Case Analysis: Hitting the Wall: Nike and International Labor Practice
Problem Identification
Established in the early 70's Nike, Inc., based in Beaverton, Oregon, USA faced a severe stream of criticism and experienced growing problems concerning their plants and employee treatment, mainly in Indonesia and Vietnam in 1988. Rising demand for Nike products, which almost doubled within a short period of time, led the company and its 350+ subcontractors to raise the production level. Series of labor problems and abuse such as cheap labor wages, poor working conditions, health and safety issues and underage workers exploitation, were the main issues Nike had to deal with. Furthermore, Nike, Inc. had to deal with managing the diversity of cultures and language barriers had to be overcome, while still be able to produce the high-quality product Nike is famous for. Throughout the 1990's Phil Knight, CEO of Nike, Inc. and the company itself lost their superb corporate image in the eye of the world and it became an international incident.
Causes of Problem
After establishing a name in the world, Phil Knight, decided to manufacture Nike's apparel in South Korea and Taiwan, and by 1982 already 86% of Nike's sneakers came from these two countries. Realizing that Asian countries like Indonesia, Vietnam and China provide cheaper labor cost, better government support and higher profit, Nike moved their production lines there, with Indonesia becoming an important location. In 1991, the daily minimum wage was barely $1 in Indonesia, compared to a typical daily wage of $24.40 in South Korea and a US hourly wage of about $8 in athletic shoe manufacturing. Even that the Indonesian government raised the minimum wage from 2,100 Rupiah ($1.00/day) to 2,500 Rupiah ($1.25/day), the new wage was still underneath the workers' living expenses. In 1992, these issues went outside of Indonesia and even hit Washington D.C., when President Clinton introduced the task force Apparel Industry Partnership (AIP) to develop and control labor standards for foreign
Established in the early 70's Nike, Inc., based in Beaverton, Oregon, USA faced a severe stream of criticism and experienced growing problems concerning their plants and employee treatment, mainly in Indonesia and Vietnam in 1988. Rising demand for Nike products, which almost doubled within a short period of time, led the company and its 350+ subcontractors to raise the production level. Series of labor problems and abuse such as cheap labor wages, poor working conditions, health and safety issues and underage workers exploitation, were the main issues Nike had to deal with. Furthermore, Nike, Inc. had to deal with managing the diversity of cultures and language barriers had to be overcome, while still be able to produce the high-quality product Nike is famous for. Throughout the 1990's Phil Knight, CEO of Nike, Inc. and the company itself lost their superb corporate image in the eye of the world and it became an international incident.
Causes of Problem
After establishing a name in the world, Phil Knight, decided to manufacture Nike's apparel in South Korea and Taiwan, and by 1982 already 86% of Nike's sneakers came from these two countries. Realizing that Asian countries like Indonesia, Vietnam and China provide cheaper labor cost, better government support and higher profit, Nike moved their production lines there, with Indonesia becoming an important location. In 1991, the daily minimum wage was barely $1 in Indonesia, compared to a typical daily wage of $24.40 in South Korea and a US hourly wage of about $8 in athletic shoe manufacturing. Even that the Indonesian government raised the minimum wage from 2,100 Rupiah ($1.00/day) to 2,500 Rupiah ($1.25/day), the new wage was still underneath the workers' living expenses. In 1992, these issues went outside of Indonesia and even hit Washington D.C., when President Clinton introduced the task force Apparel Industry Partnership (AIP) to develop and control labor standards for foreign