Boohoo Case Study

Business Cases Study

The business case analysed is a Financial Times article titled “Boohoo faces Probe that could threaten access to US.” The article was written by Patricia Nilsson dated March 2nd 2021 and can be accessed through the url https://www.ft.com/content/16e028d0-eb9e-4dea-9295-5bbeb994531f

Boohoo

Boohoo is a fashion and clothing retail brand based in the United Kingdom and owned by Boohoo Group plc. The brand is majorly involved in online clothing and fashion retailing all over the globe through its website and other social network sites. According to Boohoo.com (2021) the company, founded in 2006, specializes in own brand fashion clothing with an inventory of more than 36,000 different products. A majority of these products include apparel, trendy clothes, shoes and accessory that are targeted towards the 16-30 age group demographic. According to Barakaat (2021), the company generates up to $1.1 billion in sales annually and employs up to 2600 individuals across its supply chain and various corresponding locations all across the world. The company also owns other clothing brands within the UK including PrettyLittleThing, BoohooMan, Nasty Gal, Miss Pap, Karen Millen Coast as well as Oasis and Warehouse design. Based on Boohoo Group plc LinkedIn page (2021), Boohoo sources its products from these brands along with multiple other individual fashion designers and suppliers predominantly from the City of Leicester, UK, leading to a wide range of offerings in fashion, clothing, cosmetics and beauty products enhancing its sales strategy.

Despite its effective success within the UK as well as in the global market, Boohoo has been involved in multiple scandals surrounding its business and production strategy. Boohoo has been repeatedly criticized for promoting fast fashion clothing and trends at the expense of their impact to the environment. Further the company lost up to 46% of its value in 2020 following allegations in the Sunday Times regarding its failure to protect workers and pay adequate wages to their suppliers (Doody, 2020). In addition, the chosen case study highlights a potential for investigation by the United States Customs and Border Protection Authority regarding forced labour allegations filed by international anti-trafficking organization, Liberty Shared. These issues facing Boohoo highlight significant illustrations of multiple topics learnt in the second part of the class module including Strategy Execution: Corporate Culture and Leadership, Ethics and Corporate Responsibility as well as Environmental sustainability and strategy.

Case study Summary

The article highlights a potential probe of the company’s supply chain by the United States Customs and Border Protection (CBP) authority that could impact Boohoo’s rights to import cloths into the United States. Following a complaint by an anti-trafficking organisation Liberty Shared, with regards to potential employee abuse within Boohoo’s supply chain, questions were raised regarding whether or not the company fully complies with the US rules and regulations regarding forced labor. On account of evidence presented by a review commission set up by Liberty Shared in 2020, in addition to reports by the company’s suppliers such as labor abuse allegations by Boohoo’s suppliers in Leicester last summer (Bland, 2020), Liberty Shared highlighted widespread prevalence of undocumented cloth makers who were paid illegally low wages and often worked for suppliers off the books. These and other identified practices, according to Liberty Shared, satisfied almost all of the international Labor Organizations indicators for forced labor.

The article also highlights that the CBP acknowledged that the evidence provided sufficient basis to launch an investigation against Boohoo. Should the CBP pursue it and find evidence of partial or whole use of forced labor in the making of the cloths within Boohoo’s supply chain, then Boohoo’s merchandise could be detained in the US borders in accordance to standard procedures. While Boohoo highlighted that they have not received any official communication with regards to the investigation, a supply chain review commissioned by the company revealed extensive underpayment of wages along with dangerous working conditions for a majority of its suppliers. However, the company concluded that it had not breached any of the UK’s Modern Slavery Act laws. While this may be true, Liberty Shared maintains that the law and rules in the United States are stricter compared to those in the UK as concerns the accountability of companies to their labor practices and supply chains. Nilsson (2021) advances that should Boohoo be found guilty of labor law breach, they stand to lose the US market which makes up more than a quarter of its revenues stream and represents the company’s fastest growing market. Elements within this case link up to multiple topics covered within the second part of the module and are effectively discussed.

Strategy Execution: Corporate Culture and Leadership

Different aspects of the case such as the development and management of Boohoo’s supply chain as well as adherence to various rules and regulations within the different markets that Boohoo operates in such as the UK and the US link up to corporate culture and leadership in strategy execution. Corporate culture and leadership looks into how leaders within an organization or company lead in light of the set company culture. According to Tanner (2021) corporate culture and leadership enables leaders to hold themselves and each other accountable for all the activities that occur within the organization while at the same time upholding and reinforcing the values and culture that the organization stands for and is run by. It is corporate leadership which not only takes account of the organization’s Key Performance indicators and profitability but as Arthur et al. (2017) points out, it also values the reputation and brand of the company and enhances it by maintaining a reputable and effective corporate culture and values.

