Group_49_Sophia_IMBD: topic report

French luxury companies and their strategies in emerging markets.


Part I. Setting the scene

Part II. Emerging markets: A winning strategy

Part III. The other side of the coin


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Group_49_Sophia_IMBD: Horror story

From our standpoint, the worst horror story regarding business offshoring strategy is the conflict that opposed Unilever and its French subsidiary Fralib, producing teas and infusions near Marseille, in South of France, about offshoring the Lipton-Elephant tea plant in Poland.

In 1972, the Anglo-Dutch multinational consumer good company Unilever purchased Elephant, a French brand of herbal teas, which has existed since 1896.

In 2010, after some declining profits, Unilever decided to close the Fralib plant, which managed the Elephant-Lipton tea production, to relocate its tea manufacture in Poland. As a matter of fact, Unilever said that the Gémenos plant “accounted for 27 per cent of the costs of its four tea plants in Europe, while making up just 5 per cent of production”.

The plant closing implied the dismissal of 182 people. To save their jobs and prevent the dismantling of their plant, workers have occupied it for 1 336 days. Unilever proposed three redundancy packages which all have been refused by Fralib employees who were convinced by the possibility to put the factory back to work.

In May 2014, after a two-year battle in the factory, the media, the courts and even in the French President François Holland office, where some Fralib workers were received, Unilever gave in and paid about 20 millions euros to Fralib for the employees and the creation of a tea cooperative named Scop-ti. Thank to this, the factory will continue to produce tea and about sixty jobs will be saved.

However, Unilever refused to cede the brand Elephant, which was born and well established in the region. Moreover, the opening of the Scop-ti cooperative is not determined yet. This offshoring strategy has been expensive for Unilever but also tarnished the brand image. French people were encouraged to boycott Unilever product to support the workers who were fighting for their jobs.

The Fralib case is not an isolated one and points out the dangers of globalization on employment, increasing social conflicts and questioning the role of trade unions.

Group_49_Sophia_IMBD : OECD sees global economy held back by slow eurozone

A slow recovery among nations using the euro is holding back the global economy, the Organisation for Economic Co-operation and Development has said.

The market economy group downgraded its growth forecast for most big economies.

Conflicts in Ukraine and the Middle East and the referendum on an independent Scotland are areas of risk and uncertainty, it said.

Its 2014 estimate is a 0.8% increase in the eurozone economy for 2014, compared with a forecast of 1.2% made in May.

The UK’s forecast was cut by 0.1 percentage points to 3.1%.

‘Worrying’ eurozone

US economic expansion for 2014 was cut to 2.1% from 2.6%. Japan’s forecast was cut to 0.9% from 1.2%.

The OECD did not provide an update to its forecast for global growth for 2014, which it forecast at 3.4% in May.

“Continued slow growth in the euro area is the most worrying feature of the projections,” the OECD said.

Among countries which are not OECD members, China’s forecast was unchanged at 7.4%. The OECD said China “has so far managed to achieve an orderly growth slowdown to more sustainable rates”.

India was the only economy to be judged by the organisation as likely to grow quicker, with its forecast upgraded to 5.7% from 4.9% after voting in a new government that said it would pursue growth-oriented reforms and progress in containing inflation.