international carpet wholesalers

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  • 1. INTERNATIONAL CARPET WHOLESALERS Chlo Avanzini Justine Fahmi Nadia Mendes

2. PRESENTATION Characters: Mr. James McHenry, buyer for International Carpet Wholesalers, New York Mr. Abdelhadi Hachad, managing director of Societe Maroc Tapis (SOMARTA) Ms. Paula Feldman, president of Intenational Carpet Wholesalers Janice, wife of Mr. McHenry 3. EXHIBITS Dialogue between Mr. McHenry and Mr. Hachad Fax from Mr. McHenry to Ms. Paula Feldman Telex from Ms. Feldman to Mr. McHenry Portion of a letter sent by Mr. McHenry to his wife Note sent from Mr. McHenry to Mr. Hachad 4. DIALOGUE: MR. MCHENRY IS MEETING WITH MR. HACHAD IN MR. HACHAD'S OFFICE TO FINALIZE THE AGREEMENT DISCUSSED THE DAY BEFORE Hachad Mr. McHenry, I had a long discussion with my brother last night. He is a co-owner of the business, you know, and I'm pleased to tell you that we will be able to meet your demand. I should tell you though, that since we'll have to increase our present production capacity a bit, there will be some delay in sending the first shipments. McHenry: How much of a delay? Hachad: About ninety days. That's forty-five days longer than you originally specified. McHenry: Could you send anything in forty-five days? Hachad: Of course, but not in the quantity you asked for yesterday. Right now, our present capacity is 5,000 square meters a month; 4,000 square meters is already exported to Germany, and your demand of 2,000 square meters a month in different sizes, shapes, and styles will necessitate not only boosting production but also making some modification in manufacturing. McHenry: Is that possible? Your factory looks like it's already working to capacity. I can't see how you'd install more looms; they're already so close together. Hachad: That's no problem. We can simply put more workers to a loom. Also, we do have another small factory in Sale that can take up some of the slack. We also have another workshop where we spin and dye the raw rug wool. McHenry: Well, I guess how you do it isn't really my business. I take your word that you'll figure it out. By the way, I noticed that a lot of workers in your factory are young girls. Is that customary? Hachad: Yes. All the factories employ young girls. Does that surprise you? McHenry: Well, not really. When I bought carpets from Iran, it was much the same, but I don't remember so many young girls. Hachad: Do you know what the working age for apprentices was in Iran? McHenry: I believe it was fourteen. Hachad: In Morocco, it's just twelve. Actually, though, those girls don't work for me. We have what's called a maalema system here. McHenry: What's that? Hachad: Do you remember the older women who were supervising the work teams? McHenry: Yes. Hachad: Well, they are called maalema. The maalema are experienced craftswomen, and they hire their own crews. We only pay the maalema. Even the state factories have maalema. It's an old tradition here, and one that works quite well. But now, back to business. McHenry: Sure. Hachad: About the wool, the question is, when can we begin receiving shipments? As I said yesterday, we could use 80,000 to 100,000 kilos a month. McHenry: Within forty-five days, providing I can get everything arranged with the Australian supplier within a week or two. Hachad: That soon? McHenry: I think so. Hachad: Well, the sooner we receive it the better. Until it arrives we won't be able to discount the prices as we talked about yesterday. We'll have to keep using the more expensive French wool. McHenry: Right. I understand that. Hachad: Regarding the wool and prices, my brother suggested that it might be to both of our advantages to work out a barter agreement. In other words, we will deduct the price of the wool from our finished rugs instead of making a separate transaction for the importing of wool and the exporting of carpets. McHenry: You mean we charge you nothing for the wool and in turn get a substantial break on the price. Hachad: Exactly. In that way we both save on all the foreign exchange expenses. McHenry: That's a possibility. The problem is we still have to use foreign exchange to pay for the wool since it comes from Australia. I'd definitely have to run that one by my boss in New York. Hachad: Well, think about it. How soon can you get an answer on that? McHenry: Well, I sent her a fax last evening about the terms. Shell get that today. I'll call her this evening to see what I can do about the wool. If I call at 6:00 P.M., it will be 12:00 noon in New York. I might be able to get an answer for you then. The two businessmen discuss about amount of deliverables, delivery date, the payment Many young girls work in his factory. Customary : the Moroccan factories employ young girls and the legal working age for apprentices is just twelve. System of maalema: experienced craftwomen and actually those who employ, supervise and pay the girls. 