Corporate Social Responsibilities of Reebok

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Challenges to Corporate Social Responsibilities
Company: Reebok International Ltd.

Student Name: Jedy Wang
Student #: 250476511
Teacher Assistant: Mike Dove
Due Date: 11/14/2008

Executive Summary
The 20th century illustrated a dispersing trend of capitalism as the end of the Cold War illustrated evident economic prosperity in Western countries. Consequently, many former Communist countries implemented economic reforms due to the perception that capitalism was the economic ideology to break away from poverty and low standard of living. The emergence of these newly industrialized countries engender fierce competition to labour-intensive corporations in high wage economies, which share emphasis in cost competitive strategies instead of quality; “[firms in developed nations] have been vulnerable to imports from newly industrialized countries (NICs) where abundant supplies of low skilled, low cost labour easily undercut their high wage structure”.1 The delineated scenario characterises a significant fraction of the apparel industries in developed nations that have been threatened by the price penetration strategy of NIC imports. In response to this competitive advantage of NICs, apparel firms initiated the globalization of production through subcontractors and subsidiaries, as trade barriers during the last decade of the 20th century declined at a remarkable pace. By relocating production facilities in developing nations where production inputs such as labour, were at optimal costs; MNEs regained competitive advantage through undercutting production costs. However, the common practice of outsourcing in nations that lack comprehensive regulation and knowledge in labour standards has become a global concern due to violation of employees’ working condition and welfare. Consequently, a trend of increasing awareness in ethical governance attracted global attention while posing the question: how to effectively transform the notion of corporate social responsibility, consideration of social consequences from business decisions, to these profit-driven MNEs? Currently, the attentive human rightists have exerted tremendous pressure upon industrial leaders through boycotting and protesting. The profound impact has successfully caused many corporations to transform image by promoting social responsibility and ethical awareness through pressuring suppliers and subcontractors to enhance labour standards. In addition, international groups are also interfering with the social obligations of multinational enterprises. Company Profile – Reebok

Company Description
Reebok International Limited, based in Massachusetts, is one of the leading sportswear producers that carries its main product lines in footwear and sports apparel. Like the rest of the apparel industry, the sportswear sector is also labour-intensive and competitive due to low entry cost for new firms. Thus, individual companies compete on quality, price and brand, which includes social image, to enlarge market share. The corporation has always had a rather remarkable history in social involvements with communities. While being a founding member of Business for Social Responsibility to promote ethical governance, Reebok has also been approached by Amnesty International to promote campaigns of the United Nations Universal Declaration of Human Rights.2 Issue

In order to remain competitive in the apparel industry, Reebok has inevitably joined the trend of outsourcing production to developing nations by relying on its subcontractor network in Asia. However, the lack of rigorous regulation in labour standards during the initial outsourcing period triggered the establishment of sweatshops, factories with horrendous working conditions and pittance wages. An exposure of its Hong Kong facility in 1997 reported, “due to poor safety conditions, workers lose fingers and even hands in machinery and are exposed daily to dust and noise pollution…” 3 As the result of public...
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