Nike Corporation

Nike Corporation

Labor Practice in Developing Countries

Over the past half century, the international flow of goods, services, and capital has grown rapidly. Globalization creates new economic, cultural, and social opportunities, but also poses the challenge of ensuring that workers throughout the world share in these opportunities. Multi National Corporations are investing in developing countries in order to exploit the new opportunities for division of labor on a global scale. This essay will examine & analyze the labor practice in Nike’s footwear and apparel factories in developing countries. In the mid-1990s Nike, one of the world's most successful footwear companies is hit by a spate of alarmingly bad publicity. After years of high-profile media attention as the company that can "just do it," Nike is suddenly being portrayed as a firm that relies on low-cost, exploited labor in its overseas plants. Nike officials vigorously deny the charges, claiming that Nike has no control over the independent contractors who manufacture Nike shoes. But, Nike must learn to deal with the tangle of conflicting data that surrounds the concept of a fair wage and working condition.

Company Background: Founded as an importer of Japanese shoes, NIKE, Inc. (Nike) has grown to be the world's largest marketer of athletic footwear and apparel. In the United States, Nike products are sold through about 20,000 retail accounts; worldwide, the company's products are sold in about 110 countries. Both domestically and overseas Nike operates retail stores, including NikeTowns and factory outlets. Nearly all of the items are manufactured by independent contractors, primarily located overseas, with Nike involved in the design, development, and marketing. In addition to its wide range of core athletic shoes and apparel, the company also sells Nike and Bauer brand athletic equipment, Cole Haan brand dress and casual footwear, and the Sports Specialties line of headwear featuring licensing team logos. (IDC, 2001)

Nike Outsourcing: As the Japanese market matured a decade after NIKE began contracting there for shoe production, Nike shifted its operations to cheaper Taiwanese and Korean suppliers. As demand increased over time, these suppliers further subcontracted to less-developed labor markets in countries such as China, Indonesia, Thailand, and Vietnam (Parloff, 2002). By 1999, NIKE operations were so large the company received athletic wear from over 500 factories in 45 countries (Annual Report, 2003). Nike’s control over and awareness of the factory conditions decreased with each successive production level outsourced to subcontractors. This lack of awareness was poignantly reversed in June of 1996, however, when the conditions of Nike’s factories became a nationwide media topic.

Nike is characterized of making its equipments in countries which are in the developing phase, having very cheap labor, authoritarian government and lack of human rights appeal and union movement. In doing this it has made greater margins on the cost of mere cents to its workers. So Nike success story is not just based on good name and advertising alone but also attached to it is the tears of workers and child labor. As a good business strategy, Nike always thinks ahead of its movement. It does not launch its production directly in to the developing country, such as Vietnam, Indonesia, Korea, Pakistan or Vietnam, but instead it subcontracts it to them by selecting a local firm. When doing this, the local firm has to abide by the Nike's international rules and regulations when producing its goods. And it is the duty of the international firm (Nike) to monitor its subcontracted production units and hold it to tight scrutiny. But this is not what really happens. Both Nike and the local production company aims to minimize cost and earn the highest amounts of profit thus involving themselves in illegal practices, such as low wages, abuse of workers and child labor, a practice which is not so highlighted by the government of the host developing country.

What happens when you question Nike about its labor practices? An answer comes that it is not they who are involved in this illegal labor practices but it is the local subcontractor who is doing so. This is wrong to say as Nike and local firms both benefits with access to cheap labor and poor working condition in developing countries such as Vietnam, Indonesia, Korea and Pakistan. If Nike cannot control its subcontracted plants, it means they have not implemented their rules and regulations effectively and is not abiding by the international standards which they have set for themselves.

Pointing the Finger: Nike was dogged throughout the late 1990s by protests and boycotts over allegations regarding the treatment of workers at the contract factories in Asia that made the bulk of Nike shoes and much of its apparel. Charges included abuse of workers, poor working conditions, low wages, and use of child labor. When the June, 1996 issue of Life magazine carried an article about child labor in Pakistan, Nike knew that it was in trouble. The article's lead photograph showed 12-year-old Tariq surrounded by the pieces of a Nike soccer ball which he would spend most of a day stitching together for the grand sum of 60 cents. In a matter of weeks, activists all across Canada and the United States were standing in front of Nike outlets, holding up Tariq's photo. Nike started to suffer from serious image problem.

Around same time in early June, Bob Herbert, a New York Times columnist, boldly criticized NIKE labor conditions with a harsh op-ed piece (1996). The accusations alleged that NIKE built its wealth and products with the “slave” labor of young Asian women. The article said NIKE used “sweatshops” of “wretched origins,” and compared the corporation to a giant pyramid that crushed the backs of oppressed laborers (Herbert, 1996). This column created an immediate nationwide stir among consumers, activists, and international corporations. Soon afterwards, NIKE found itself in a sweltering spotlight, with several nonprofit groups’ studies hitting the newsreel. The accounts described human rights abuses, violence to laborers, and hideous working conditions within Nike’s Asian facilities (Kasky, 2002). The news rooted itself quickly in consumers, and protests and small boycotts sprang up around the country. Over 40 demonstrations occurred at nationwide NikeTowns, with one NikeTown grand opening being marred by the arrest of 19 demonstrators (Emerson, 2001). Nike’s image was stained, and it was pressured to respond.

The Public Relations Campaign: Nike responded by mobilizing