Nike's Business Practices Case Study

Excerpt from Case Study :

Nike Case Study

There are three basic concerns about Nike's manufacturing policies and practices that have left critics, including Jeff Ballinger, wary of their employment policies. The first practice is that the Nike manufacturing plants are not considered to by their critics to be run in a safe and efficient manner. The second practice is that Nike has employed workers younger than it could legally employ in the United States. The third practice is related to the first two practices and is more comprehensive; "Nike was an early target for the very reason it's been so successful. Its business model was based on outsourcing its manufacturing, using the money it saved on aggressive marketing campaigns" (Nisen, 2013). The three problems are distinctly interrelated. The reason that outsourcing becomes a money-saving business option is that many locations outside of the United States fail to offer the same protections for workers that the United States offers. Laws regulating safe working conditions, minimum wages, the number of hours an employee may work, and the minimum age for workers vary wildly around the globe and manufacturers can optimize profits by choosing to construct factories in areas with the lowest worker protections. Nike did so, as did many other companies, and it reaped significant profits. However, its willingness to exploit child labor and engage in dangerous employment practices while offering slave-level wages for many of its factory workers resulted in tremendous backlash from many of its consumers.

However, from a purely economic perspective, Nike's business strategy, including its decision to outsource much of its labor, seemed to provide significant rewards. This financial success was occurring contemporaneous to the public outcry against its outsourcing practices. Moreover, Nike chose to use subcontracting factories to manufacture its produces. In 1998, Nike had a 47% market share of the domestic footwear industry, with almost all of its manufacturing done in Asia (Van Dusen, 1998). "Their majority of their output today is produced in factories in China, Indonesia, and Vietnam, but they also have factories in Italy, the Philippines, Taiwan, and South Korea. These factories are 100% owned by subcontractors, with the majority of their output consisting solely of Nike products. However, Nike does employ teams of four expatriates per each of the big three countries (China, Indonesia, Vietnam), that focus on both quality of product and quality of working conditions, visiting the factories weekly" (Van Dusen, 1998). While they theoretically have standards for their subcontractors, the reality is that the subcontracting relationship relieves Nike of potential legal liability for dangerous factor conditions, which protects their financial bottom line, while also exposing them to concerns about their human rights practices.

Human rights advocate Jeff Ballinger launched some pretty significant criticism against Nike's treatment of workers in foreign countries. He suggested that Nike's willingness to exploit foreign workers reflected a gross violation of human rights. However, his arguments were mischaracterized by Nike at the time that he made them and by much of the corporate world. Ballinger was not arguing that Nike should treat foreign workers in the same way that it would treat workers inside the United States. He recognized the fact that a living wage in a third world country was far lower than a living wage in the United States and that providing a good employment environment in those countries had to be based on comparing wages and working conditions with those that exist elsewhere in that country. It is a relativist argument, and, before considering it, one must first address the very critical and emotional issue of child labor.

The very idea of child labor leaves many people feeling uneasy. However, the reality for many children worldwide is that the lack of opportunities for child labor leaves them in vulnerable positions where they have to choose between starvation and criminal activity. These children might then be forced into theft, prostitution, and other illegal activities in order to provide for their own very basic needs. In an idyllic world, no children would need to work to support themselves and adults would ensure that at-risk children were cared for through government programs. However, this idyllic world does not exist. On the contrary, all modern first-world nations have experienced historic periods of growth and change during which they employed child labor. Moreover, if one looks at the Latin American example, where child laborers are oftentimes organized…

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