International Business: Competing in the Global Marketplace Fourth Edition Cases

NIKE: THE SWEATSHOP DEBATE

SYNOSIS
Nike is a !orld!ide global corporation that has its shoes manu"actured on a contract basis in places like
#sia$ China$ and %ietnam& #lthough it does not actuall' o!n an' o" the manu"acturing locations$ it has
long been accused o" ha(ing its products manu"actured in "acilities that e)ploit !orkers& #lthough Nike
admits some !rongdoing in the manu"acturing "acilities o" its contractors$ it claims to ha(e started a
commitment to impro(e !orking conditions in those "acilities&
Nike has su""ered attacks "rom a number o" agencies and organi*ations throughout the !orld that claim
that the !orkers !ho manu"acture Nike shoes are denied the basic essentials o" li(ing+a "air !age and
decent bene"its& #ll that occurs !hile se(eral sport megastars are reaping in multimillion dollar contracts
to promote Nike shoes& O(er the 'ears$ Nike "ormulated tactics to deal !ith the problems o" !orking
conditions and compensation in subcontractors& It hired a strong consultant ,#ndre! Young-$
commissioned an independent audit o" its subcontractors$ and spelled out initiati(es to impro(e those
!orking conditions& Still$ Nike.s critics !ere not satis"ied& /he' protested on uni(ersit' campuses and
accused Nike o" continuing to hide the conditions o" !orkers&
/E#C0ING OB1EC/I%ES
/he main teaching ob2ecti(es o" the case are:
3& ro(ide an understanding o" pressures that can a""ect an international compan' accused o"
!orker e)ploitation&
4& Indicate ho! a "irm must be responsible "or its subcontractors$ e(en though the' appear to be
acting la!"ull' in a "oreign countr'&
5& Sho! that aggressi(e public relations campaigns ma' still be ine""ecti(e !hen the actions o"
contractors recei(e !idespread attention and intensi(e media co(erage& &
/his case can be most e""ecti(e !hen used a"ter Chapter 6$ describing the issues and debates in(ol(ed in
international business&
S/7#/EGIC ISS8ES #N9 9ISC8SSION :8ES/IONS
3& Should Nike be held responsible "or !orking conditions in "oreign "actories that it does not !on$ but
!here sub;contractors make products "or Nike<
#lthough Nike ma' be technicall' remo(ed "rom responsibilit' in some areas$ it clearl' has the obligation
to be certain that e)ploitation b' subcontractors do not occur& Certainl' the pa' and !orking conditions
that the !orkers o" subcontractors recei(e is due in large part to the contract that has been negotiated b'
Nike& I" Nike had chosen to make impro(ed !orking conditions a part o" the arrangement$ them those
bene"its ma' ha(e been passed on to the !orkers& Still$ Nike is a publicl' o!ned "irm !hose goal is to
impro(e the !ealth o" its shareholders& /he !orkers in these #sian countries !ere happ'$ e(en eager$ to
accept the conditions that !ere pro(ided as a manu"acturer o" Nike& /he reason is that those !ages !ere
probabl' e=ual or superior to !ages a(ailable "rom other sources& I" Nike !ere to lea(e the countr'
because o" the pressures placed upon it$ the !orkers !ould undoubtedl' su""er greatl'&
4& >hat labor standards regarding sa"et'$ !orking conditions$ o(ertime$ and the like$ should Nike
hold "oreign "actories to: those pre(ailing in that countr'$ or those pre(ailing in the 8nited
States&
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International Business: Competing in the Global Marketplace Fourth Edition Cases
Clearl'$ Nike has the responsibilit' to hold suppliers to those conditions that pre(ail onl' in the suppl'ing
countr'& I" it insisted on pre(ailing conditions in the 8nited States$ there !ould be little reason "or Nike to
seek contractors "rom outside countries& 0o!e(er$ through pressure or contractual concessions$ it is
possible "or Nike to seek !a's to impro(e the conditions o" !orkers in suppl'ing countries& In doing so$
Nike ma' "ind that it recei(es some public relations bene"it rather than undergoing the e""ort and the cost
o" de(eloping de"ensi(e 7 strategies&
5& #n income o" @4&4A a da'$ the base pa' o" Nike "actor' !orkers in Indonesia$ is double the dail'
income o" about hal" the !orking population& 0al" o" all adults in Indonesia are "armers$ !ho recei(e less
than @3 a da'& Gi(en this$ is it correct to critici*e Nike "or lo! pa' rates "or its subcontractors in
Indonesia<
#lthough student ans!ers !ill (ar' according to their sensiti(it' on this issue$ Nike probabl' should not
be held responsible "or the pa' rates o" its Indonesian subcontractors& /he !orker pa'$ and resulting lo!
