Hitting the Wall: Nike and International Labor Practices Case Analysis

Hitting the Wall: Nike and International Labor Practices Case Analysis

Q.1: Discuss in detail the circumstances that led to Nike's confrontation with labor activists, NGOs, etc. (You should also try and examine the underlying reasons and motivations for the actions of these individuals and organizations, instead of merely describing them.)

Circumstances that led to Nike's public confrontation with labor activists were those of Phillip Knight's strategy for the company and pressure from being at the top of the playing field at a young age for the organization. Knight had a strategy in which its first measure of operation was that all manufacturing to be outsourced, a virtual corporation. There were to be no actual physical assets or dedicated manufacturing lines. The second measure to his strategy was that all leftover income would be dumped into its marketing department to endorse big name celebrities like Michael Jordan, Tiger Woods, and Jerry Rice. When implementing this strategy, Knight and his Nike team decided low cost locations such as South Korea and Taiwan were the best fit because they can cut major costs on labor and production. At one time these locations accounted for 86% of total production. Nike was so focused on having their labor costs at the lowest possible level that when costs began to raise, their core global network was moved to China and Indonesia in the 1990s. During this time there was also an increase in foreign labor abuses and unpredicted labor demands from factory workers inspired bands of labor fairness organizations. With efforts from these organizations and people like Jeff Ballinger, it was found that the amount an Indonesian worker was receiving could not even pay for that person to live and was 50% less than what workers in South Korea and the US were making. Nike became a key target for the hype on bashing these foreign labor companies. We think that Nike was in the wrong place at the wrong time, however, they could have done more to insure the safety of their employees at their factories. Even after the Indonesian government increased minimum wage, many factories ignored the increase and it provided little impact, including Nike. Activist pressure and unflattering media was surrounding Nike, we think, largely due to the little they cared about the conditions of their manufacturing plants. Even their Code of Conduct document sent to all contractors was a poor response compared to Reebok's efforts. The ridicule got to a point that any self promoting action taken by Nike became an easy target for the foreign labor activists to jump on. No matter what, we think that Nike's motivation to have lowest possible labor costs was just to capitalize on their successful endorsement contracts, sacrificing whoever and whatever they had to do so.

Q.2: Do you think all the accusations leveled at Nike were justified?