Monday, October 22, 2012

nike case

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Situation The case talks about how awareness was created about the abysmal working conditions of the (Nike’s) factory workers in the third world countries. It clearly states the various incidents and instances, which confirm child labor and the appalling work conditions in these sweatshops.

In 001, Jonah Peretti, a customer, was trying to customize his Nike shoes with the word “sweatshop” on it. The company rejected the order saying ‘sweatshop’ was an inappropriate slang. In response, Peretti changed his order and wanted a ‘snapshot of a 10-year old Vietnamese who makes his shoes’ instead. Nike had to face a lot of the negative publicity because of this incident. Nike has faced a number of sweatshop allegations in the past for almost a decade now. In 18, Thomas Nguyen, founder of Vietnam Labor watch, reported several cases of worker abuse. He reported that workers were allowed one bathroom break and two drinks of water in each 8-hour shift. In 17 former Atlanta Mayor, Andrew Young was hired to review Nike’s overseas labor practices. He concluded that Nike was doing a good job and can do better and came up with a 6 recommendations to improve. Nike announced to implement them all. Nike also decided to expand its education programs for these workers. It also raised the minimum hiring age from 14 to 16 and then finally to 18.

Issues Management’s defense to all these allegations is that the wages of their workers are much higher than the average monthly wages in those countries. This has a tremendous negative impact on the local economy. The prices in these countries shoot up because of the few companies like Nike; the other work force cannot afford the high prices. This causes a lot of economic and social instability and eventually leads to increasing the marginal poverty in that region. The solution is not just increasing the wages of the workers but to invest some of its profits in developing their communities. The issue of sweatshops is more than just an ethical issue for the people living in these countries.

The attitude of the management is also an issue here. The CEO was not disturbed by the fact that they were employing 14 year olds in their factories. The idea of hiring the teenage kids in preference to the (abundant) adult workforce has immense implications in the long run for these countries; the adult workforce when employed can support their children’s educational needs. This in the long run will result in increased wages in those countries. Companies like Nike will then lose the advantage of having their factories in the third world countries. So they don’t want it to happen.

Stakeholders Nike and the workers in Nike’s factories are the primary stakeholders in this case. The sweatshop allegations can result in an ethical outrage and the customers of Nike can reject their product and this in turn would affect the company and the company’s stock price; thereby the shareholders. The shareholders and the customers have large stakes. So do Nike’s competitors. The various Unions and organizations like, ‘The made in the USA foundation’, have some stake in this issue. The other non-Nike workers in these countries also have a stake. The athletes endorsing Nike’s products will have a stake. The various third world countries’ Governments have some stake.

Alternative actions It is not enough that Nike pays their workers more; Nike should invest more of its profits in developing the community. Educational programs for the workers as well as the community can be implemented. Nike should take steps so that the disparity between the rich and the poor is not increased because of its efforts.

Final outcome In my opinion, Nike should not bring all its profits to its home country but should invest more of it in the countries where they manufacture or operate.

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