Outsourcing with Nike

Topics: Third World, United States, Minimum wage Pages: 8 (2208 words) Published: March 13, 2011

Table of Contents:

No.Desc.Page No.

4.Overview/history of company3
5.Reasons for outsource3
6.Offshore or domestic4
7.Pros and Cons of outsourcing to third world countries5
8.Alternative recommendations7
9.Conclusions:Is outsourcing a good thing8

Investigation on outsourcing within business. The outsourcing of trainer companies within developing countries with particular emphasis on Nike outsourcing history.


Overview/history of company;

Nike is one the leading shoe and athletic clothing company in the United States and probably one of the largest in the world. In 1993, Nike's yearly revenue became as large as the NBA, NFL, and Major League Baseball's television deals, ticket sales, and merchandising sales combined. In addition to their phenomenal sales, Nike has marketed itself so thoroughly that it has literally become a household name. A large percentage of NBA players wear Nike shoes, with a majority of those under contract to do so. The percentage of professional football players and Major League Baseball players has similar numbers of patrons. Nike's business is far reaching however, is not limited to professional sports. Multiple colleges and universities teams have worn Nike shoes and clothing under endorsement agreement and the company has those endorsement agreements in place wit a view to peer approval to further promote the business. The scope of this extends beyond the United States, as Nike paid a massive two hundred million dollars in an endorsement deal with the Brazilian National Soccer Team.

Reasons for outsource;

Nike has a reputation for designing but not manufacturing their products. The manufacturing was outsourced. Nike has hired subcontractors in China, Indonesia, Vietnam and Thailand, and independent factories in Argentina, Brazil, India and South Africa to manufacture its products. The reason for this outsourcing is lower wages and lower costs of production than would be incurred in the U.S. (Nike, Inc., 2005, Datamonitor). This strategy also resulted in cash savings from not owning manufacturing buildings and equipment in factories in Argentina, Brazil, India and South Africa. Also working conditions and regulations were different so the manufacturing process that allowed prolonged working hours and workers exposed to dangerous chemicals were not of a concern to head office in the U.S.. In these countries;

Employees often put in 40 to 50 hours of overtime per month, sometimes without compensation •Workers made only 20 cents an hour, or $1.60 a day, not even enough to cover three meals a day for one person, which was about $2. •It was widely reported that workers earned below the minimum wage of $45 per month. Offshore or domestic:

The choice for outsourcing, in this particular case was offshoring. The practice was to use a third world or close to third world country to far-shore as far as possible. Probably some of the reasons for this would be : •Social perception

It’s much easier to market a product if the public that is targeted are unaware of the on-going moral and social dilemmas of the workforce. •Cost
As above, if 100 of your work force somewhere in Indonesia can do a week’s work as cheaply as one in the USA, it is as the Americans say a “no-brainer” to locate non-skilled or low to semi-skilled employment in an offshore location. •Circumvention of laws

With the lack of western laws and customs hampering ethics and the propensity of public bodies in developing countries to “look the other way” while having under the table payments, allows for companies to easily setup. •No requirement for active live communication

With only Argentina and Brazil being within similar time-zone albeit far enough away to be categorised as far-shored, the type of manufacturing did not require as strict monitoring as companies that are...

References: .. ( Feb 2011). The Foundation of Nike Brand. Available: http://www.123helpme.com/view.asp?id=150458. Last accessed 27 Feb 2011.
How to Internationally Outsource Manufacturing | eHow.com http://www.ehow.com/how_2052365_internationally-outsource-manufacturing.html#ixzz1FGyQeclq Last accessed 28 Feb 2011
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