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MINI CASE: NIKE AND SWEATSHOP LABOR

Nike, a company headquartered in Beaverton, Oregon, is a major force in the sports footwear and

fashion industry, with annual sales exceeding $ 12 billion, more than half of which now come from

outside the United States. The company was co-founded in 1964 by Phil Knight, a CPA at Price

Waterhouse, and Bill Bowerman, college track coach, each investing $ 500 to start. The company,

initially called Blue Ribbon Sports, changed its name to Nike in 1971 and adopted the “Swoosh” logo

recognizable around the world originally designed by a college student for $35. Nike became highly

successful in designing and marketing mass-appealing products such as the Air Jordan, the best selling

athletic shoe of all time.

Nike has no production facilities in the United States. Rather, the company manufactures athletic

shoes and garments in such Asian countries as China, Indonesia, and Vietnam using subcontractors, and

sells the products in the U.S. and international markets. In each of those Asian countries where Nike has

production facilities, the rates of unemployment and under-employment are quite high. The wage rate is

very low in those countries by U.S. standards the hourly wage rate in the manufacturing sector is less

than $ 1 in each of those countries, compared with about $ 20 in the United States. In addition, workers in

those countries often operate in poor and unhealthy environments and their rights are not particularly well

protected. Understandably, host countries are eager to attract foreign investments like Nike’s to develop

their economies and raise the living standards of their citizens. Recently, however, Nike came under

worldwide criticism for its practice of hiring workers for such a low rate of pay “next to nothing” in the

words of critics and condoning poor working conditions in host countries.

Initially, Nike denied the sweatshop charges and lashed out at critics. But later, the company began

monitoring the labor practice at its overseas factories and grading the factories in order to improve labor

standards. Nike also agreed to random factory inspections by disinterested parties.

Discussion points




1. Do you think the criticism of Nike is fair, considering that the host countries are in dire needs

of creating jobs?

2. What do you think Nike’s executives might have done differently to prevent the sensitive

charges of sweatshop labor in overseas factories?

3. Do firms need to consider the so-called corporate social responsibilities in making investment

decisions?

Answer 1

1. Do you think the criticism of Nike is fair, considering that the host countries are in dire needs of creating jobs?

Yes and no. In a pure capitalist economic system employers will seek to pay workers as little in cash and benefits as possible and will locate his plant in the location that incurs the least cost. That being said there is a certain moral consideration to pay a wage that allows the worker to reasonably support themselves and their dependents. Lastly you should consider Henry Ford's Famous quote "The more I pay my workers, the more modal "T"s they can buy.



2. What do you think Nike’s executives might have done differently to prevent the sensitive charges of sweatshop labor in overseas factories?

For a start build safe modern facilities and pay a decent prevailing wage scale. Of course if the appropriate wage for the area is $ .90/hr and there is little in the way of local Health & Safety regulations. it is difficult for someone raised in the usa not to see these as oppressive conditions and view the entrepreneur as taking Advantage of "downtrodden people"



3. Do firms need to consider the so-called corporate social responsibilities in making investment decisions?

Absolutely ! We are seen a time when the Traditional superpowers are seeing their influence decline globally. Meanwhile the former 3rd. world nations are industrializing and modernizing and are becoming players in the world economy Too many of these nations harbor hostility towards us for our perceived plundering of their resources and people



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