ADMS 3900 Midterm assignment

217133745 Hyelee Yang

This paper will discuss the recent boycott of the SPC group due to unethical labour

practices. The boycott started from Paris Baguette, which is a large bakery chain that the SPC

group owns. There was an incident where a worker got caught in the machine and it led to a

tragic death. The very next day other workers were forced to work where the machine was

covered in a white sheet instead of suspending the operations. After the accident, Paris

Baguette’s poor working environment was revealed and also discovered that a week before the

incident there was another accident in which a worker's arm got stuck in the machine, but the

worker was not sent to the hospital due to temporary working status. It was found that around

half of pregnant female bakers experienced miscarriage due to the excessive workload and they

were asked to leave the company once they raised any objections. After these tragic incidents

were revealed, the public got upset about how the firm handled the incidents and treated the

employees as mere resources rather than as human beings. The boycott started as a boycott

against Paris baguette but has led to a boycott of other brands that the SPC group owns such as

Baskin Robbins. () I think this case is related to the themes of the first two modules because this

recent management issue demonstrates how current leadership styles are still faced with ethical

breakdown and failure to foster trust and exercise their relational power which is fundamental in

a purpose-driven workplace.

T The first analysis is from “The five competitive forces that shape strategy” which

introduces Porter’s five forces model that examine five major forces determining the

attractiveness of an industry that a firm operates within. The first force is the threat of new

entrants. The threat of new entrants is high when there are low barriers to entry which include the
ability of product differentiation, capital requirement and economies of scale for new entrants. In

this case, the threat of new entrants is high. The capital requirement to enter the industry is high,

it requires a substantial level of investment toward baking equipment, skilled employees, leases

etc. The industry engages in a lot of product differentiation to be competitive within the industry.

Bakeries especially chain bakeries often attempt to differentiate their products by engaging in

marketing strategy and increasing the brand reputation because it is hard to differentiate solely

based on product attributes due to the homogenous nature of baked goods. Increasing the brand

reputation allows customers to perceive their products as better quality and worth paying the

premium price. The industry can achieve a moderate level of economies of scale. It is important

to note that in the baking industry, there is cost volatility of the main ingredient, wheat. Wheat

prices fluctuate a lot, which makes it hard to achieve steady economies of scale by just

increasing the level of production when the wheat costs are high. However, it is not to say that

they cannot achieve economies of scale because there is a high chance of decreasing production

costs by moving down the learning curve. The threat to the bargaining power of suppliers is high.

This is especially true for suppliers of main ingredients such as wheat and dairy products. These

main ingredients are a major part of the production cost. There is a switching cost involved in

switching these main ingredient suppliers, especially for wheat. Due to the price volatility of

wheat, when firms establish a good relationship with suppliers, they can have the benefit of

buying wheat at a more affordable price and can be less concerned about price volatility. It poses

some level of threat that suppliers engage in forward integration where they can end up

producing, the product themselves. However, suppliers that do not provide the main ingredients,

for example, sugar, do not hold large power because bakeries do not have a large switching cost

of switching to different suppliers and pose a low threat of forward integration. The industry has
a high threat of substitutes. Even though for many people, bread is a staple in their diet it has a

lot of alternative products to substitute such as oatmeal, potato, rice etc. Due to the increasing

trend of more health-conscious buyers, customers might turn towards healthier substitutes. The

bargaining power of customers is high. It is due to the few switching cost related to the

homogenous nature of the baked goods. Even though bakery chains engage in product

differentiation through marketing strategies, price-sensitive customers do not perceive the brand

reputation as an important factor to consider in their purchasing decision. It does pose a high

threat of backward integration, for example, there is a chance that buyers can decide to acquire

small bakeries and develop the product themselves. There is a high threat of competitive rivalry.

Even though there are many bigger bakeries chain that dominates the market share, there are a

significant amount of equally balanced small or medium-sized bakeries that compete. The

industry does not require high fixed costs. It requires a large initial capital requirement but

operating the bakeries does not require a high fixed cost. It has low switching costs for buyers

even though the industry engages in product differentiation through fostering brand reputation

because for the majority of the customers baked goods are staples in their diet and price will be a

more significant factor in their buying decisions. The exit barriers are high due to the specialized

assets such as baking equipment and skilled bakers.

