Student help center: Apr 29, 2011

Friday, April 29, 2011

Widgets Incorporation, employee termination, Whistle blowing Protection, Technology and Surveillence, Employment Discrimination

Question Number 1.Board Compensation- How will you compensate the board of widgets, Inc? (For example, will their compensation be at the high, low or a mix of the two?)

The compensation policy of the Fat- Be-Gone board of directors would be in the middle end of the spectrum because at the moment the company is facing hard time in terms of financial, legal and ethical standpoint. At this particular point of time, Fat-Be-Gone is not in sound condition to provide huge compensation to its board of director’s team and the compensation would be the mix of cash and company stock. The ratio would be 60% cash and 40% stock because company cannot give the 100% cash due to its weak financial position and market slow down on the other hand it neither can offered just stock as a compensation to its board members because that may de-motivate the board team leading to the inefficient performance and low dedication and motivation. The mix of two would be the best idea because restricted stock awards as an incentive to assure the executives are strongly aligned with the interests of shareholders.

So instead of paying higher salaries as cash, some part of compensation to the board of directors will be stock-based incentives. By doing so, the leadership team will work harder to increase shareholder value because executives themselves will gain financially when the company does well. If it doesn't, management suffers along with stockholders.

Question Number 2 Termination- what policies, if any, would you implement for the terminating an employee?

In today's litigious society, in which lawsuits for wrongful discharge are becoming more commonplace, protecting our company from a potential lawsuit is definitely is the best interests. The outcome of such a lawsuit may not only result in a major financial cost to the company but in many cases a supervisor and other employees can also be held personally liable for damages.

The first step in avoiding litigation is to have company policies developed to address the most common employee work performance concerns, and then have each employee read and sign that they received these policies. The policies should outline the company’s discipline process and outline what behaviors that an employee can be terminated immediately for, such as, theft, sexual harassment, and endangering other employees. Then coach supervisors in using company’s policies in connection with terminating employees. Our companies will have one verbal warning, one written warning, and then termination after the next incident. The company will also develop forms for both the verbal and written warnings that supervisors can use.
Document any verbal warnings that are given to the employee. In addition to this, past precedents of company reactions to rule infractions will determine the legality of the company termination policies in the future. Because of this, many lawyers and legal advisors suggest that company terminate every employee that breaks a rule in order to preserve company legal right to terminate employees in the future. The final factor we should take into consideration when determining if a termination due to a rule infraction is legal is if the termination is an appropriate reprimand for the rule that was broken. This not only takes into consideration the type of rule that was broken but also the length of time that the employee has been employed. As a general rule the longer that the employee has worked for our company, the more corrective or disciplinary steps we have to take before terminating their employment. Following are the some of the reason to terminate the employees:

The Employee violated a known company rule.
The employee is not able to perform the job adequately.
The company is reducing is workforce for economic reasons.

Question Number 3. Whistleblowing Protection- what, if any, policies would you implement to protect whistleblowers in the company?

Employees are often the first to realize that there may be something seriously wrong within the Company. However, they may decide not to express their concerns because they feel that speaking up would be disloyal to their colleagues or to the Company. They may also fear harassment or victimization. In these circumstances, they may feel it would be easier to ignore the concern rather than report what may be a suspicion of malpractice. A culture of turning a "blind eye" to such problems means that the alarm is not sounded and those in charge do not get the chance to take action before real damage is done. Whistleblowing can therefore be described as giving information about potentially illegal and/or underhanded practices i.e. wrong doing. this policy makes it clear that employees can voice their concerns without fear of victimization, subsequent discrimination or disadvantage. This Whistleblowing Policy is intended to encourage and enable employees to raise serious concerns within the Company rather than overlooking a problem or seeking a resolution of the problem outside the Company. Following are the unlawful acts in which whistleblowing is encouraged and whistleblower will be protected. Following is the list which is not definitive, but is intended to give an indication of the kind of conduct which might be considered as "wrong doing".

