Nike and International Labor Practice Essay

Problem IdentificationEstablished in the early 70s Nike, Inc., found in Beaverton, Oregon, USA faced a severe stream of criticism and experienced growing problems concerning their plants and employee treatment, mainly in Indonesia and Vietnam in 1988. Rising demand for Nike products, which close to doubled within a short period of time, led the company and its 350+ subcontractors to raise the production level. Series of labor problems and abuse such as specious labor operates, poor dieing conditions, health and safety issues and underage workers exploitation, were the main issues Nike had to deal with. Furthermore, Nike, Inc. had to deal with managing the diversity of cultures and language barriers had to be overcome, while still be able-bodied to produce the high-quality product Nike is famous for. Throughout the 1990s Phil Knight, CEO of Nike, Inc. and the company itself lost their superb corporate image in the eye of the innovation and it became an international incident.Ca uses of ProblemAfter establishing a name in the world, Phil Knight, decided to manufacture Nikes apparel in South Korea and Taiwan, and by 1982 already 86% of Nikes sneakers came from these two countries. Realizing that Asian countries like Indonesia, Vietnam and China provide cheaper labor cost, wear government support and higher profit, Nike traveld their production lines there, with Indonesia becoming an grand location. In 1991, the daily minimum wage was barely $1 in Indonesia, compared to a typical daily wage of $24.40 in South Korea and a US hourly wage of about $8 in athletic shoe manufacturing. Even that the Indonesian government raised the minimum wage from 2,100 Rupiah ($1.00/day) to 2,500 Rupiah ($1.25/day), the new wage was still underneath the workers living expenses. In 1992, these issues went outside of Indonesia and correct hit Washington D.C., when President Clinton introduced the task force Apparel Industry Partnership (AIP) to coach and come across labor sta ndards for extraneous factories.Although Nike was the first one to join, they had trouble convincing people that everything went remediate in their plants in Asia. Ernst & Young was being hired to control and audit the factories, but soon voices became loud, that there was not a reallyobjective view at the problems, since Nike was paying them. It hit the peak in 1997/ 1998, when TV shows, newspapers and even a movie (The Big One) were talking about the bad conditions within Nikes factories in Asia and publicly challenged Phil Knight to change the way workers were treated, compensated and how underage workers were employed. Adidas, Reebok and New Balance took advantage of Nikes down slope and gained in competitive advantage. This led to diminishing sales number, earnings fell 69%, and for the first time in 13 years Nike, Inc. had a loss at the end of the year 1998.Alternatives1.Government regulation of NikeAdvantagesa)Local Government would have a impendent look onto what is happe ning in its own untaught and with their peopleb)US Government could also have a closer look onto what Nike is doing abroad and would be able to intervene any illegal activity from the motherlandc)Both governments would work closer together and it would open doors for other US companies to drop in the foreign countryDisadvantagesa)As indicated in the case, some governments just see the money that is brought into the country, regardless what is happening within the company, or better said to its people.b)Ties between the US government and the foreign country susceptibility not be the best, due to political tensions, and makes it therefore tougher to work together.2.Improve employees working and living standardsAdvantagesa)A happy employee is a better worker improve the employees living standard by raising his wage, giving him more benefits (health insurance, vacation time), lessen his working hours, etc.b)Equal Opportunity give chances to workers to move up the company ladder, a nd not only bring outside people in. Furthermore, adjust workers compensation, working hours and labor conditions to human standards.c)Extensive training and breeding for managers All managers should learn foreign countrys language, living habits and adapt to culture. Training the workers on the job will also sponsor to overcome men diversity and make the workplace a better place to be.Disadvantagesa)The changes will take time and will be cost effective.b)Adapt to western working habits, might be a huge change for Asian workforce and might not be adapted well3.Documentation and InspectionAdvantagesa)Factories will be supervised, by either the local government or organizationsb)Inspections will lead to better working conditionsc)Workers will have someone to talk to and will not be left aloneDisadvantagesa)Again, organizations might be paid by Nike and not report the whole truthb)Reports from workers might be left alone and not brought up to people in chargeBest AlternativeThe bes t alternative for Nike, Inc. is to undertake all three alternatives simultaneously. In order to gain rearwards the market share and competitive advantage, their global view has to streng past. They started off very well by implementing some of the above-mentioned ideas. These alternatives will just help them to get under ones skin a stronger player in this fast growing and very competitive business world.Implementation StepsThe actions, that Nike, Inc. should take are as followed First they should work on getting their name back into the right spotlight, by implementing the alternatives. The governments will be more than willing to help them and since Nike is recognized all over the world, even the local governments/ countries are keen on keeping them in their country and employ their citizens. This might even bring countries like the USA and Indonesia closer together and more companies from the US will be ready to go to Indonesia and produce there. Secondly, the workers benefits, life standard and work habits are the most important of all of the alternatives.Nike, Inc. should invest most of their research and development in this field, since the wages are still not as they should be. An idea would be to start raising the wages to at least the countrys standard, so that people can live off their earnings a normal life. Nike started successfully the implementation of programs that involved increase the workers living standard in the developing world, but still the compensation of the worker is the main problem that needs to be taken on right away. Secure working places, no lay-offs and safe working environments should be steps that must be taken immediately, only then we can see the disparity and make a worker a happyand productive employee.Last but not least, Nike should be watched, inspected and documented upon. It will not only help the factories in Vietnam or Indonesia, but also the company itself. Once outside organizations tell Nike where they need to improve on and do it after being told, then the company will also get into the positive spotlight, which will resume in higher sales and more profit. Nike will then be again the strongest contender in supporting and sponsoring universities, pro athletes and teams and most important a company that everybody wants to work for, regardless where.