Hitting the Wall: Nike and International Labor Practices Essay

Based in Beaverton, Oregon, Nike had been a corporate success story for more than three decades. It was a sneaker company, but one armed with an inimitable attitude, phenomenal growth, and the apparent ability to dictate path trends to some of the gentlemans gentlemans most influential consumer. Selling a combination of basic footgear and street-smart athleticism, Nike pushed its r stillues from a 1972 level of $62,000 to a starting $49 million in just 10 years.In the 1980s and 1990s, Nike had been plagued by a series of cut into incidents and public relations nightmares underage workers in Indonesian plants, allegations of coerced overtime in China, dangerous working conditions in Vietnam. For a while, the stories had been largely confined to assiduity circles and militant publications, until a young female worker had died in a Nike contracting factory in 1997, the labor conditions at Nike had hit the mainstream.While the marketing of Nikes products was based on selling a naug hty profile fashion item to affluent Americans, the manufacture of these sneakers was based as an arms-length and often-uneasy affinity with low give, non-American workers. list Issues Nikes strategy of shaving costs ca utilise ethical dilemmas that ultimately damaged its reputation. Nike outsources all of its manufacturing. This approach has provided Nike with grand nets, from a 1972 level of $60,000 to a startling $49 million in just 10 years. occupation is now globalised, with different countries concentrating on different parts of the process depending on what they are true(p) at, or what they can do most efficiently or cheaply. Poorer countries get the less lucrative activities such as lowly paid semi-skilled or unskilled production or assembly. This approach also allows Nike to keep an arms-length constitution with its subcontractors, stating that, it is not they who employ cheap labor, but their contracted suppliers, hence the responsibility lies with the latter.Define the ProblemNike has a difficult situation to resolve. Its strategy to use celebrity endorsements to develop a strong brand identity operator had the result that Nike became by the 1990s one of the worlds best known brands, as nearly as a global symbol of athleticism and urban cool. This situation began to change by 1998, when currentness woes in Asia along with the damage to its image resulted in Nike experiencing a loss for the first time in 13 years. This strategy resulted in Nike requiring steep wage concessions from its subcontractors to continue its intense growth patterns.Nike has always paid the lowest possible wages in Indonesia, claiming year after year that it could not afford even to pay the spheres minimum wage. Each year, Nike contractors in Indonesia refused to pay minimum wage raises of a few cents a day. Thanks to a corrupt and inefficient government, they usually got away with it. Adding to this problem was the give up of child labor. Nike went into Pakistan, k nowing full well that child labor is an ages-old practice there and taking no precautions whatsoever to prevent the use of child labor in the production of its soccer balls.We have to discontinue that Nike expected to profit from its Pakistani contractors known usage of bonded child labor. Nike further tarnished its reputation by attempting to burn information that had come to the attention of the general public regarding its practices, resulting in a lawsuit. Mike Kasky is suing Nike, Inc. Under atomic number 20 laws regulating unfair competition and false advertising. Kasky claims that when an internal audit was leaked to the press that revealed illegal employment practices in Nikes factories in China, Vietnam, and Indonesia, Nike responded by issuing to the press numerous statements it knew to be false.The California courts ruled brook year that Nikes PR effort was meant to bolster its image and improve its sales so indeed, it did aggregate to advertising, and, as such, it needed to be truthful. Alternative Solutions Nike must to enforce its own mandate of Conduct with its subcontractors. This Code has been amended some(prenominal) times, but had been very general in its listing of business practices. Its current stochastic variable stipulates many implyments that we take for granted, one of which is that a subcontractor certifies that it pays at least the minimum total compensation involve by local law, including all mandated wages, allowances and arrive ats.Another option for Nike would be to contract with a U. S. shoe manufacturer. Although the improvement of having its suppliers overseas has been the low prices for the finished goods, Nike would gain an advantage by providing work for the people at home. make in USA labels are very important to many Americans. Also, the combination of job creation and nudity to providing equitable wages and benefits for its workers as required in this country could reduce the uproar about its labor practic es, especially among the youth.In addition, Nike could incorporate at least one factory into a tourist attraction, providing visitors with the fortune to tour the plant, learn the history of the company, and become more familiar with the products Nike trains, thus developing more client loyalty. A third option for Nike