May 31, 2010
Instructor: Adrianne Ford
Nike: The Sweatshop Debate
The purpose and intent of this paper is to describe the legal, cultural, and ethical challenges that face the Nike Corporation in their global business ventures. This paper will also touch on the roles of the host government and countries where Nike manufactures their products and the author will summarize the strategic and operational challenges that Nike managers face in globalization of the Nike product.
Nike is a United States based sports company in Beaverton, Oregon. Nike’s original name was Blue Ribbon Sports and its mission is to be the world’s leading sports and fitness company (Nikebiz, 2010). Nike had two options for the manufacturing of footwear products. The first option is Nike can own and operate the factories and manufacture the product. The second option is to subcontract the manufacturing of the products to outside sources. In either situation, the facilities can be domestic or international and the company can have issues within its systems and processes at either place. Companies that stay within the domestic territory have a better opportunity to manage the workplace such as the benefit of being able to evaluate and monitor workplace processes, skilled workers, job creation, government stability, and the ability to reinforce labor practices. However, when using this option the company may suffer in paying higher wages to their workers. For companies choosing to operate overseas the effectiveness of monitoring the workplace is less effective but the company would save money by paying lower wages to the workers. The company still must follow the labor laws of the hosting country (Hill, 2009).
Nike decided to create and design the product and use manufacturing companies outside of the United States. Nike has continued to soar in the marketplace and in 2006, Nike’s annual revenue was 15 billion dollars, sold Nike apparel in140 countries and had a global manufacturing network of 600 factories and employed 650,000 people. If someone were looking at the financials of Nike, one would see a company he or she could stand behind and represent. However, Nike found that success could come with a price. In 1996, there were accusations that Nike was using women and underage workers who work long hours and in unsafe conditions in those sweatshops in foreign factories such as Indonesia, China, and more recently in Vietnam. Factory workers reported being paid 11 cents to 45 cents per hour depending on which country they lived in (Hill, 2009).
Challenges for Nike are the legal, cultural, and ethical points of view of this case study. Even though Nike may subcontract its companies overseas, Nike still has a responsibility to make sure the manufacturing sites are ran with integrity. After the negative press, and investigations that took place to prove Nike was guilty of running sweat shops, Nike had to rethink their position overseas and they had to begin to think about the effect the negative press had on its financial stand as well the effect it had from an ethical point of view. In the 1990’s Nike began to take steps to rectify the implications such as the implementation of a code of social responsibility throughout its supply chain that would make an improvement in the working conditions of 800,000 workers at 700 factories in 52 countries. Nike’s goal was to make systematic changes for its suppliers and the entire industry this affected (Dutton, 2008). However, suppliers were not so eager to make these changes because the suppliers wanted to see their direct benefits. Nike had to become first partaker in the changes by first leading by example and through education.
Nike developed a supplier code of conduct, and assembled an internal team to enforce the codes of conduct, also working with external processes to monitor the policies set into place and developing consistent contact...