Hitting the Wall: Nike and International Labor Practice

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Hitting the Wall: Nike and International Labor Practice
BY SEASON

ISSUE DEFINITION
How do Nike do the international labor practice effectly?

SITUATION ANALYSIS
In the mid-1990s Nike, one of the world's most successful footwear company, is hit by a spate of alarmingly bad publicity. After years of high-profile media attention as the company that can "just do it". Nike is suddenly being portrayed as a firm that relies on low-cost, exploited labor in its overseas plants. Nike officials vigorously deny the charges, claiming that Nike has no control over the independent contractors who manufacture Nike shoes. But the activists will not retreat. Eventually, Nike must learn to deal with the activists' claims and with the tangle of conflicting data that surrounds the concept of a "fair" or "living" wage.

Just like McDonald with its most recognized hamburger - a flat patty of ground meat, usually beef, that is broiled, grilled, or fried and usually served in a bun- is a symbol of American pride all around the world, Nike with its footwear, apparel and all other sport product embodied of swoosh logo is a symbol of American business success in sport, athletic and fashion industry. The company history recall that The Nike athletic machine began as a small distributing outfit located in the trunk of Phil Knight's car. From these rather inauspicious beginnings, Knight's brainchild grew to become the shoe and athletic company that would come to define many aspects of popular culture and myriad varieties of 'cool.' Nike emanated from two sources: Bill Bower man’s quest for lighter, more durable racing shoes for his Oregon runners, and Knight's search for a way to make a living without having to give up his love of athletics. In 1963, Phil Knight traveled to Japan on a world-tour where he met with a Japanese running shoe manufacturer, Tiger--a subsidiary of the Onitsuka Company, presenting himself as the representative of an American distributor interested in selling Tiger shoes to American runners. The Tiger executives liked what they heard and Knight placed his first order for Tigers soon thereafter. By 1964, Knight had sold $8,000 worth of Tigers and placed an order for more and ended up hiring a full-time salesman, Jeff Johnson. After cresting $1 million in sales and riding the wave of the success, Knight devised the Nike name and trademark Swoosh in 1971 and went from $10 million to $270 million in sales. Beside the swoosh logo, Nike was also personified by its motto: just do it.

Company business strategies to be competitive, low price seller and maximize profit, Nike had to find a way to keep its labor cost as low as possible. The company adopted a strategy that will take advantage of the new trend offered to many multinational enterprises by trade agreement, technology and communication sweeping developed and developing countries alike by outsourcing production to low labor cost countries. As noted by Christopher, Sumantra, and Paul , “the company would shave costs by outsourcing all manufacturing and has all products made by independent contacting factories”. Another strategy which is a logical consequence of the above mentioned was that Nike chose not to have “physical assets”. Before to look at how outsourcing ruined the company reputation and operations, the next section will explain the outsourcing concept and look at its advantages and disadvantages.

STRATEGIC OPTION
In its early beginning, outsourcing is a business strategy by which a company is “purchasing from someone else a product or service that had been previously provided internally”. In general, products manufactured in repetition and routine sequence are outsourced within the country or overseas. By the end of the twentieth century, the world was becoming a global village, term coined by Levitt who noticed that “the world’s needs and desires have been irrevocably homogenized with the commonalty of...
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