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Nokia India Exits Economic Zone: Employees Enter ‘Collective’ Conflict Zone

CASE STUDY, HUMAN RESOURCE MANAGEMENT
ET Cases, 12 pages

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Nokia India Exits Economic Zone: Employees Enter ‘Collective’ Conflict Zone

 

In 2014, after Narendra Modi took over as the Prime Minister of India, he invited foreign companies to invest in India with his ‘Make in India’ campaign. While the campaign was discussed among the business circles and became an agenda for several companies, the news of Nokia’s closure was doing the rounds. While business experts were lining up to discuss the benefits of ‘Make in India’, the Nokia employees and trade unions were negotiating with the company and urging politicians to save Nokia and their jobs. But all their efforts went in vain and Nokia ended its run in India on November 1st 2014, and shifted its operations to Vietnam.

Since January 2013, Nokia faced tax disputes amounting to more than $3.5 billion. The Tamil Nadu Sales Tax department accused Nokia of showing domestic sales as exports and evading sales tax, while the Income Tax department accused the company of unpaid taxes, interest and penalties relating to the import of software from its Head Office in Finland. However, Nokia denied all the accusations as baseless. In September 2013, Nokia sold its Devices and Services division to Microsoft for $7.5 billion but kept Nokia’s Sriperumbudur factory out of the deal since it was mired in tax troubles and seized by the IT officials. Though, Microsoft initially announced that Nokia’s existing plant in TSEZ would be a contract manufacturing facility, later the manufacturing was shifted to Vietnam. And hence from November 1st 2014 the Indian operations of Nokia at Sriperumbudur came to a grinding halt, leaving nearly 30,000 workers jobless disturbing the larger ecosystem.

While trade unions put efforts to save the plant, they could not do much except to protest and bargain the severance package for the last batch of the Nokia employees. Many industry experts opined that there was not much left for the trade unions to do except negotiating the severance package as none of the political parties and the governments seemed concerned in saving the interests of the workers...........................

Teaching Note Preview

Nokia India Exits Economic Zone: Employees Enter ‘Collective’ Conflict Zone

 

Synopsis

This case study enables a discussion on the role of trade unions and the collective bargaining that happened between the Nokia employee unions and the Nokia  management during the shutdown of its plant at Sriperumbudur, India. In 2013, the Tamil Nadu Sales Tax department and the Income Tax department had accused Nokia of evading taxes summing up to more than $3.5 billion. But Nokia denied of having any such arrears. In September 2013, it sold its Devices and Services division to Microsoft. Since January 2014, the Nokia employees and their unions have been persuading the governments of Tamil Nadu and the Centre to save the plant and their jobs, but to no avail. Nokia shut its operations in India on November 1st 2014 and started producing in another low-cost haven, Vietnam. This left 30,000 direct and indirect employees devastated with no means of livelihood and also came as a blow to the ‘Make in India’ campaign. The case study enables the participants to discuss
the role played by trade unions and debate about the alternate course of actions that could have benefited both the parties.

Prerequisite Conceptual Understanding (PCU)/Before the Classroom Discussion

  • • Gary Dessler and Biju Varkkey, “Labor Relations and Collective Bargaining”, Human Resource Management, 12th Edition (Indian Adaptation), Pearson Education, Inc., 2011 – To understand the role of trade unions, and collective bargaining in case of industrial disputes between the workers and the management of a company and the instruments used by the unions to bargain
  • • Trade Unions Act, 1926 and Industrial Disputes Act, 1947 – To understand the principles/basic tenets of collective bargaining from the provisions of the Acts

 

Case Positioning and Setting

This case study can be used in either MBA or Executive MBA or Executive Development Programs, for the following modules/topics in the Human Resource Management course:

  • • Labor Relations and Collective Bargaining – To understand the limits and limitations of Trade Unions in affecting a meaningful collective bargaining advantage
  • • Trade Unions Act, 1926 and Industrial Disputes Act, 1947 – To sensitize the participants to the principles/basic tenets of collective bargaining as interpreted from the Acts

 

Assignment Questions

  • I. What do you think were the reasons behind the shutdown of the Nokia’s Sriperumbudur plant? Was its decision justifiable? Could it have been avoided?
  • II. How were the TSEZ workers and unions trying to save the jobs and the company from the closure? Explain the role of trade unions and collective bargaining in case of issues related to workers in factories/companies? What could be the relevant provisions of collective bargaining (as applicable from Industrial Disputes Act, 1947 and Trade Unions Act, 1926) that can be invoked to present the case of Nokia’s employees?
  • III. ...................

 

Suggested Orchestration

The classroom discussion and analysis was facilitated under three broad sections [Exhibit (TN)-I] and could be summarized through the Board Plan [Exhibit (TN)-II]............

$4.57
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Product code: HRM-1-0020, HRM-1-0020A

Abstract


This case study can be used to sensitize the participants of the broad provisions/tenets of collective bargaining mechanism. Set in the backdrop of Nokia's decision to shut its Indian plant (in Sriperumbudur, Tamil Nadu), invoking the relevant provisions of collective bargaining, this case study requires the participants to debate on alternative course of action in the interest of the employees. While the Indian Prime Minister Narendra Modi's 'Make in India' campaign was gaining ground, Nokia was quitting the country to invest in the low-cost haven, Vietnam, leaving thousands of direct and indirect employees devastated. The resultant dissent (especially from Nokia's employees) was a telling tale of how a celebrated FDI can cause major disruption when it decides to exit. Earlier, in 2013, the Tamil Nadu Sales Tax department and the Income Tax department had accused Nokia of evading taxes summing up to more than $3.5 billion, while Nokia denied of having any such arrears.
In September 2013, it sold its Devices and Services division to Microsoft and shutdown its plant at Sriperumbudur on November 1st 2014. Even the efforts of various trade unions to persuade the Government of Tamil Nadu and the Government of India to keep the plant operating for the workers' benefits failed. What more could have been done by the trade unions in terms of collective bargaining or as industry experts said, was there no case at all for collective bargaining? How should have the governments dealt with the issue to avoid any negative effect on the country's investment climate?



Pedagogical Objectives

  • To understand how the political and business environment affects the inflow and sustenance of FDIs in the country in the backdrop of Nokia's entry (2005) into India and its exit (2014)
  • To understand the role of trade/labor unions in resolving industrial disputes by examining the efforts of Nokia India's employees to save their jobs
  • To examine the relevant provisions of Collective Bargaining (as enshrined in Industrial Disputes Act, 1947, and Trade Unions Act, 1926) and debate on the application of the same in the case of Nokia India
  • To discuss and debate on the alternative courses of action, if any, for both the aggrieved parties

Case Positioning and Setting
This case study can be used in either MBA or Executive MBA or Executive Development Programs, for the following modules/topics in the Human Resource Management course:

  • Labor Relations and Collective Bargaining - To understand the limits and limitations of Trade Unions in affecting a meaningful collective bargaining advantage
  • Trade Unions Act, 1926 and Industrial Disputes Act, 1947 - To sensitize the participants to the principles/basic tenets of collective bargaining as interpreted from the Acts



This Case Pack Includes:
 - Abstract
- Case Study
- Teaching Note (**ONLY for Academicians)
$4.57
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