cost o" goods$ is a ma2or reason !h' Nike has contracted !ith these subcontractors& /he result has been to
gi(en 2obs to Indonesians !ho might not other !ise ha(e them& It is also not clear to !hat degree Nike
can in"luence the pa' that subcontractors pa' to !orkers& /here"ore$ it is not "air to be continuall' critical
o" Nike in that regard&
6& Could Nike ha(e handled the negati(e publicit' o(er s!eatshops better< >hat might ha(e been
done di""erentl'$ not 2ust "rom the public relations perspecti(e$ but also "rom a polic' perspecti(e<
/here is certainl' ma2or room "or Nike to impro(e on its handling o" the negati(e publicit'& # de"ensi(e
polic' o" denial is al!a's more poorl' recei(ed than an open admission o" "ault !ith constructi(e
strategies "or impro(ement& art o" Nike.s problem !as that it didn.t address the total criticisms$ and
chose to ans!er the age issue rather than the issue o" total in"erior !orking conditions& Its strateg' to
announce polic' change at large public relations "unctions appeared insensiti(e$ rather than addressing
criticism directl'$ on the spot$ and !ith correcti(e action strateg' in hand& From a polic' perspecti(e$ it
!ould be better to suggest programs "or training o" !orkers$ changes in suppliers and a general
impro(ement o" the plight o" the !orker& /he de(elopment o" ad(isor' boards and the in(ol(ement o"
interested agencies and outside organi*ations to achie(e a consensus "or the impro(ement o" !orking
conditions might be more e""ecti(e$ both "rom a 7 point and a polic' initiati(e than to continue to !ith
its o!n in!ard looking policies&
B& 9o 'ou think Nike needs to make an' changes to its current polic'< Is so$ !hat< Should Nike
make changes e(en i" the' hinder the abilit' o" the compan' to compete in the market place<
Clearl' Nike needs to make changes in its polic'$ i" onl' because its current polic' has ser(ed it so poorl'&
One strateg' !ould be to in(ol(e international agencies to assist !ith polic' ad2ustments that !ill help to
correct the problem& #nother change might be abandoning a de"ensi(e$ Cit.s not too brokeD strateg' and
admitting the problem$ !hile outlining strategies "or impro(ement& But Nike.s ma2or obligation is to its
shareholders and to continuing to operate in an increasingl' competiti(e marketplace& It does the plight o"
the !orker not good i" Nike adopts policies that e(entuall' cause its business to go under& /he =uestion o"
changes that make the compan' uncompetiti(e is a real one+one that is addressed b' international
business managers all the time& Clearl'$ Nike has to remain competiti(e !hile still causing change to
occur to its !orkers$ and that is a challenge that is "ormidable&
E& Is the >7C right to argue that the FF# is a tool o" industr'<
erhaps not an' more than to argue that the >7C is a tool o" organi*ed labor& I" the FF# is incapable o"
conducting independent audits o" international s!eatshops$ then the charge ma' be partiall' true& But the
>7C$ "unded and backed b' labor unions$ re"uses to meet !ith companies because it !ould C2eopardi*e its
independence&D >ith that kind o" posturing and intransigence$ both sides appear to be culpable !ith a
highl' emotional issue&
G& I" s!eatshops are a global problem$ !hat might be a global solution to this problem<
3H
International Business: Competing in the Global Marketplace Fourth Edition Cases
S!eatshops are a global problem in that companies the !orld o(er can seek lo! cost manu"acturers in
e(er' corner o" the globe& >hen those lo! costs occur as a result o" in"erior$ and e(en illegal$ !orking
conditions$ then s!eatshops are a ma2or global problem& # possible solution !ould be to change$ or at
least modi"'$ the conditions under !hich s!eatshops continue to "unction& 8ni(ersal !orkers rights$ !ith
minimum age and minimum !ages could be a solution& Still$ certain countries !ill al!a's ha(e the
ad(antage o" lo! cost labor and !ill e)ploit that ad(antage in the international marketplace& 0o!e(er$ the
disparit' bet!een the great di""erences in labor cost can be lessened$ but it can best be done b' continuing
to promote !orld "ree trade and continuing to impro(e the =ualit' o" li"e in de(eloping nations$ !here lo!
cost labor is most abundant&
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