Sweatshop Effect on Nike

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How should Global Corporations behave in a period of Globalisation filled with International competitors and cheap imitators? It has been argued that such competitive pressure is likely to create new lows in global labour standards.

In an attempt to remain competitive, Corporations cut costs by paying lower wages, hiring child labour, and imposing unsanitary working conditions on their workers. From this perspective, globalization is likely to undermine national efforts to impose labour standards. Even if countries are successful in passing legislation that introduces or raises labour standards, global pressures may prevent firms from adhering to them.

This case study aims to look at the effect of human rights violations and unethical sub-contractor labour practices on the apparel industry. The objective is to study the effect it has on growth, brand image and the response of Corporations to such practices.

Sweatshops and the Apparel Industry’s role in its creation

The apparel industry has an unfortunate history of unethical labour practices. The concept of a “Sweatshop” has its origins between 1830 and 1850 as a specific type of workshop in which a middleman directed workers in garment making under arduous conditions. The workplaces created for this were called “Sweatshops”.

In a sweatshop, the role of the middleman (or sub-contractor) was considered key, because he served to keep workers isolated in small workshops. This isolation made workers unsure of their supply of work, and hence unable to organize against their true employer. Instead, tailors or other clothing retailers would subcontract tasks to the middleman, who in turn might subcontract to another middleman, who would ultimately engage workers at a piece rate for each article of clothing produced. The middleman made his profit by finding the most desperate workers, including immigrants, women and children who could be paid an...
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