Hitting the Wall: Nike and International Labor Practices
HITTING THE WALL: NIKE AND INTERNATIONAL
LABOR PRACTICES
Synopsis of The Situation
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 fashion trends to some of the world’s most influential consumer. Selling a combination of basic footwear and street-smart athleticism, Nike pushed its revenues 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 labor 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 labor circles and activist 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 Nike’s products was based on selling a high profile fashion item to affluent Americans, the manufacture of these sneakers was based as an arms-length and often-uneasy relationship with low paid, non-American workers.
Key Issues Nike 's strategy of shaving costs caused ethical dilemmas that ultimately damaged its reputation. Nike outsources all of its manufacturing. This approach has provided Nike with huge profits, from a 1972 level of $60,000 to a startling $49 million in just 10 years. Production is now globalised, with different countries concentrating on different parts of the process depending on what they are good 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 arrangement with its subcontractors, stating that, it is not they who employ cheap labor, but their
LABOR PRACTICES
Synopsis of The Situation
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 fashion trends to some of the world’s most influential consumer. Selling a combination of basic footwear and street-smart athleticism, Nike pushed its revenues 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 labor 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 labor circles and activist 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 Nike’s products was based on selling a high profile fashion item to affluent Americans, the manufacture of these sneakers was based as an arms-length and often-uneasy relationship with low paid, non-American workers.
Key Issues Nike 's strategy of shaving costs caused ethical dilemmas that ultimately damaged its reputation. Nike outsources all of its manufacturing. This approach has provided Nike with huge profits, from a 1972 level of $60,000 to a startling $49 million in just 10 years. Production is now globalised, with different countries concentrating on different parts of the process depending on what they are good 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 arrangement with its subcontractors, stating that, it is not they who employ cheap labor, but their
References: Bartlett, C., Ghosal, S., Birinshaw, J. (2004). Transnational Management 4th Ed. New York: McGraw-Hill/Irwin. "Nike 's New Code of Conduct". (1997). Instituto per Il Lavoro. Retrieved 1/30/2204 from http://www.ipielle.emr.it/mqsr/docs/esperienze/codici/NIKE%20NEW%20CODE%20OF "Top Cambodian Garment Union Leader Shot Dead". (2004). Reuters web site. Retrieved 1/29/2004 from www.reuters.com/newsArticle.jhtml?type=topNews&storyID=4181868 "Wages and Living Expenses for Nike Workers in Indonesia". (1998). Global Exchange.