Issues Affecting Nikes Decision to Move Its Operation in Vietname

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There are a number of issues that affect Nike’s pay decision in Vietnam. Retail is an extremely competitive industry. When selling products that require intensive labour, organizations like Nike are faced with pressure to decrease their labour costs in order to increase their profit margins. Nike is able to remain competitive because they have relocated many of its manufacturing plants to Vietnam, where labour costs are extremely low, therefore increasing their profit margin. If they were to make their products in US, they may not break even because they will need to factor in all operational costs, such as executive salaries, pensions and benefits, and many other expenses not required in Vietnam. Organizations such as Nike are interested in setting up their manufacturing sites in countries like Vietnam because the Asian business culture is known for its lenient business practices and laws. In addition, Vietnam’s government policies, laws and regulations are a lot more lenient than those in the United States, therefore making it more profitable for Nike to manufacture their products in Vietnam. Thus, third world countries like Vietnam are positioned to have higher production of Nike products. For example, they may have shorter lunches and breaks, more work days, less vacations time and/or holidays, resulting in more work time available to make Nike products. There are a number of organizational factors that affect the decision to relocate manufacturing to Vietnam, all of which are cost saving measures. In terms of strategy, by saving money in production, Nike can then focus their efforts on marketing and creating new technologies. In terms of human capital, employees are performing repetitive, less knowledge based work, and therefore workers tend to be less educated, have lower skill sets resulting in lower demands and expectations. Therefore HR policies in Vietnam will only provide the basic needs for employees. Nike’s decision to relocate to Vietnam for...
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