Stephen Koenig Management Principles and Process Profess McLaughlin

Case Analysis: Nike the Sweatshop Debate

Established in 1972, Nike is a global corporation that markets athletic shoes and apparel in 140 countries. Nike only designs and markets their products. The manufacturing of Nike products is contracted out to a global network of factories. For the past decade, the Nike production companies were labeled sweatshops that encouraged slave labor tactics, low wages, hazardous working conditions, and long working days. Nike faced legal challenges for the companies that produced Nike products. The main challenges for Nike was the enforcement of minimum wage laws, child labor laws, and overtime laws of production companies in host countries. Reports from media and private audit companies revealed that the production companies were in violation of the host countries labor laws previously mentioned above. Nike required contracted production companies to increase pay, minimum age requirements, reduce working hours, working conditions, and exposure to harmful chemicals. Legally, the production companies were following the host country laws and disregarding contract stipulations required by Nike. Enforcing production rules and regulations were a major challenge for Nike. Nike faced cultural challenges for the companies that produced Nike products. The labor market for these production companies came from undeveloped countries that employed labor from an impoverished labor force. The culture of the host countries left the labor force

with no other options to make a daily living. The companies that operated in the host countries were operated from owners from other countries. The clear implication of the story was that Nike was at fault here for allowing such working conditions to persist in the Vietnam factory, which, incidentally, was owned by a Korean company. The companies that were owned from other countries share different cultural values from the labors of the host countries. Nike faced ethical challenges for the companies that produced Nike products. Major ethical challenges were minimum wage laws, child labor laws, overtime laws, and safe working conditions. A popular line of high-priced Nike sneakers, the Air Jordans, were put together made by 11-year-olds in Indonesia making 14 cents per hour and working a 54-hour week. An ethical challenge is minimum wage supporting the daily cost of living in host countries. An ethical challenge is companies providing safe working conditions in factories. Workers were exposed to carcinogens that exceeded local legal standards by 177 times in parts of the plant and that 77 percent of the employees suffered from respiratory problems. The ethical challenges in host countries generated negativity on the Nike products and the companys ethics and practices. The roles of host governments influence company practices. The labor laws and the inability to enforce those laws in host countries create conditions for exploitation. Host countries like China make labor unions illegal and that contributes to labor exploitation without a means for improving labor laws and conditions. Strategic challenges global managers face is finding host countries that guarantee a livable minimum wage, acceptable child labor laws, overtime laws, and safe working conditions

at the lowest production costs. A challenge global managers face is forming a contract with the production companies on additional requirements that improve on the labor laws and working conditions. An example of this is increasing the pay scale and minimum age requirements. The operational challenges managers face is enforcement of labor laws and work conditions of the host country or labor laws and work conditions under contract requirements. Managers are challenged when monitoring companies by getting truthful information from interviewing employees and company records. Independent companies are hired to monitor the companies but poor training and monitoring practices cause operational challenges in correctly monitoring compliance. Nike faces challenges when using production companies in other countries. The challenges are related to minimum wage, child labor laws, overtime laws, and working conditions that are acceptable practices in host countries. The culture in these host countries create ethical challenges that negatively reflected on Nikes products. Managers need to overcome strategic and operational challenges when using outside production companies that produce Nike products.

References <www.nikebiz.com/media/n_uofo.shtml> <www.nikebiz.com/media/n_interim.shtml> <www.corpwatch.org/trac/nike/tuck.html> <www.corpwatch.org/trac/nike/news/indonesia.html> <www.corpwatch.org/trac/nike/lawsuit.html> <www.saigon.com/~nike/reports/report1.html>