§ Breach of Fat-Be-Gone Code of Business Conduct and Ethics

§ Breach of or failure to implement or comply with any approved Fat-Be-Gone policy;

§ Knowingly breaching federal or provincial laws or regulations;

§ Unprofessional conduct or below recognized, established standards of practice;

§ Questionable accounting or auditing practices;

§ Dangerous practice likely to cause physical harm / damage to any person property;

§ Failure to rectify or take reasonable steps to report a matter likely to give rise to significant and avoidable cost or loss to the Company;

§ Abuse of power or authority for any unauthorized or ulterior purpose;

§ Unfair discrimination in the course of the employment or provision of services.

Now if anyone did any of the above mention wrong doing and somebody bellowed whistle then he/she will be protected if and only the following statement is true. This Policy is set to protect any employee who makes a disclosure or raises a concern under this Policy

§ Discloses the information in good faith;

§ Believes it to be substantially true;

§ Does not act maliciously or make false allegations, and

§ Does not seek any personal or financial gain.

Concerns will be investigated as quickly as possible. It should also be considered that it may be necessary to refer a matter to an external agency and this may result in an extension of the investigative process. It should also be borne in mind that the seriousness and complexity of any complaint may have an impact upon the time taken to investigate a matter. A designated person will indicate at the outset the anticipated time scale for investigating the complaint. The Company will not tolerate an attempt on the part of anyone to apply any sanction or detriment to any person who has reported to the Company a serious and genuine concern that they may have concerning an apparent wrongdoing. The Company will respect the confidentiality of any whistle blowing complaint received by the Company where the complainant requests that confidentiality. However, it must be appreciated that it will be easier to follow up and to verify complaints if the complainant is prepared to give his or her name. In the event that anonymity is requested and the information is given through the ethics hotline, the person will be given a case number and a time or times when he or she can call back for updates on the investigation of his or her complaint.

Question Number 4. Technology and Surveillance- What policies would you implement with respect to surveillance of employee activity? (For example, what policies would you implement for monitoring employee e-mail, web-surfing, phone calls, out-of-office activity, etc?

Internet monitoring is becoming more and more a common occurrence in the workplace. A few of the primary reasons for work places to use monitoring software is to prevent sexual harassment lawsuits, threatening viruses, bandwidth concerns and slacking off. Though these are valid issues, we would believe that constant monitoring is counterproductive. It promotes an air of suspicion and hostility among the employees. Also, by tracking and storing details of employee's email and web browsing, the employer may inadvertently be storing potential evidence that could be used against him/her in future litigation. Generally, the scope of our authority regarding surveillance is dictated by our company's privacy policy. We should develop and implement consistent policies and procedures for monitoring our employee’s activity that balance employees privacy interests with our company’s efficiency concerns. We should make these policies available to all our employees. It is probably best for us as we intend to use any form of surveillance to obtain informed consent from our employees before implementing a monitoring program to avoid any legal liability (such consent can take the form of a signed acknowledgement that the employee has received and read an employee manual that contains our company's surveillance policy). We are planning to monitor workplace-generated communications including voice mail, email, and other online activities but we will make sure that ours monitoring is not excessive and serves a legitimate business purpose.

In conclusion, we of course use some software to regularly monitor employee’s email, web-surfing, phone calls and constantly monitor those things for company’s privacy concerns but we do not interfere with our employee’s personal life and out of office activity. We clearly inform our employees that we constantly monitoring them and their activity and we will also let them know that we do that to protect company’s privacy.

Question Number 5: Employment Discrimination- What policies, if any, would you implement with regards to employment discrimination, be it gender based, or other, to ensure the company does not violate any anti-discrimination laws?

