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Hitting the Wall Nike and International Labor Practices Case Solution
The case study discusses how Nike was publicly criticized for the alarming labor practices in its outsourced factories which tarnished the image and reputation of the company. The corporation faced severe allegations and a public relations disaster due to the defensive attitude of Nike refusing to take responsibility for the labor conditions in its contractor's factories. The late response of Nike towards addressing the labor violation through factory audits and a separate Labor Practice department was met with suspicion of false research methods and publicizing fake information. In 1998, the sales and stock prices of Nike were severely impacted by the public outcry and protests. This is when the company withdrew its defensive stance and acknowledged the labor violations. The company introduced a series of reforms including the development of the Fair Labor Association. However, the critics still argued that the company failed to address one of the biggest issues – Low wages.
Following questions are answered in this case study solution:
Should Nike be held responsible for working conditions in foreign factories that it does not own, but where subcontractors make products for the company?
What labor standards regarding safety, working conditions, overtime, and the like, should the company hold foreign factories to those prevailing in the country, or the United States?
An income of $2.28 a day, the base pay of Nike factory workers in Indonesia, is double the daily income of about half the working population. Half of all adults in Indonesia are farmers, who receive less than $1.00 a day. Given this, is it correct to criticize the company for the low pay rates of its subcontractors in Indonesia?
Could the company have handled the negative publicity over sweatshops better? What might it have done differently, not just from a public relations perspective but also from a policy perspective?
Do you think the company needs to change its current policy? If so, how? Should Nike make changes even if they hinder the ability of the company to compete?
If sweatshops are a global problem, what might be a global solution to this problem?
Case Study Questions Answers
1. Should Nike be held responsible for working conditions in foreign factories that it does not own, but where subcontractors make products for the company?
As mentioned in the case study, it is Nike's business strategy to outsource all its manufacturing to reduce costs. In line with this low-cost strategy of Nike, the organization has no in-house production or manufacturing facilities and all Nike products are hence manufactured through independent facilities contracted by the company. These subcontractors and factories are in a contract with Nike. Therefore, in my opinion, Nike should be held responsible as well as accountable for the conditions factory workers are subjected to while manufacturing Nike’s products.
Nike is a powerful company with a lot of worldwide influence, and when it comes to the contract, it has the final say because it can find other subcontractors. Therefore, it should be able to dictate what kinds of working conditions it wants in the factories. As a corporation that employs many subcontractors to manufacture its products from different parts of the world, it is Nike’s responsibility to verify and ensure that all manufacturing facilities meet a set of factories' working conditions and standards. Moreover, Nike should also influence its contracted facilities to improve the working conditions of their employees. Nike should make a routine of regularly assessing, monitoring, and evaluating the working conditions of its contracted international factories to ensure no exploitation is done.
It was of utmost importance for Nike to understand that while the company was able to acquire cheap labor from these overseas factories, the company still needed to be socially responsible. A step towards being socially responsible is to make sure that all employees are getting paid the minimum wage rate and were working in globally accepting conditions. All business is accountable for their workers as well as all individuals who are directly or indirectly associated with their products. Therefore, Nike too should be held responsible for the ill-handling of the people who manufacture the company's various products.
2. What labor standards regarding safety, working conditions, overtime, and the like, should the company hold foreign factories to those prevailing in the country, or the United States?
Nike should set firm labor standards regarding the working conditions, pay, working hours and safety for all its subcontractors and other companies the organization does business with. This should be done so that Nike can ensure the well-being of the people who manufacture its products. Monitoring, evaluating, and making policies regarding the working conditions in its factories regularly can help the organization stay away from the claims that it is another U.S company exploiting third-world factory workers.
Nike must implement a strategy for its global business that will enable the company to benefit from the cost savings that offshoring manufacturing provides while also maintaining Nike’s integrity as a humanitarian organization. However, this policy will vary according to different countries. For example, in the case of Indonesia, if Nike follows standard operating procedures of the country, it will be unable to meet the criteria of human rights that international corporations must address. As a result, Nike must implement a set of criteria that assures laborers are paid at least the minimum pay in their countries, but that working conditions are also appropriate for employees to work in, and that the minimum age limit for workers is carefully enforced. An example of a policy that Nike can implement at all its foreign manufacturing facilities is to set a minimum age limit for factory workers to discourage child labor. In addition, the organization should set policies regarding the minimum wage rate that allow manufacturing workers to comfortably satisfy their daily needs for food and other necessities. Ensuring good working conditions will not only improve Nike’s reputation as an employer but will also enhance the brand reputation of Nike’s products in the eyes of the customers.
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