Managing Labor Disputes by Easibag Vietnam Co.

Topics: Employment, Wage, Management Pages: 7 (2220 words) Published: September 27, 2010
I.Introduction of the company
Easibag Korea
EasiBag Inc., a Korean bag manufacturing company, was founded 1986 in Kyungki-do, Korea. EasiBag is now operating woth total assets worth 14,832 million won, net assets worth 8,840 million won and employing around 140 people. The company exports different kinds of bags to Europe Japan and Saudi Arabia. In 1992 facing rising demand from Japan and Europe and on account of rising labor costs in Korea and difficulties in securing domestic labor, EasiBag had to expand its operations and was planning to open a manufacturing plant abroad. After having done intensive research about possible countries, the management decided to open a subsidiary in Vieynam. There were several reasons why they chose Vietnam:

Vietnam offered many opportunities including cheap abundant labor and an open foreign-exchange management policy. In addition to that, there was a geographical benefit since Vietnam is not that far away from Korea and Japan, too. Moreover, Easibag estimated long-term opportunities in the domestic market development. However, there were also threats by choosing Vietnam. For example one of the major threats was coming from the unfriendly attitude towards foreigners and discrimination. Furthermore, there was a lack of skilled labor, high bureaucracy, weak economical development and an insufficient infrastructure. The company also noticed that the financial service sector was weak and the insurance-sector non-existent. Still, the management weighted the opportunities more than the threats and regarded the country as the most profitable.

Easibag Vietnam Co.
In 1992, Easibag Inc. established a local subsidiary in the Guchi area in Ho Chi Minh City, Vietnam. The subsidiary was first established as a joint venture with the Vietnamese partner KEE (Kefigeration Engineering Enterprise), because this mode of entry seemed the most suitable since Vietnam’s investment climate was yet insecure and Easibag had no experience abroad, except for exporting. Moreover long screening processes were necessary to get Investment License and s far there were no relations between Korea and Vietnam. In the company, the Rules Committee (1) had the decision power. The committee consisted of one Korean manager and one Vietnamese vice president from KEE and managers but the Korean president was solely empowered to manage company’s operation. From time to time there occurred different viewpoints and disagreements so that in 2000 the Korean headquarter decided to convert the Vietnamese subsidiary into a 100% foreign owned enterprise.

II.Reasons for strike at Easibag Vietnam Co
On the surface there were four major reasons:
The first problem was the wage scheme which consisted of $50(regular wage) + $50(average overtime pay). However,in Vietnam the minimum wage is to be $70. So, this wage system made some workers dissatisfied since they felt they were underpaid, although they earned in the end more than the minimum wage. Another reason for the strike were the illicit actions. Throwing things, harsh words and continuing conflicts from the past stirred up employees and on the top of that a Korean supervisor tried to correct a group leader and In order to get his attention “tapped him on the shoulder twice”, which the Vietnamese employee considered a brutal response. The third reason was caused by overtime complaints. In recent month orders are made in excess of the productivity so that employees had to work 2 more hours of overtime a day, three times a week and work on Sundays twice a month. This overtime was very exhausting and local employees would have prefered to work less than to have additional income by working overtime. An additional reason for the strike were the impulsive decisions made by local employees.

But there was also a big underlying structural problem:
A clear clash of cultures between employees and employers existed and both sides had different assumptions about the other party. Locals...
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