Federal law prohibits discrimination against any employee because of race, national origin, color, religion, sex, disability or age (forty and over) with respect to hiring, promotion, firing, compensation, transfer, termination or other terms, conditions or privileges of employment. Considering all those laws, our company support and will comply, with such federal law in all respects. Following are some of the policies for our company:

Equal employment opportunity: Our Company is an equal opportunity employer. All decisions concerning the employment relationship will be made without regard to age, race, color, religion, creed, sexual orientation, national origin, and marital status, the presence of any physical or mental disability, or any other status or characteristics. Discrimination or harassment based upon any of these factors is wholly inconsistent with our company values and will not be tolerated.

Discrimination and Harassment: free environment: Our Company’s employees have the right to work in an environment that is free of unlawful discrimination and harassment. The company prohibits discrimination and harassment based upon any individual's age, race, color, religion, creed, sex, national origin, marital status, and sexual orientation, mental or physical characteristics. Discrimination and harassment not only violate our code of conduct, but also violate federal law.

Harassment: Harassment is verbal or physical conduct that shows hostility toward an individual because of his or her status or characteristic, example, race, gender, color, etc. Sexual harassment includes:

· Unwanted sexual advances.

· Visual conduct: leering, sexual gestures, cartoon, picture

· Verbal abuse of a sexual nature, graphics, verbal commentaries about an individual's body.

· Suggestive or obscene email, letters, notes.

Complain Procedure- Discrimination, Harassment or Retaliation: Employees who feel they have witnessed or experienced discrimination, including harassment by a coworker, supervisor, client, customer, vendor, contractor or anyone else during the course of their work employment because of their age, race, color, religion, creed, sex, national origin, marital status, sexual orientation, mental or physical characteristics should immediately speak with a supervisor, manager or Human Resource Representative. Supervisor and managers must promptly refer all reports of discrimination, harassment to Human Resource Representative. All reports of possible discrimination will be treated seriously and thoroughly investigated. If the company determines that prohibited discrimination, harassment has occurred, it will take effective remedial action commensurate with circumstances.

Question Number 6: Sexual Harassment / Hostile Work Environment- What policies, if any, would you put in place to protect against sexual harassment and hostile work environment.

Aside from not engaging in this unacceptable behavior, it is critical for employees to understand what constitutes sexual harassment. According to the U.S. Equal Employment Opportunity Commission (EEOC), unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature constitutes sexual harassment.

Specifically, this applies when submission to or rejection of this conduct:

Explicitly or implicitly affects an individual's employment;
Unreasonably interferes with an individual's work performance; or
Creates an intimidating, hostile, or offensive work environment.

One of the best ways to avert a sexual harassment suit is to know what's involved. Be aware, for example, of the circumstances that characterize sexual harassment. We should know that sexual harassment is gender blind. That is, either the victim or the harasser could be male or female, or does the victim necessarily have to be of the opposite sex. Anyone can be a harasser- a supervisor, an agent of the employer, a supervisor at another location, a colleague, or even a nonemployee who has contact with the employees of our organization.

In addition, even those who are not directly affected can be "victimized" by the harassment; a victim could simply be an individual who is affected in some way by the offensive behavior, which, in order to be classified as sexual harassment, must be unwelcome.

Ideally, the harasser must be told from the start that his or her conduct is unacceptable, unwelcome, and must stop immediately. Of course, many victims are intimidated by their harasser and worry (rightly so in some situations) that by expressing their disapproval the behavior will continue or perhaps worsen. Sometimes harassers threaten their victims, claiming, for instance, that their jobs could be in jeopardy if they report the harassment. This is one reason why employees must have easy access to an employer complaint mechanism or grievance system.

Take Any Complaint Seriously: The best way we prefer to do to eliminate the problem is to prevent it from happening in the first place. In our sexual harassment policy, we will state clearly that sexual harassment will not be tolerated and if it does occur, those responsible will face serious consequences. If sexual harassment is occurring in the workplace, it is imperative that the employer act quickly and appropriately by investigating the complaint.

