1. Who are the primary stakeholders of Knights Apparel?

2. For each stakeholder group, what are their major concerns?

3. Describe the key roles and responsibilities of HR professionals at Knights Apparel.

4. Do you think this factory will succeed and become a model for competitors, such as Nike and Adidas? Why or why not?

Imagine how changed your life would be if you woke up one day and you could no longer see the vibrant blue sky or your child’s face, if your once colorful world had been taken from you and turned to darkness. That is exactly what happened to Knights Apparel’s CEO, Joe Bozich, when he suddenly lost his vision due to the unexpected onset of multiple sclerosis. Certainly, the founder of a leading supplier of college-logo apparel was disturbed by his situation. In response to his experience, Bozich reflected, “While we had the resources for medical help, I thought of all the families that didn’t. I started thinking that I wanted to do something more important with my business than worry just about winning market share. That seemed kind of empty after what I’ve been through. I wanted to find a way to use my business to impact people that it touched on a daily basis.”

Fortunately, Bozich’s vision made a full recovery. The experience left him with an urge to evaluate what was really important and what he believed to be right. Knights Apparel is a privately held company based in Spartanburg, South Carolina, and contracts with 30 factories worldwide. Its apparel deals with scores of universities have allowed it to surpass Nike as the premier college supplier of college-logo apparel. When CEO Joe Bozich met with Scott Nova, the Executive Director of the Worker Rights Consortium, his goal was to address stamping out worker abuses and fair treatment in apparel factories. He decided to open a model factory. At Nova’s urging, Bozich chose the depressed Dominican Republic community, Alta Gracia, to set his example.

GATHERING INFORMATION

The Alta Gracia community was home to the former Korean-owned baseball cap factory that made caps for Nike and Reebok and that had recently displaced 1,200 employees when it closed. Under Bozich, Knights Apparel cooperates closely with the Worker Rights Consortium, a group of 186 universities that press factories making college-logo apparel to treat workers fairly. Bozich reopened the Alta Gracia factory with the explicit goal of paying workers a premium wage. He responded to appeals from myriad university officials and student activists who wanted the garment industry to stop using poverty-wage sweatshops.

The Alta Gracia factory has about 150 employees. Most apparel factories worldwide still pay the minimum wage or only a fraction above, which is barely enough to lift families out of poverty. For example, minimum wages are below 50 cents an hour in Bangladesh. The minimum wage is around $148 a month (85 cents an hour) in the Dominican Republic’s freetrade zone, where most of its apparel factories are located. The Alta Gracia factory pays over $3 an hour, with 4% annual raises negotiated in the collective bargaining agreement. Further, the workers share in annual profits through a bonus system, and the most productive workers receive bonuses as incentives.

DEVELOPING AGENDAS 

Bozich invested $500,000 in renovations to overhaul the factory with pricey new equipment and furniture. He brought in bright lighting, five sewing lines, and pricey ergonomic chairs, which many seamstresses thought were for the managers. The Alta Gracia factory has gone further than its competitors by embracing higher wages and unionization. In a community where the minimum wages are not sufficient enough to support families, Knights Apparel is a pioneer in the developing world because it pays a “living wage.” In this case, the Alta Gracia factory has pledged to pay employees more than three times the minimum wage.

IMPLEMENTING AGENDAS 

Knights Apparel has faced hurdles as a result of the opening of the Alta Garcia factory. There was a question of whether students, alumni, and sports fans would be willing to pay $18 for the factory’s T-shirts, the same as premium brands like Nike and Adidas, in order to sustain the plant and its generous wages. Knight’s biggest problem is self-imposed: Can it compete with other apparel makers such as Nike and Adidas when its wages are so much higher? While there are consumers who really care and will buy apparel at a premium price, there are those who say they care, but then just want value. Bozich says the factory’s cost is $4.80 a T-shirt, 80 cents or 20% more than if it paid minimum wage. Knights absorbs a lower-than-usual profit margin, he said, without asking retailers to pay more at wholesale. Knights sells the T-shirtss for $8 wholesale, with most retailers marking them up to $18.

Marketing and branding are key elements for the Alta Gracia factory’s success. It helps that Knights has many universities backing the project. Duke University placed a large order, ran full-page ads in the campus newspaper, put postcards in student mailboxes, and hung promotional signs on light poles. Giant college bookstore operators Barnes & Noble and Follett sold Alta Garcia’s T-shirts and sweats at bookstores on campuses. Also, to promote its gear, Knights prepared a video to be shown at bookstores and an online documentary, both highlighting the improvements in workers’ lives. The T-shirts have hanging tags with pictures of Alta Gracia employees and the message “Your purchase will change our lives.” The tags also contain an endorsement from the Worker Rights Consortium, which has never before backed a brand.

And The United Students Against Sweatshops, a nationwide college group that often lambastes apparel factories, plans to distribute fliers at college bookstores urging freshmen to buy the Alta Gracia shirts.

THE RESULTS SO FAR 

The results of this unconventional business model are generally positive, depending on the stakeholder. Sales of the Alta Gracia merchandise have increased steadily and now top $16 million. Sales are projected to increase 50% in the next few years because of new NHL and NFL licensing agreements and increasing university bookstore promotions. Workers of the factory and their families are substantially better off with improved child nutrition, education, housing, and overall health. Because of the relatively high wages, the turnover rate has been one tenth of the industry average. However, the operation was not profitable its first four years, but is now close to break even. Gains from higher productivity, less absenteeism, and lower turnover are starting to be realized.