The Sweatshop Debate analyzes the legal, cultural and ethical challenges confronted by global business and will also examine the roles that host governments have played while summarizing the strategic and operational challenges facing global managers at Nike. Having standards in place will protect the organization from a major crisis like the one formally faced by Nike.
Philip Knight and Bill Bowerman created the world’s largest sportswear company, Nike, in 1962. Nike now controls more than 40% of the U.S. Market for sports related goods. However, Nike does not have one shoe factory in the United States (Miller, 1995). As Nike continues to make millions, they continue to employ workers from overseas and paying them very little wages and requiring long hours without overtime pay in their factories. The controversial issues are why the majority of Nikes labor is conducted in Third World countries. Nike subcontractors employ nearly 500,000 workers in plants located in Indonesia, China and Vietnam (Saporito, 1998).
Many challenges must be considered within the case study of which many include legal, cultural and ethical differences. “The majority of Nike shoes are made in Indonesia and China, countries with governments that prohibit independent unions and set the minimum wage at rock bottom (Hill, 2009, p.155).” When discussing ethics, Third World countries have a different standard on what is ethical when it comes to working conditions, wages and labor practices. The average pay in Indonesia of a Nike factory worker in 1997 was $2.46 per day. Labor groups estimate that a livable wage is about $4 a day in Indonesia. In Vietnam, the pay is $1.60 a day. The average living wage is about $3 a day in Vietnam (Hill, 2009). Compared to the United States this wages are very low in comparison to the overall cost of living. Considering these wages, Nike must question the legal, cultural and ethical implications of its global workforce policies and procedures.
Nike was involved in cheap labor practices, which were not regulated by the governments in these other countries, which in the end played a significant role in the case at hand. The United States has specific labor wages that must be followed which are set by the government. If these foreign governments would have minimum wage requirements this whole problem would never exist and the child labor laws would eliminate the use of children for 14 cents per hour to produce goods. Nike must concentrate more on doing what is right to protect their reputation.
Strategic challenges in this case study with Nike is ensuring that consumers can get the same quality products from anywhere across the globe and making the Nike customer aware what the company is doing to ensure that its contractors and subcontractors are compliant with Nike’s policies and ethical standards.
Operational challenges are ensuring that each manufacturing plant has similar working conditions regardless if the factory is in the US or in a Third World country. In addition to the factory conditions, Nike needs to ensure that every worker receives fair wages across the globe, global training and development programs, and implementing policies to improve workers rights.
Nike has the ability to simply continue to conduct business globally while adhering to ethical regulations. Nike has made progress in the past few years by ensuring safer working conditions and focusing on corporate responsibility.
Nike must continue to monitor the companies, governments, and workers with whom they do business to ensure the reputation of the organization is not completely ruined. Facing another major crisis like this could be the end of a profitable organization and could also lead to the loss of several major celebrity sponsors. Always doing the right thing must be in the back of the CEO’s of Nike minds to ensure that something like this never happens again. Having standards will only raise the appeal of the organization and lead to larger volume of sales and in the end result in greater revenue for the organization. Just Do It RIGHT!
Hill, C.W.L. (2009). International business: Competing in the global marketplace (7th ed.).
Boston: McGraw-Hill Irwin.
Saporito, Bill (1998, March, 30). Can Nike Get Unstuck? Retrieved 10 13,
2008, from http://www.time.com/time/magazine/article/0,9171,988058,00.html?iid=digg_share