Question Number 7 Work place condition and safety- What policies, if any, would you implement with regard to work place safety and labor conditions, both in the company’s U.S facilities and Mexican facilities? (Assume for the purpose of this issue that a significant amount of money can be saved by cutting costs with regards to workplace conditions and safety)

A written safety policy provides the foundation for every successful safety program and could help organization avoid the expense, inconvenience, and other consequences of workplace accidents by making sure that employees know what is expected of them. Although we can orally inform employees of safety standards and procedures, for lasting impact there is no substitute for a written policy to which an employee may refer. And if each employee acknowledges that he or she has read the policy, it can help protect us when there is a workplace accident.

Workplace Safety Rules of the company Employee’s safety is the constant concern of our company. Every precaution has been taken to provide a safe workplace. [Name or title of the person in charge of safety] makes regular inspections and holds regular safety meetings. He or she also meets with management to plan and implement further improvements in our safety program. Common sense and personal interest in safety are still the greatest guarantees of our employee’s safety at work, on the road, and at home. We take employees safety seriously and any willful or habitual violation of safety rules will be considered cause for dismissal. Our company is sincerely concerned for the health and well being of each member of the team.

The cooperation of every employee is necessary to make this company a safe place in which to work. Our safety policy says that “Help yourself and others by reporting unsafe conditions or hazards immediately to your supervisor or to a member of the safety committee. Give earnest consideration to the rules of safety presented to you by poster signs, discussions with your supervisor, posted department rules, and regulations published in the safety booklet. Begin right by always thinking of safety as you perform your job, or as you learn a new one.’’ Following are the other safety request to our employees:

Accident reporting: Any injury at work no matter how small-must be reported immediately to your supervisor and receive first aid attention. Serious conditions often arise from small injuries if they are not cared for at once.

Specific safety rules and guidelines: To ensure your safety, and that of coworkers, please observe and obey the following rules and guidelines:

· Observe and practice the safety procedures established for the job.

· In case of sickness or injury, no matter how slight, report at once to your supervisor. In no case should an employee treat his own or someone else's injuries or attempt to remove foreign particles from the eye.

· In case of injury resulting in possible fracture to legs, back, or neck, or any accident resulting in an unconscious condition, or a severe head injury, the employee is not to be moved until medical attention has been given by authorized personnel.

· Never distract the attention of another employee, as you might cause him or her to be injured. If necessary to get the attention of another employee, wait until it can be done safely.

· Where required, you must wear protective equipment, such as goggles, safety glasses, masks, gloves, hair nets, etc.

· Keep your work area clean.

· Observe smoking regulations.

· Shut down your machine before cleaning, repairing, or leaving.

· Do not block access to fire extinguishers.

· Do not tamper with electric controls or switches.

· Report any UNSAFE condition or acts to your supervisor.

· Use designated passages when moving from one place to another; never take hazardous shortcuts.

Safety checklist: It's every employee's responsibility to be on the lookout for possible hazards. If you spot one of the conditions on the following list, or any other possible hazardous situation, report it to your supervisor immediately.

Slippery floors and walkways, Tripping hazards, such as hose links, piping, etc., Missing (or inoperative) entrance and exit signs and lighting, Poorly lighted stairs, Loose handrails or guard rails, Loose or broken windows, Dangerously piled supplies or equipment, Open or broken windows, Unlocked doors and gates, Electrical equipment left operating, Open doors on electrical panels, Leaks of steam, water, oil, etc., Blocked aisles, Blocked fire extinguishers, hose sprinkler heads, Blocked fire doors, Evidence of any equipment running hot or overheating, Oily rags, Evidence of smoking in nonsmoking areas, Roof leaks, Directional or warning signs not in place, Safety devices not operating properly, Machine, power transmission, or drive guards missing, damaged, loose, or improperly placed

Safety equipment: Your supervisor will see that you receive the protective clothing, safety shoes, safety belts and other safety equipment required for your job. Use them as instructed and take care of them. You will be charged for loss or destruction of these articles only when it occurs through negligence.