The second analysis would be stakeholder management theory. The stakeholder

management process involves a few steps which highlight the importance of stakeholder

relationships from the relational motivation (week 2 PowerPoint). The first step in the

stakeholder management process is to start by identifying the firm’s stakeholders. The Paris

Baguette’s most important stakeholders that are relevant in this case include customers and

employees. The second step is what is the interest of each stakeholder. The customer’s stake in
the firm would differ based on different customer segments. For price-sensitive customers, it

would be being able to buy baked goods at affordable prices than competitors. For less price-

sensitive customers, the interest would be high-quality products that are worth paying premium

prices and providing special customer services such as customized birthday cakes that other

competitors do not provide. There has also been an increasing trend of customers’ interest in

expecting the firm to engage in ethical management and be socially responsible. Employees’

stake in the firm would be a healthy working environment where employees are treated fair and

supported by their management team which the firm has failed to achieve. The third step of the

process involves identifying the threat and opportunities that different stakeholders present. The

increasing demand for more health-conscious customers demands poses both opportunities and

challenges for the firm. It poses an opportunity for the firm as they can start producing baked

goods for different diets such as vegan, vegetarian, and less sugar-containing baked goods which

will help the firm to achieve a wider range of customers. On the other hand, it poses the threat

where more customers are reaching towards the healthier alternatives available in the market.

The employees pose the opportunity for the firm to provide a healthy work environment which

could help them decrease employee turnover and boost productivity and profitability and also

brand themselves as social responsibility firm as it boosts the company’s image. It will increase

the financial benefit for firms as an increasing number of customers prefer firms that are aligned

with their morals and values and are willing to pay more for goods that are ethically produced.

The fourth step is to identify the responsibilities that the firm has towards its stakeholders. When

considering the responsibilities, the level of responsibility to respond to each stakeholder’s

interest differ based on factors such as power, legitimacy, and urgency. If the stakeholder holds

significant power, high urgency and a high degree of legitimacy firm have a greater
responsibility to respond to the stakeholders’ interest. Based on these factors, Paris Baguette has

a great responsibility to respond to satisfy customers’ interests and employees as they hold a high

degree of power, legitimacy, and urgency. The high degree of power and urgency that customer

hold is apparent in this case as the public including customers and employees collectively avoid

purchasing the firm’s product making the firm suffer financially and also urgent because if the

firm does not take immediate action to respond to the issue they would turn to other competitors

to purchase baked goods. The firm has failed to meet a responsibility to both stakeholders that

the firm has the most responsibility towards which has led them to recent challenges.

The third analysis would be based on the reading “begin with trust”, this reading suggests

building trust is about empowering and recognizing others and that trust is important for leaders.

The author introduces three core drivers to develop trust which is authenticity, logic, and

empathy. Authenticity refers to leaders’ capability of being vulnerable and showing the “real”

you. Empathy refers to the feeling that leaders care about others. Logic refers to having

confidence and faith in leaders’ judgment. (citation- week 4). Based on these incidents that case

a present, the public lost trust because these incidents were able to reveal a lack of empathy

throughout the management team. The manager’s action of forcing people to work after the

tragic incident instead of ceasing the operations, not sending a worker to a hospital after injury

due to their temporary working status, the excessive workload to pregnant bakers, and firing

workers that raise any objections signalled lack of empathy by putting their profit maximization

goal of managers above employee’s health. Lack of empathy toward workers had led to

frustration and losing trust in the SPC group overall.

The fourth reading is “creating a purpose-driven organization “ ( week 1 reading), this

reading highlights the ways to become an effective manager. The reading objects to the idea of
negative assumptions of economic motivations. The reading talks about things to note to become

an effective manager. A few things that are relevant to the case include turning midlevel

managers into purpose-driven leaders which failed in this case because midlevel managers such

as plant managers who decided to make these unethical decisions were focused on maximizing

profit goals instead of creating a purpose-driven workplace. The middle manager was blinded by

their goal of profit-maximizing, which led them to engage in the exploitation of labour. The Paris

Baguette’s values include “Have heart, rise to the occasion, nourish community, spread joy”

(https://www.parisbaguette.com/about/) In this sense, unethical labour practice is not only the

fault of middle managers but also the fault of top-level managers as they have failed to help

middle-level managers to become not only aware of the organization’s value but also deeply

connect with it and lead with moral power.