would be to both enforce its Code of Conduct and invest at a high level in the countries where it has factories, and highly advertise those efforts.Regarding to Nikes web site, since 1997, Nike, with help from several of its key partners, has supported micro-enterprise ventures in Asia, playing a small but significant and direct federal agency in building and expanding the number of locally-owned businesses in mostly rural areas throughout the region. Nike has funded micro loans and provided technical assistance in Thailand, Vietnam and Indonesia, working with the Population and Community Development Association (PDA), Vietnamese Womens Union and hazard Internat ional, respectively. The press has given faces to the people who have been affected by Nikes contractors exploitation.Nike must rectify the indemnification by giving faces to the people who have been affected in a positive way by the loans and other assistance given to the local populations. This, coupled with Nikes firm stance on the give-and-take of those making its goods, would help regain its lost positive image. In addition, this option would forge a stronger relationship with the countries where the factories producing Nikes products are located. It would also help Nikes subcontractors to entice and retain the best local employees, thus ensuring high quality products.Selected Solutions to The Problem This change in how Nike will handle its operations has significant drawbacks. intimately adhering to its Code of Conduct will be very overpriced for Nike. Nikes success has been heavily operate by the aggressive stance it has taken on labor costs. In addition, Nikes subcontr actors have used the freedom given to them to provide Nike the labor expense level they expect while also allowing themselves to profit as well. Nike will now be monitoring their subcontractors workplaces and wage practices, which will place a pedigree on their relationship.This new focus for Nike will require the company to divert some of its attention from its main marketing focus to supervise the overseas operations. Expected Results An immediate benefit of this decision would be the good press it would generate that Nike would be willing to put pressure on its suppliers so that the people who produce its goods are treated fairly. Another benefit would be to align Nikes suppliers actions with Nikes vision as listed on its web site www. nike. com to bring inspiration and innovation to every athlete in the world.This would include those employed by Nike because the company considers all people to be athletes. A third benefit would be to prevent work stoppage strikes that had previ ously affected the company in Indonesia. Positive and disallow Results This option would require Nike to make a major shift in its focus from having a limited, long-distance relationship with subcontractors to playing a more active role in the manufacture of its products due to the propinquity of its suppliers. This significant change in how Nike does business would be very expensive, both in terms of the fiscal outlay and use of personnel.It would require a more direct involvement of the company in a portion of the business in which it has no first-hand experience, which would entail a considerable learning curve. This would result in major upheaval for the company, and a loss of confidence by investors. Nike would also lose the competitive butt of its competitors who have lower foreign wages. To reinstate the Nike image back to its earlier prominence, Nike would be wise to mesh the option to enforce its Code of Conduct, and invest in the countries in which its factories are lo cated.The Code of Conduct should require unannounced audits of Nikes factories at random, frequent time intervals to ensure compliance to rules and regulations. Equipment should be inspected to meet higher safety standards than would be required in the host country. For example, if the factory is located in Indonesia, the equipment should be inspected to be compliant to United States Occupational Safety and Health Association (OSHA) safety standards. Doing so is above-and-beyond what may be considered reasonable and should shed positive light on Nikes effort.In addition, hiring documentation should be corroborate in the audits to assure that workers are of the appropriate age, and that children are not placed into the workforce. Subcontractors would be trained in cultural awareness and required to maintain consistent and reasonable management practices. This approach would be expensive for Nike. The company will also have to expend more energy to both monitor the manufacturing faci lities and unsex which small businesses to support, diverting its attention from the companys primary focus of marketing its products and making a profit.In addition, making investments in other countries will help Nike relate in more personalised ways to their local environments. This will make it more difficult for Nike to direct its subcontractors to move to another country when local labor wages have become too expensive. However, there would probably be no lack of interest if movement to new countries became necessary with Nikes products so well known. It would ultimately choke up the companys ability to be competitive with the other shoe manufacturers who use Indonesian labor.