Bos 200e - Case Write-Up: Hitting the Wall: Nike and International Labor Practices

Thao P Le

BOS 200E

Prof.: Nancy Kurland

Case Write-Up: Hitting the Wall: Nike and International Labor Practices

Since the founding of Nike, Inc, from a small sneaker company in Oregon, it has risen to the position of a multinational cooperation with revenue in excess of $24.1 billion (2012). Nike’s success results from the unique strategy that helps the company to lower cost by obtaining all goods from foreign manufacturers. Nevertheless, this tactic has also brought about much criticism and damaged Nike reputation as its fashionable luxurious products has strong association with labor exploitation.

        The labor activist Jeff Ballinger has played an active role in the study about the working conditions in Nike, Inc. Ballinger has demonstrated persuasive arguments against Nike’s labor practices, pointing out a number of reasons why Nike is “a symbol of greed and exploitation”. First of all, he explains that Nike’s pursue of cheap cost strongly inspires the outside manufacturers to violate labor rights and pay workers low wages.  His argument is valid in a way that Nike’s great buying power towards suppliers forces them to lower their prices. As a result, the only way for manufacturers to earn profits is to reduce variable cost, especially workers’ wages. In fact, in the August issue of Harper’s magazine, Ballinger showed that with that current wage, one Indonesian worker had to work 44,492 years to earn the same amount with what Michael Jordan made through an endorsement contract. Consequently, Nike received sudden outburst of public criticism, putting the firm under the spotlight that later damaged its reputation seriously.

        Despite the public outburst against it, Nike unsuccessfully managed to address its critics. Indeed, the cooperation had no long-term plan to solve the problem but only superficial and weak responses to pacify the public. Initially, when Ballinger made arguments against Nike’s labor practices, the company literally had no convincing reaction. It seems that Nike’s strategy was to deal with temporary issues. When Nike was accused of the allegations that workers for the company were only paid 19 cents per hour, only at that time it hired Ernst & Young to inspect the problems. However, the whole issue in Nike’s method of handling the publicity lied in its ignorance and denial. In spite of receiving much criticism, Nike insisted on denying its responsibility for the workers’ conditions. The giant company particularly ignored the controversy about labor wages or just simply argued that it had no control over the issue. Also, its refusal for Reverend Jesse Jackson to tour one of its factories resulted in nothing but the negative response from the media. Thus, finally, the company responded in vain that it committed nothing yet was the victim of “uninformed media campaign”. Nike then went through numerous damages, especially in its reputation, and only saved its stance when Phil Knight admitted the company’s wrongdoings and proposed numerous methods to improve the working conditions. In fact, if Nike had admitted earlier and actively monitored the code of conduct to solve the root of the problem, the company would not have suffered from great damages to its reputation.