You are the CEO of Dell Corporation. Dell has developed a tablet device that is scheduled to enter the market for the holiday season. The major competitors for your product are Apple’s iPad and the Samsung Galaxy. Obviously, the iPad controls a significant part of the market. In consultation with the board of directors, you have decided that your marketing strategy should focus on price point. You plan to sell the “Dell Dream” device for a retail price 25% below the comparable iPad model. To that end, you have located a Malaysian manufacturer that has committed to produce the device for $50 per unit, which represents a 15% savings over the closest-priced U.S. manufacturer. As a result of your Malaysia plan, the Dell profit margin on the Dell Dream will be 30%.
Six months before the Dell Dream is launched, a consumer action group begins protesting outside Dell headquarters. The group claims that the Malaysian manufacturer scheduled to produce the Dell Dream employs children as young as 5 years old and operates under “sweatshop” conditions, meaning that workers are required to put in 60-hour work weeks and earn the U.S. equivalent of 50 cents per hour.
The sweatshop issue is discussed at the next board meeting. The board is considering switching back to a U.S. or European manufacturer, but doing that would mean a reduction in profit margin and the risk of devalued stock shares and/or reduced success for the Dell Dream. The board asks for its options and your advice. What do you tell the board? In a 2- to 3-page, double-spaced paper, give your response. Be sure to discuss the board’s duties, the shareholders’ expectations, and the alternative models of corporate governance which could influence their decision on this matter.