Nike: Unfair Labor Practice and International Market Essay

Submitted By alleyoop1962
Words: 1742
Pages: 7
Open Document
Hitting the wall: Nike and international labor practices.

Introduction
This case details the missteps Nike made when it failed to respond to criticism of unfair international labor practices. What started out as a sneaker company in 1970s grew from $60,000 a year revenues to $49 million in just 10 years. This was accomplished utilizing a strategy CEO Phil Knight devised that consisted of two main focuses. The first was to save costs by outsourcing all manufacturing to low cost parts of the world. Instead of in house production all products would be made by independent contracting factories. The second tenet was to take all the money saved by outsourcing and invest it in marketing. Specifically, the money would be poured into high profile athlete endorsements to establish brand identity around the Nike name.
Most manufacturing started in Taiwan and South Korea where costs were quite low. After many years the Taiwan and South Korean economies grew and the costs of manufacturing rose so Nike urged its suppliers to move to new lower cost regions. This lead to manufacturing moving to Indonesia and China where costs were 50% less than Taiwan and South Korea.
About the time Nike moved to Indonesia, labor unrest swept through the country with the number of strikes rising from 19 to 112 in 1991. Additionally, articles very critical of foreign countries labor abuses began appearing in Indonesian newspapers. At this same time a labor activist named Jeff Ballinger was trying to make a name for himself. His goal was to draw world attention to the exploitation of third-world factory workers by rich U.S. companies and Nike was his ideal target.
Nike’s first response was that they should not be concerned and could not be held responsible for the labor conditions in the factories of independent contractors. The attitude Nike took was obviously not well received by labor activists and eventually news of the harsh labor conditions made their way into mainstream U.S. news publications.
To combat this Nike hired Ernst & Young to conduct audits of its contractor’s factories but this was largely seen as just a public relations marketing campaign. Additionally, Nike created a Labor Practices Department and when President Clinton formed a task force that created the Apparel Industry Partnership Nike was the first to join. But it was too late, all these campaigns were seen as halfhearted attempts to make things better for Nike and not workers.
The anti-Nike campaign was hitting full stride and Nike bashing reached a peak when they became the focus of Doonesbury cartoons and late night television jokes.
I believe Nike could have avoided the bad publicity and the lost sales if they would have planned their move into the international market and properly organized their business to respond to the external forces and realized that it isn’t only about them.

1. The problem.
Nike entered the international market without giving proper thought to changing their organizational structure in a way that would help them respond to new relationships with foreign companies and governments. Nike instead was completely driven by King’s model of reducing costs. What they failed to realize was total cost includes the cost of the bad publicity of being perceived as an exploiter of labor. Daft says that one of the ways to build horizontal relationships is to, “appoint preferred suppliers, establishing agreements, business partnering, joint ventures or even mergers and acquisitions.” (172.) Nike was not concerned with partnerships or building any kind of relations, in fact the only thing Nike wanted from its suppliers was low cost sneakers.
Another area Nike failed to consider was how their use of cheap outsourced labor would be viewed by their customers and how those customers would perceive the interorganizational relationships between Nike and their foreign factories. Daft explains that the institutional perspective is how
Show More

Related Documents: Nike: Unfair Labor Practice and International Market Essay

Essay on Nike Doing Business in Indonesia

Nike Doing Business in Indonesia Firm Profile Indonesia is a difficult entrant country environment for corporations to do business in which have constraints like: child labor, low wages, mandatory overtime, and education. Low wages are beneficial for Nike; on the same token the constraints like child labor, unfair work conditions, and mandatory overtime can harm the world renowned brands repetition. The media has painted negative picture of Nike, because productivity of shoes and other athletic…

Words 3228 - Pages 13

Nike- Ethical Issues Essays

Analysis: Nike Introduction Nike was established in 1972 by Bill Bowerman and Phil Knight. These two men were visionaries. The goal for Nike was to carry on Bowerman’s legacy of innovative thinking by helping every athlete reach their goal or by creating lucrative business opportunities that would set the company apart from any competition. This included providing quality work environments for all who were employed by Nike.…