Conclusion

The company recognizes that the owners, supervisors, and all other employees share responsibility for a safe and healthful workplace. Management is accountable for preventing workplace injuries and illnesses. Management will consider all employee suggestions for achieving a safer, healthier workplace. Management also will keep informed about workplace safety and health, hazards and regularly review the company’s safety and health program. Supervisors are responsible for supervising and training workers in safe work practices. Supervisors must enforce company rules and ensure that employees follow safe practices during their work. All employees have responsibility for their own safety as well as for the safety of their fellow workers. They are expected to participate in the safety and health program, which includes immediately reporting accidents, hazards, and unsafe work practices to a supervisor or safety committee representative, wearing required personal protective equipment, and participating in and supporting safety committee activities. Our policy would be the same for both American and Mexican facilities.

Question: 8 Advertising- What policies, if any, would you implement with respect to advertising? Would you limit advertising of the company’s product in any way?

Advertising exerts a significant impact on consumers' lives (Pollay 1986). On the positive side, advertising has discouraged participation in harmful behaviors (such as drunk driving and drug use), encouraged participation in socially beneficial behaviors (such as conservation and physical fitness), and provided detailed information which consumers need to accurately conduct product evaluations. On the other hand, advertising has misled and deceived consumers resulting in misinformed and inappropriate product selections. But as a socially responsible company, we try to use advertisement as a pure means to inform our valued consumers about our product and services. To minimize the negative effect of advertisement and to keep our advertisement fair in terms of ethical and legal standpoint, we have create following policy as a guidelines for our marketing department.

At first we will make sure that is there anything about ads, the idea, their casting, the dialogue or even the media plan for instance that is likely to show a lack of respect to people who will see it? Second important thing we consider is our every advertisement should be prepared with a due sense of social responsibility and should conform to the principles of fair competition, as generally accepted in business. In addition to this, our advertisements will not contain statements or visual presentations which offend prevailing standards of decency. And it should be so framed as not to abuse the trust of consumers or exploit their lack of experience or knowledge. Special care should be taken to ensure that advertisements do not mislead children and young people as to the true size, value, nature, durability and performance of the advertised product. The composition and layout of advertisements will be such as to minimize the possibility of misunderstanding by the reader. For example, prices, illustrations, or descriptions should not be so placed in an advertisement as to give the impression that the price or terms of featured merchandise apply to other merchandise in the advertisement when such is not the fact. An advertisement should not be used which features merchandise at a price or terms boldly displayed, together with illustrations of higher-priced merchandise, so arranged as to give the impression that the lower price or more favorable terms apply to the other merchandise, when such is not the fact.

We will not limit the advertising of the company product as it is the vital way to communicate with our customers and let them know what we are offering and why our product best suits their needs. We belief that, advertisement is a kind of investment, that provides some direct financial return to our organization and helps to compete in the competitive global marketplace.

Question Number 9 Product liability- what policy would you enact for the company with regards to when it should pull a product from distribution? (For example should the company wait until legally forced to do so?)

In this particular situation we will take legal advice because, we need to establish the facts of the case, and whether we have a reasonable chance of defending a claim or at least reducing any liability. Secondly, if there is mistake from our side we will start by assessing the risk that the defective products will cause harm or loss. If these are more than minimal, take immediate steps to recall the products - contacting customers to advise them of the problem and arrange the return of the defective products. Giving adequate warning of the risks will help protect us from a claim if a customer subsequently suffers any injury or harm.

We may need to inform the authorities if this is a general problem with a product rather than an isolated incident (e.g. a problem with a particular batch of products which we have been able to recall). We should contact our local authority trading our service.

Other important issues we will want to consider include:

Investigating how the defect arose, and correcting any weakness in our systems.
Handling the recall in a way that sends a positive message to our customers.
Reintroducing the product (or an updated version of it).

