Hitting the Wall: Nike and International Labor Practices
Case Study
"Hitting the Wall: Nike and International Labor Practices"
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 ten years" (Bartlett, Ghosal, & Birinshaw, 2004). "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" (Ballinger & Olsson, 1997). 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 contracted suppliers, hence the responsibility lies with the latter" (Ballinger & Olsson, 1997).
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 country 's 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" (Global Exchange, 1998). Adding to this problem was the issue of child labor. "Nike went into Pakistan, knowing 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 conclude that Nike expected to profit from its Pakistani contractors ' known usage of bonded child labor" (White, M., 1997). Nike further tarnished its reputation by attempting to dilute information that had come to the attention of the general public regarding its practices,
"Hitting the Wall: Nike and International Labor Practices"
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 ten years" (Bartlett, Ghosal, & Birinshaw, 2004). "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" (Ballinger & Olsson, 1997). 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 contracted suppliers, hence the responsibility lies with the latter" (Ballinger & Olsson, 1997).
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 country 's 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" (Global Exchange, 1998). Adding to this problem was the issue of child labor. "Nike went into Pakistan, knowing 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 conclude that Nike expected to profit from its Pakistani contractors ' known usage of bonded child labor" (White, M., 1997). Nike further tarnished its reputation by attempting to dilute information that had come to the attention of the general public regarding its practices,
References: "Research into Nike 's Global Alliance Assessment Study". (2000). Clean Clothes Org. "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.