Words 1441 - Pages 6

Cocacola Nike Case Essay

just window dressing, or does the company seem to be sincere in its efforts? For more than a decade Coca-Cola has been fighting allegations of a lack of health and safety of its products, unlawful competitive practices, racial discrimination and employee intimidation, channel stuffing, unfair distributor treatment, and the pollution and pillaging of natural resources, but under Neville Isdell and Muhtar Kent's leadership, the company appears to have rebounded and begun to take strides toward improving…

Words 972 - Pages 4

Essay about Nike Company Analysis

2 Nike, Incorporated Company Analysis Michael G. Castro Capella University MBA6008 – Global Economic Environment Professor Hadsell February 15, 2013 Introduction Being the world’s leading innovator in athletic footwear, apparel, equipment and accessories, Nike holds to their mission to bring inspiration and innovation to every athlete in the world (Bowerman, 2011). Not only does Nike design, develop, and sell a slew of products and services to help athletes, they also market sports-inspired…

Words 2944 - Pages 12

Imposing Labour Standards Essay

report is to look at stakeholders within developing and developed company’s and their conflicting views regarding labour standards. This report looks at The World Trade Organisation, Non-government organisations, Multi-national organisations and International Labour organisations as a whole in order to draw conclusions. Limitation for this report are imposed by a maximum word count and time restrictions. A STUDY OF THE DEBATE SURROUNDING IMPOSING LABOUR STANDARDS ON DEVELOPING COUNTRIES:…

Words 6967 - Pages 28

Essay about Politics: European Union and Company

of production or supply over demand. * Free Trade - A policy by which a government does not discriminate against imports or interfere with exports by applying tariffs (to imports) or subsidies (to exports). * Protectionism - The theory or practice of shielding a country's domestic industries from foreign competition by taxing imports. * Import Taxes/Tariffs - A government tax on imports or exports. * Quotas - A limited quantity of a particular product that under official controls can…

Words 8985 - Pages 36

Background paper WTO

trade is “the purchase of products directly from producers and retailed to consumers with explicit labelling”. These products are purchased at a price above market price, in order to offset the perceived exploitation of product-market power by large multinationals, and to make the production environmentally sustainable. At the same time, international trade has become one of the most important instruments for economic development, because in many developing countries trade has turned into the main instrument…

Words 5035 - Pages 21

MEC Paper

Table of Contents Table of Contents 0 Introduction 1 Objectives and Goals 2 Franchising in Brazil 4 Macro Environment in Brazil 9 Industry Analysis 15 Organizational Value Chain Analysis 17 Market Entry Strategy 21 Segmentation 21 Marketing Mix 22 Action Plan 26 Limitations 28 Conclusion 29 References 31 Appendix A: Comparing Brazil with India & China 35 Appendix B: Hofstede’s Cultural Dimensions 36 Appendix C: SWOT Analysis 37 Appendix D: Time Line 38 Appendix D: Budget 39 Introduction Mountain…

Words 8162 - Pages 33

The Cultural Aspect Of Mergers And Acquisitions Factors To Success And Failure In Two Indsrty Examples Essay

The Cultural Aspect of Mergers and Acquisitions Factors to success and failure illustrated in two industry examples Contents 1. Introduction .................................................................................................................................................1 2. Cultural Aspects of Mergers & Acquisitions – Literature Review ...............................................................2 3. 2.1. Definitions ........................................…

Words 5302 - Pages 22

Syllabus: Strategic Management and Class Essay examples

management. The skills and perspective that you gain from this course will help you in whatever job you take after graduation, and are especially critical if you desire to pursue careers associated with general management, consulting, product planning, market research, industry analysis, new venture creation or management, venture capital, or investment banking. In order to formulate proper strategies, there are two types of strategic inputs – external analysis (assessing opportunities and threats in…

Words 3906 - Pages 16