Producing products that match the standards and best practice guidelines, and comply with specific safety regulations, will not necessarily protect us from a claim if our product causes loss or harm - the question is whether our product is as safe as people are reasonably entitled to expect - but might help reduce our potential liability. However, we will not be liable if we can show that the defect in our product that caused the damage was the inevitable result of complying with the law - for example, following a legally required safety procedure. Conversely, failing to meet standards and follow regulations is likely to significantly weaken our defense against any claim. Failing to follow specific regulations will also lay our company open to prosecution, even if our product hasn't caused any damage. Therefore these are the things we would like consider in our policy to protect ourselves from such incident and issues.

If we need to pull the product from the distribution then we will do it before we are force to do so by the legal authority. Because we value our customer and immediate correction from our side for the any inconvenience made to the customer provides us better customer trust in the market where we have to go back and again in the future.

References

Halbert, J.D., Terry, Ingulli, ESQ., Elaine, (2006). Law And Ethics In The Business Environment : South Western Cengage Learning.

http://www.bls.gov/opub/mlr/2001/01/art1full.pdf

http://www.marketingdonut.co.uk/marketing/marketing-strategy/product-strategy/product-liability-23-faqs#1

Student help center: BUILDING AN ORGANIZATION CAPABLE OF GOOD STRATEGY ...

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Tommy Hilfiger case analysis and strategic review

General Information

Arvind Brands Ltd, a wholly-owned subsidiary of Lalbhai Group flagship Arvind Mills based in Ahmadabad, was established in the year 1993 with the launch of Arrow. Arvind Brands today is one of the largest branded apparel manufacturing and marketing companies in India. The company brings to the Indian consumer a host of international and national brands, ranging from premium to mass market. The two licensed brands Arrow and Lee are market leaders in the premium men's formalwear and Jeanswear segments, respectively. Newport, the homegrown brand is the market leader in the mass-market casual wear segment. Other brands include Excalibur, Flying Machine, Ruggers and Wrangler. (investor.tommy.com)

Tommy Hilfiger Corporation, through its subsidiaries, designs, sources and markets men's and women's sportswear, Jeanswear and children wear under the Tommy Hilfiger trademarks. Through a range of strategic licensing agreements, the Company also offers a broad array of related apparel, accessories, and footwear, fragrance and home furnishings. The Company's products can be found in leading department and specialty stores throughout the United States, Canada, Europe, Mexico, Central and South America, Japan, Hong Kong, Australia and other countries in the Far East, as well as the Company's own network of outlet and specialty stores in the United States, Canada and Europe.(investor.tommy.com)

Discussion Questions:

1. Evaluate the long-term implication of the decision of Tommy Hilfiger to sell the rights to Mr. Murjani for Tommy Hilfiger products in India.

One of the major implications of the decision of the Tommy Hilfiger to sell the rights to Mr. Murjani for Tommy Hilfiger products in India is that India is the one of the biggest growing market in the world and it has lots of growing business possibilities and market. By selling the rights to Mr. Murjani, Tommy Hilfiger opened door for the new market. Beside this, Tommy Hilfiger is able to choose a manufacturer (i.e. Murjani) that has the skills and experience necessary to make its product. Furthermore, after selling the right to Murjani, Tommy Hilfiger can increase the brand exposure and generate extra revenues from the new market by enhancing brand image. Furthermore, Licensing out is not only a good and easy way for a company like Tommy Hilfiger to reap the benefits of globalization but also it enables a way to capitalize on the potential of foreign markets. Licensing to other foreign firms for production and distribution to different populations can enable a company to further profit from its technology while protecting itself from the overhead required to participate in foreign markets. By licensing out its technology, Tommy Hilfiger may generate income from unused portions of its intellectual property. In addition to making this potential energy kinetic, licensing enable a company to exploit other markets by allowing the licensee to apply the existing technology to a different market. When an invention is useful to several industries, licensing can prove profitable to both the licensor and the potential licensee as experts in separate fields. (Fernandez D.)

Some of the negative implication of the strategic licensing agreement is that Tommy Hilfiger may lose its brand identity in the future due to the lack of control over its international operations. Furthermore, Tommy Hilfiger may create its own competitors for very negligible portion of royalty in long run.