5. EXHIBIT 1: FAX FROM MCHENRY TO MS. PAULA FELDMAN, PRESIDENT OF INTERNATIONAL CARPET WHOLESALERS FEB 13, 1994 TO: P. FELDMAN FM: J. McHENRY RE: RUG AGREEMENT MET TODAY WITH A. HACHAD, RABAT MANUFACTURER OF HANDMADE CARPETS. HACHAD AGREES TO SUPPLY 2, 000 SQ. M. /MONTH. BREAKDOWN AS FOLLOWS: 1,000 SQ.M./MTH MOYEN ATLAS (15/15*) @ 140 DH/SQ.M.; 300 SQ.M./MTH RABAT (30/30) @ 300 DH; 400 SQ. M. /MTH CHICHAOUA (30/30) @ 300 DH/SQ.M.; 150 SQ .M./MTH PLAIN ( PLIED WOOL) 127 DH/SQ. M.; 150 SQ. M. /MTH SIMPLE DESIGN (2-COLOR 15/15) @ 135 DH/SQ. M. ROUNDS OR OVALS AT NO EXTRA COST. ALL PRICES F 0 B ALSO WORKED OUT AGREEMEMT FOR IMPORT OF AUSTRALIAN RAW WOOL FROM HEATHERSTONE. HACHAD WILL TAKE 80,000-100,000 KILOS/MTH. CAN YOU CONFIRM PER HEATHERSTONE? RUG QUALITY IS HIGH. HACHAD WELL ESTABLISHED AND IS CURRENTLY DOING BUSINESS WITH GERMANS. PLEASE ADVISE ASAP *15/15: fifteen horizontal knots and fifteen vertical knots per 10 square centimeters. The more tightly packed (30/30, 40/40), the better the carpet. 8.0 DH (Dirham) = 1 U.S. dollar. All the terms for the agreement: the amount of carpets in detail and the prices, details about SOMATRA. Purpose of this email : ask for advice to confirm agreement. 6. EXHIBIT 2: TELEX FROM FELDMAN TO MCHENRY FEB 14, 1994 TO: J. McHENRY FM: P. FELDMAN RE: RUGS AGREEMEMT SOUNDS BASICALLY OK, BUT PLAIN @ 127 DH/SQ.M. AND SIMPLE @ 135 DH/SQ.M. IS HIGH. ALSO NEED QUANTITY BREAKDOWN ROUNDS/OVALS. HEATHERSTONE CAN 'T CONFIRM 80,000 KILOS/MTH. 50,000 KILOS/MTH MAX TILL APR, THEN 80,000 KILOS: O.K. WHAT IS ADVANTAGE OF EXPORTING WOOL? ARE PRICES FOR MOROCCAN OR HEATHERSTONE WOOL? CALL ME TOMORROW A.M. ALL BEST Response to the fax mentioned before. Ms Feldman basically agrees with the terms, even if she finds some prices quite high. She asks for more details on the exportation of the wool. 7. EXHIBIT 3: PORTION OF A LETTER SENT BY MCHENRY TO HIS WIFE As I mentioned, Morocco is fascinating, and I have been quite successful arranging a deal here. The problem, though, is that I feel terrible about it, and really don't know what to do. This probably sounds like a contradiction, but I wish I could somehow undo what I've done. Why? Because I realize that by getting these rugs at such a good price, I'm directly contributing to the exploitation of children. Janice, you should see this factory! Little girls, no older than ten or eleven, some maybe even younger, are working forty-eight hours a week for 50 cents a day making these rugs. They sit four or five to a loom, tying knots hour after hour. The owner doesn't even "see" them. The only people he "employs" are their supervisors, older women called maalema. The maalema hire their own crews and barely pay these kids. I've tried to maintain an attitude that this is Morocco and this is the way it's done. At the same time, it really bothers me knowing that I'm perpetuating this situation. From what I hear, most of the factories are the same way, so I just can't go to another. I suppose I could ignore it I'm supposed to be a businessman after all, not a humanitarianbut I can't. I'm even thinking of telling Paula that I can't get a good deal, but thats nearly impossible since I've already faxed to her the details. As you can see, I'm in a quandary. The part of me that is a good businessman says that I should get the best deal I can; the part of me that is a human being says that I should have nothing to do with this exploitation. Of course, if I don't go through with this deal, I better start looking for another job. Ill let you know what happens. Ill probably leave for Turkey next week. Dilemma: great deal / Contribute to the exploitation of children. 8. EXHIBIT 4: NOTE SENT FROM MCHENRY TO HACHAD HOTEL RABAT Dear Mr. Hachad, I just got a telex from my boss. She says that the wool import deal is going to be hard to arrange. Also, she thinks your prices on plain and simple design (two- color) rugs are too high, so we'll have to do some renegotiation. Please call me when you return from Tangier. Sincerely, James McHenry Renegotiate the agreement in terms of import and price 9. EXISTING SITUATION Strenghts Weaknesses Working condition: they sit four or five to a loom Boosting production Not enough space to work Intercultural differences: Employ a young workforce Cheap labor for the Moroccan society Moral problem: they are children Management: Use maalema system Hierarchy of the work, he delegates his work The children are almost paid nothing Finance: Opportunity to make an agreement For both firms, its a good deal Mr. McHenry does not want to contribute to the expoitation of children 10. PROBLEM Mr McHenry is a businessman but this agreement brings out his humanitarian side. We are faced to a social problem: the exploitation of child labor. 11. PROPOSITIONS 1) Status quo: Mr. McHenry makes the agreement ignoring the way that the Moroccan company works. 2) Mr. McHenry accepts the deal and tries to convince Mr. Hachad not to employ young girls (even indirectly). 3) Mr. McHenry accep