The case study indicates a significant lack of corporate culture leadership within Boohoo’s corporate management structure. In addition paying very minimal attention to the working conditions and welfare of their suppliers and their workers, the company has not taken any action to assist or effectively sustain their workers. According to Boohoo.com (2021) the company’s philosophy “we don’t take life and fashion too seriously” is not only reflected in the wide range of products in clothes, cosmetics and accessories sold but also in how the company is managed and in their strategy execution. Nilsson (2021) advances that despite conducting an evaluation of their supply chain through a review commission, and revealing a severely underpaid workforce within its ranks as well as hazardous working conditions, the company did not take any steps to correct the situation, rather they concluded that the company had not breached any rules within the UK Modern Slavery Act. These not only confirm a complete disregard of its own employee welfare but also a disregard to the company’s reputation and brand image indicate a significant gap in the company’s corporate culture and leadership.

Ethics and Corporate Responsibility

The ignorance of employees’ working conditions and payment also speaks to Boohoo’s ethical standards and corporate social responsibility. According to Bradley (2020) Corporate Social Responsibility (CSR) refers to the need for organisations to be good corporate citizens. It entails going beyond the law requirements to ensure effective protection of the business environment and contribute to the social welfare of all its stakeholders including employees. Boohoo again demonstrates a lack of effective corporate responsibility and ethics on account of how they handle the welfare and situation of the workers within their supply chain. While the companies supply chain review commission confirms the existence of insufficient remuneration impacting forced labor along with a hazardous working environment for most of the employees within its supply chain, Boohoo fails to act because regardless of the situation , the company has not yet breached the law on account of the UK Modern Slavery Act. The company exhibits insufficient corporate responsibility on account of being legally on the right despite the welfare of their linked employees.

In addition, while the company’s practices and strategy execution in the supply chain remains within the bounds of the law in the UK, Nilssen (2021) advances according to Duncan Jepson, the MD of Liberty Shared, that the rules are fairly more strict in the US and international market compared to the UK. Given the universality of these ethical norms within the global market, Boohoo should abide by the higher standards of ethics set in the international level than the low standards in their locale. A major impact of the Integrated Social Contracts theory according to Johnson et al. (2017), is that Adherence to universal ethical norms take precedence over local norm. A local custom, culture or ethical standard is not ethical if it violates a universal ethical norm and standard. As such despite abiding by the UK Modern Slavery Act, which is less strict than the rules and regulations in the US and international market, Boohoo exhibits a deficiency in ethics and corporate responsibility.

Environmental Sustainability and Strategy

The case study also links to the topic of environmental sustainability and strategy considering Boohoo is in the fast fashion industry, a leading cause for harmful carbon emissions and environmental pollution. According to Johnsen (2019) the fast fashion industry emits more carbon than maritime shipping and international flights combined. In addition to the carbon and greenhouse gases emitted due to the decomposing of dumped apparels, the fast fashion industry also generates greenhouse gases on account of the high amount of energy used in the manufacturing, production and transportation process. Charpail (2017) further advances that the fast fashion industry not only engages significant consumption of water but also contributes significantly to water pollution. Up to 20,000 liters of water is required to produce just 1kg of cotton a major raw material in the fast fashion industry; this effectively generates significant pressure on the supply of water an already scares resource around the world (Charpail, 2017). In addition, waste waters containing toxic substances such as mercury, arsenic, lead and others are often released directly into rivers by fast fashion industries further accentuating the impact of the fast fashion industry for which Boohoo is a major part of.

On top of the allegations of forced labor advanced against Boohoo by Liberty Shared, the company has initially been charged on allegations of forced labor and its failure to protect workers and suppliers in the UK. Boohoo has also been involved in multiple scandals surrounding its business and production strategy. The company has been repeatedly criticized for promoting fast fashion clothing and trends at the expense of their impact to the environment this speaks to the company’s inadequate environmental sustainability strategy. While based on the company’s website Boohoo.com (2021), the company has engaged in various environmental sustainability activities such as reinventing and encouraging recycling among its customers as well as using recyclable packaging bags, the company still has a long way to go in developing and implementing an effective and sufficient environmental sustainability strategy.

Summary

The case study not only indicates a potential of loss of market by Boohoo in the US based on adherence to labor laws, but also indicates a significant deficiency of effective strategy execution, corporate leadership culture,ethical and corporate responsibility as well as environmental sustainability strategy. This presents a significant problem for the company’s ultimate long-term growth and success. While the company effectively adheres to the UK rules and standards, in the international market, they still fall short of the effective management structures and quality required for a multinational retailer. As such to enhance effective growth, the company should re evaluate its management structure, culture and philosophy towards paying more attention to all stakeholders including their employees. The company should also re evaluate their Corporate Social responsibility to include its employee’s social welfare and working conditions while at the same time advancing a better environmental sustainability strategies to ensure the conservation of the environment and a move towards carbon free production.

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References

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