“Every licensee is a potential future competitor of the licensor. If the original licensing agreement does not stipulate the region within which the licensee may market the licensed product, the licensee could create problems for the licensor by insisting on marketing the product in third –country markets in competition with products already served in the market by the licensor”.(Phatak V. A., Bhagat S.R., Kashiak J. R.)

Another major limitation or negative implications of the Licensing is that the licensee may refuse to pay the regular royalties claiming that they have changed or altered the original service, product or the technology and the original product or the technology is no longer in used in the production or the manufacturing process. Beside this, because the royalty is usually paid in the local currency therefore, devaluation in the local currency may cause the decline in the value of the royalty in the home country currency. (Phatak V. A., Bhagat S.R., Kashiak J. R)

2. What should Tommy Hilfiger consider in the licensing agreement with the Arvind Group?

The licensing agreement is a complex legal document that begins by identifying parties to the agreement, as well as the dates of the agreement. It specifies the subject matter to be licensed, including patents and trade secrets. Beside this, the provisions or rights of the license, such as whether it grants exclusive rights or is subject to other agreements should also be specified. Any limitations, such as territorial and quantity restrictions, are also specified. A final section can specify duration, termination, and related provisions of the agreement. (referenceforbusiness.com)

In business, licensing agreements or arrangements are mutually beneficial. The licensor (Tommy Hilfiger) provides property right and the licensee contributes expertise in the particular industry or territory covered by the licensee. The resulting relationship becomes much the same as a joint venture or partnership. Licensing agreements include several types, including copyright licensing, patent licensing, merchandise licensing, trademark licensing, and software licensing. (referenceforbusiness.com)

It is important that proceeding with a prospective Licensing Agreement is done so with caution. Tommy Hilfiger must carefully consider every condition and term they wish to include in the agreement. Things to consider include the royalty percentage willing to be settled for and the initial term of agreement, meaning the length of time the initial term of the contract is to be for, in months or years. Tommy Hilfiger should also include clauses/articles that protect them from law suits of any kind that might arise, as a result of the marketing practices of the manufacturing company. Tommy would also need to be able to terminate the agreement in writing; in the event the manufacturer i.e. Arbind Group does not honor the agreement. Non-compliance can be due to non-payment of royalties or by not fulfilling a minimum sales requirement, in order for the agreement to remain in force, should this be included. Terms would however need to be reasonable and workable and not so strict as to cause disinterest by potential manufacturers in entering into a contract to market an invention. An inventor (Tommy Hilfiger) can study licensing agreements through search online and/or consult with an attorney who is experienced in composing and executing marketing contracts. (Lowrance J.) Licensors should also ensure that their business partner’s plans for expansion do not clash with their own. If a licensee starts to run a competing business side-by-side then the trademark owner or the Tommy Hilfiger can lose both credibility and business.” (Liu Twiggy). Therefore, Tommy Hilfiger should consider the future business plan of the Arvind Group.

In addition to this, when considering a licensing strategy, Tommy Hilfiger should look closely at how the licensing program will fit into the overall business plan of the company. The most ideal strategy should not only compliment but enhance a company's product line while providing an even more attractive position for the company along with the market in which it participates. Another good piece of advice is to use particularly stringent terms of licensing agreements when dealing with competitors. Additionally, if a company is attempting to license a technology that has been standardized, then it may be wise for it to decide not to compete with its licensees by avoiding the manufacture and sale of products in the markets where it knows it has licensed technology. Making a market or territory restriction in the licensing terms may prove beneficial to both parties as well.

