"Hitting the Wall: Nike and International Labor Practices" case study focuses on Nike, one of the world's most successful enterprises for footwear. The company was hit by extremely bad publicity in the mid-1990s. The company known for its slogan "just do it", is suddenly being portrayed as a company exploiting low-cost labor in its overseas plants. Although Nike vigorously denies the claims, the activists will not retreat. Hence, Nike must learn to deal with their claims.
Debora L. Spar; Jennifer Burns
Harvard Business Review (700047-PDF-ENG)
January 19, 2000
Case questions answered:
- 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?
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Case answers for Hitting the Wall: Nike and International Labor Practices
Nike, an Oregon based athletic apparel company lead by Phil Knight, started selling shoes in the 1960s. Their growth was astonishing, going from a year’s revenue of $60,000 in 1972 to $49 million in 1982. Their growth continued in the 1990s and by 1998 Nike had a 40% market share of the $14.7 billion athletic footwear market in the U.S.
This rapid growth and success was not because they had the best shoe or a remarkably unique product. Their product offerings were fairly similar to their large competitors like Reebok and Adidas. The key to Nike’s success came from the business strategy put in place by Phil Knight when he started the company. His strategy had two unique aspects.
The first was rather than making the Nike products in-house, Nike would outsource its production to low-cost manufacturers overseas. The second aspect was using the money saved by outsourcing manufacturing to put into marketing. With extra money in marketing, Nike was able to have high caliber celebrity athletes in their marketing campaigns. This strategy played a huge part in Nike’s rapid growth but it also raised many questions, starting in the 1990s, about the workers in the factories that were producing their products.
The first of these questions was, should Nike be held responsible for the working conditions in the factories overseas that make Nike products, but are not owned by Nike? The conditions in these overseas factories were sub-par at best. Employees worked long hours in sometimes dangerous conditions and were paid very low wages. That being said, it was not necessarily Nike’s responsibility to maintain the conditions within these facilities.
The factories were a) not owned by Nike and b) in developing countries with work regulations far different from what we have here in the U.S. It is easy to judge a working condition from the lens of an American. We benefit from a system of worker regulations that has been being developed for many years and is still changing, while many of these countries are still developing these worker regulations. This leads nicely into another question…