“Connected capitalism- an intro” talks about the meaning of spiritual work and the

meaning of co-creation within the working environment. It also introduces the concept of ethical

dilemma which is a concept relevant to this case. Managers are faced with an ethical breakdown

when they start to think that the idea of making a business decision to achieve specific financial

outcomes separately from considering the ethical outcomes of the decisions. Purpose-driven

firms make sure that ethical dimensions as paired with strategic dimensions and that the ethical

decision-making process is always aligned with the strategic decision-making process. The

manager of Paris Baguette caught in this concept of ethical breakdown when they engage in a

decision-making process where they thought of ethical decisions of fostering a healthy working

environment as a barrier to achieving the desirable profit which led to engaging in unethical

business practices which they perceived would convey specific financial outcomes.
 I would suggest three alternatives that Paris Baguette can implement based on the

analysis above. The first alternative is for the firm to admit the financial burden this boycott has

on franchisee owners and set a compensation plan for any of the financial losses that have been

incurred by franchisee owners of Paris Baguette. The public has raised concerns about how a

boycott would have a more negative impact on franchisee owners of Paris Baguette than the firm

itself. If Paris Baguette fails to provide any compensation towards the financial burden of the

innocent party involved, franchisee owners of Paris Baguette, the firm will not only be associated

with the image of unethical labour practice and management team but also sacrifice their

franchisee owners that have nothing to do with. The frustration is not only from employees and

customers but also the frustration of the owners of franchisees could lead to an even worse brand

reputation. Based on the analysis, the industry that the firm operates in employs product

differentiation through fostering a good brand image especially for a big chain bakery such as

Paris baguette so it is important to prevent any action that could damage the brand reputation any

further. Franchisee owners are also important stakeholders to the firm has a responsibility to

respond to, so they need to make sure that the boycott does not affect franchisee owners

financially. The second alternative would be close all franchises for a day as a mourning period

provide mandatory ethical labour practices and educate managers on treating employees with

empathy to foster a healthy working environment where employees are respected. This

alternative gesture of empathy towards employees and holding themselves accountable for the

handling of the incident. It attempts to show their attempt to emphasize the firm’s value to the

managers' progress of working towards fostering an ethical workplace. The third alternative is to

set up preventive measures for safety hazards within a factory and monitor the condition of

equipment to ensure a safe working environment. Based on the stakeholder management theory,
customers, and employees both have stakes in a firm to ensure a safe working environment.

Increasing customers’ stake includes the firm acting in a socially responsible manner and

employees’ stake is the firm to make them feel that they are valuable assets to the firm.

Boycotting of firms’ products is due to their failure to respond to these responsibilities.

Out of all three alternatives, I would recommend the SPC group choose the second alternative,

closing every franchise for a whole day and dedicating it to educating managers into fostering a

healthy working environment. The first alternative of setting a compensation policy for franchise

owners may prevent worsening their brand reputation. Making sure that the franchisee owners

are not finically burdened due to the management issue is critical, however, franchise owners’

stake should not be prioritized over customers and employees because franchise owners’ stake

lacks the level of urgency that customers' and employees' stake holds. The third option of setting

up a preventive measure for safety hazards of equipment is critical to prevent injury of workers

and this alternative should be implemented for the SPC group in further future however,

prioritizing this alternative would lead to management failing twice because it does not address

the main issue managers lack empathy towards the employees. The Paris Baguette’s immediate

goal should be to implement an action plan that encourages a culture that signifies the well-being

of employees. The decision to implement the second option will solve the management issue

because it tackles the root of the problem, the frustration of stakeholders due to the management

teams’ lack of empathy towards employees. Choosing to implement this action, shows the

stakeholders that the firm is willing to sacrifice their daily revenue, which is huge as they are a

large chain bakery, by closing all of their stores across the countries to take time to pay

condolences which shows a gesture of empathy towards the employees and educating the
mangers in which stakeholders can trust by improving one of the core drivers of trust that Paris

Baguette’s leader lacked, empathy through training.