3. How can Tommy Hilfiger ensure its brand reputation in India?

One of the principle and essential elements of a licensing agreement is the notion of “quality control.” The licensor Tommy Hilfiger must have mechanisms in place to ensure quality control standards and consistency in all licensed products. These standards must be outlined in the licensing agreement, and will serve as the guidelines for the proper use by the licensee for the remainder of the life of the license. In the written agreement, quality control measures should include: submission of product samples prior to approval, allowances for regular inspection of the licensee’s facilities, and the right of the Tommy Hilfiger to approve any product developed by the licensee. In accordance with the Lanham Act - the principle legislation concerned with trademark rights - licensors have the responsibility to control the use of their marks, or else face possible abandonment and loss of the mark. (John Jennings) Furthermore, to ensure the brand reputation Tommy Hilfiger should consider the Indian markets behaviors and they should have trademark usage guidelines. They should understand the risk of the market and should ensure that the licensee have criteria for selecting suppliers.

A serious problem of reputation could occur if a multinational company does not retain control over the production and marketing of its products by the licensee. A company can retain control over the production by providing for quality control in the agreement. Agreement could be reached with the licensee that provides for the permanent station of technical representative in the licensee’s plant to check on the quality of the products produced or the process being used. Alternatively, Tommy could visit to the production site and to the company’s production and quality control personnel that also could help the marketing of inferior-quality products. ”.(Phatak V. A., Bhagat S.R., Kashiak J. R.)

4. Can Tommy Hilfiger control the operations of Arvind Brands?

No, Tommy Hilfiger cannot control over its operation of the licensee because it is one of the major risks and disadvantages to licensing in terms of control mechanism. In this case, Tommy Hilfiger may lose control over the manufacture and marketing of its goods in India. As a mode of international market entry, licensing also may be less profitable than other choices because returns must be shared between two parties. Beside this, there is a risk that the foreign licensee may sell a similar kind of competitive product after the license agreement expires. Other risks and issues involve selecting a partner, as well as all of the general uncertainties in doing business with an international partner, including language, culture, political risk, and currency fluctuations. (referenceforbusiness.com)

Limitations of licensing include lack of control over manufacturing, quality, and marketing. More importantly, the licensee may become a competitor if too much knowledge and know-how is transferred.

Licensing tends to be more passive form of international operations, so that it is easy to slip into an arrangement whereby the market is totally left to the licensee to develop. For example, one respondent company had commented: the licensing deal is good arrangement because there is no work for licensor to do. The income just keeps on flowing to licensor. In this case of Tommy Hilfiger, the firm was undertaking no information gathering or any other activity in the licensed foreign market. The market had been left completely to the licensee. Usually the licensor was almost totally passive in the arrangement. (Buckely P., Pervez N Ghauri)

Therefore, applying strategic licensing agreement Tommy Hilfiger cannot control over the operation system of the Arvind Brands because licensing is one of the easy way to enter the international market and usually Licensor lose the control over its operations in this kind of strategy. To gain control over the operations of the Arvind Brands Tommy should move to equity international venture and share the risk and investment of the business equally.

5. Given the expansion in 2006 and 2007, should Tommy Hilfiger consider the equity international joint venture option?

Given the expansion in 2006 and 2007, Tommy Hilfiger will be better off if it goes for joint venture options because by doing so it can:

Share the risks

Jointly managed the risk associated in the Indian market

Can share the benefits

Aligned the interest with that of Indian business partners

Access the financial resources

Can accelerate the revenue growth

Help diversify the business

Helps better define industry boundaries i.e. it helps to build a stronger presence in unclear Indian territory.

Beside this, the company is growing rapidly during 2006 and 2007 that the retailer launched four new outlets in India, in Ahmadabad, Bangalore, Delhi, and Lucknow. These sites are in addition to stores already located in Bangalore, Chandigarh, Gurgaon, Hyderabad, and Kolkata. As of 2007, all nine Hilfiger outlets in India were franchised. The more new outlets opened, the more Tommy needs control over its operation for quality and control purpose. Joint ventures are extraordinarily helpful to some companies in gaining access to foreign markets. One of the aims of a partner in a joint venture is to have a majority interest in it; that way, it maintains control over a project. By going into joint venture Tommy Hilfiger can cut the costs of doing business as a way to save money.