is something that is made in a factory; a brand is something that is bought by a customer."2 Savvy ad agencies have all moved away NO JOBS from the idea that they are flogging a product made by someone else, and have come to think of themselves instead as brand factories, hammering out what is of true value: the idea, the lifestyle, the -attitude. Brand builders are the new primary producers in our so-called knowledge economy. This novel idea has done more than bring us cutting-edge ad campaigns, ecclesiastic superstores and utopian corporate campuses. lt is changing the very face of global employment. After establishing the "soul" of their corporations, the superbrand companies have gone on to rid themselves of their cumbersome bodies, and there is nothing that seems more cumbersome, more loathsomely corporeal, than the factories that produce their products. The reason for this shift is simple: building a superbrand is an extraordinarily costly project, needing constant managing, tending and replenishing. Most of all, superbrands need lots of space on which to stamp their logos. For a business to be cost-effective, however, there is a finite amount of money it can spend on all of its expenses - materials, manufacturing, overhead and branding- before retail prices on its products shoot up too high. After the multimillion-dollar sponsorships have been signed, and the cool hunters and marketing mavens have received their checks, there may not be all that much money left over. So it becomes, as always, a matter of priorities; but those priorities are changing. As Hector Liang, former chairman of United Biscuits, has explained: "Machines wear out. Cars rust. People die. But what lives on are the brands."3 According to this logic, corporations should not expend their finite resources on factories that will demand physical upkeep, on machines that will corrode or on employees who will certainly age and die. lnstead, they should concentrate those resources in the virtual brick and mortar used to build their brands; that is, on sponsorships, packaging, expansion and advertising. They should also spend them on synergies: on buying up distribution and retail channels to get their brands to the people. This slow but decisive shift in corporate priorities has left yesterday's nonvirtua 1 producers - the factory workers and craftspeople -in a precarious position. The lavish spending in the 1990s on marketing, mergers and brand extensions has been matched by a never-before-seen resistance to investing in production facilities and labor. Companies that were traditionally satisfied 196 THE DISCARDED FACTORY with a 100 percent markup between the cost of factory production and the retail price have been scouring the globe for factories that can make their products so inexpensively that the markup is closer to 400 percent.4 And as a 1997 UN report notes, even in countries where wages were already low, labor costs are getting a shrinking slice of corporate budgets. "ln four developing countries out of five, the share of wages in manufacturing value-added today is considerably below what it was in the 1970s and early 1980s."5 The timing of these trends reflects not only branding's status as the perceived economic cure-all, but also a corresponding devaluation of the production process and of producers in general. Branding, in other words, has been hogging all the "value-added." When the actual manufacturing process is so devalued, it stands to reason that the people doing the work of production are likely to be treated like detritus - the stuff left behind. The idea has a certain symmetry: ever since mass production created the need for branding in the first place, its role has slowly been expanding in importance until, more than a century and a half after the lndustrial Revolution, it occurred to these companies that maybe branding could replace production entirely. As tennis pro Andre Agassi said in a 1992 Canon camera commercial, "lmage is everything." Agassi may have been pitching for Canon at the time but he is first and foremost a member of Team Nike, the company that pioneered the business philosophy of no-limits spending on branding, coupled with a near-total divestment of the contract workers that make its shoes in tucked-away factories. As Phil Knight has said, "There is no value in making things any more. The value is added by careful research, by innovation and by marketing."6 For Phil Knight, production is not the building block of his branded empire, but is instead a tedious, marginal chore. Which is why many companies now bypass production completely. lnstead of making the products themselves, in their own factories, they "source" them, much as corporations in the natural-resource industries source uranium, copper or logs. They close existing factories, shifting to contractedout, mostly offshore, manufacturing. And as the old jobs fly offshore, something else is flying away with them: the old-fashioned idea that a manufacturer is responsible for its own workforce. Disney spokesman Ken 197 QUESTIONS ON READING FOR TOPIC 9 Excerpt from Klein, N. (2000) No Logo, London, Flamingo. This examination of the nature of globalised production and branding was published in the year 2000 and very quickly became an international best-seller, receiving rave reviews from both the general book-buying public and many academic audiences.  In the chapter we consider here, cultural critic and journalist Naomi Klein examines the conditions of labour and production in our economically globalised world.  With her combination of detailed empirical evidence and accessible journalistic prose Klein’s chapter makes for compelling, and disturbing, reading and gives us much to reflect upon concerning the nature of management in a globalised/ globalising world. 1.    What is the main argument of this chapter and how is the work structured to develop this argument? 2.    Outline the nature of the ‘Nike Model’ of outsourcing as Klein (2000) describes it. 3.    What are ‘Economic Processing Zones’?  What is the significance of the contribution of these zones to the production of goods and profits in the global economy?  What are the: i.    typical working conditions ii.    level of wages iii.    type of management control, and iv.    profile of the employees in these zones? 4.    What is the likelihood that you are currently wearing clothes or footwear produced by workers in these zones, working under these conditions? 5.    Why do corporations in Australia, the US, the UK, Europe, Japan, etc, outsource production to Economic Processing Zones? 6.    Do managers of corporations (in Australia for example), that have significantly lowered costs by subcontracting out production to those operating in such zones, have a responsibility for monitoring and improving the working conditions of the workers involved? a.    If yes, why?  What part of this responsibility is legal, moral, commercial.....? b.    If no, why not?  And again, what part of your argument is made from legal, moral, and /or commercial grounds? 7.    What are some of the potential dangers of commercial decisions to reduce labour costs by outsourcing production to low wage economies?  (n.b. think broadly here, for example, dangers for corporate reputation, for humanity, for global inequality, for future political instability).  Who should consider and act upon such dangers and how?