Marketing Management, SWOT Analysis, Marketing Mix,
Case Study: Nike Sweatshop Controversy
Sweatshops are work environments that possess three major characteristics—long hours, low pay, and unsafe or unhealthy working conditions. Sweatshops may also have policies that severely restrict workers’ freedoms, including limiting bathroom breaks and even conversations with fellow workers. At its worst, violence is use against sweatshop workers. Sweatshops have been a factor in the production of goods around the world for centuries, but the globalization of business has led increasing numbers of major corporations to take advantage of low-cost sweatshop labour in developing countries.
Nike Inc. uses the sweatshops extensively in developing and third world countries for manufacturing its shoes, sportswear and other items. Thus a campaign was launched against Nike by various human rights organisations in early 1990’s. Employing media-savvy PR techniques, Global Exchange coordinated publicity, arranged high-profile media events and gave the campaign a media framing and focus. The high-profile media campaign against Nike helped attract a diversity of transnational groups to the movement, with Western activists identifying with sweatshop workers across a range of identity-based affinities.
THE FAIR LABOR ASSN. released its own study in 2002 based on unannounced audits of 88 of its members’ supplier factories in 18 countries. It found an average of 18 violations per factory, including excessive hours, underpayment of wages, health and safety problems, and worker harassment. The actual violation rate is probably higher, the FLA said, because “factory personnel have become sophisticated in concealing noncompliance related to wages. They often hide original documents and show monitors falsified books.” Internal industry documents reviewed by Business Week reveal that numerous Chinese factories keep double sets of books to fool auditors and distribute scripts for employees to recite if they are questioned. Thus a new breed of Chinese consultants has sprung up to assist companies in evading audits.
A study commissioned by Nike covered 569 factories it uses in China and around the world that employ more than 400,000 workers. It found labour-code violations in every single one. Some factories “hide their work practices by maintaining two or even three sets of books,” by coaching workers to “mislead auditors about their work hours, and by sending portions of production to unauthorized contractors where we have no oversight,” the Nike study found.
Nike’s Response to the Sweatshop Controversy
Nike Inc. is a transnational organizational culture which thrives on the unity of all of its employees—currently at 26,000.Nike Inc.’s organizational culture stems across the globe influencing countries such as: South Korea, Japan, Taiwan, Hong Kong, Philippines, Thailand, China, Malaysia, Indonesia, United States, United Kingdom and Yugoslavia. Nike Inc. coordinates efforts in designing shoes using technology in countries such as South Korea, Japan, Taiwan, and Hong Kong (producing 10,000 pairs of shoes per day) while less developed countries such as Malaysia, Indonesia, Thailand, and Philippines produce the generic casual line of shoes (producing 70,000 to 85,000 pairs of shoes per day).
Nike’s initial response to criticism was to either ignore it or deflect the responsibility by arguing that as production was subcontracted to independently-owned factories the corporation had neither control over alleged labour violations nor any responsibility to workers who were not Nike employees. In 1992 the company formulated a Code of Conduct for suppliers, but this did little to stave of critics who argued the code was limited and not adequately enforced. It took another six years of sustained international pressure, bad press and a subsequent downturn in profits, for Nike to announce changes to its overseas business practices, namely improvements to health and safety, and an increase in the minimum age of new workers.
Nike has made some positive changes since the scandal of their sweatshop practices became public in the late 90s. In Indonesia, Nike has increased workers’ pay to above minimum wage. Nike has also begun to make changes in the safety of many Vietnamese factories, reducing the number of toxic chemicals used, changing to safer solvents and improving ventilation systems in main plants. A Nike spokesman says in a written statement that the company, based in Beaverton, Ore., “believes wages are best set by the local marketplace in which a contract factory competes for its workforce.” One way Nike is seeking to improve labour conditions is by teaching their suppliers more efficient production methods that reduce the need for overtime.
On May 12, 1998, Nike’s CEO and founder Mr. Phillip Knight spoke at the National Press Club in Washington, DC and made what were, in his words, “some fairly significant announcements” regarding Nike’s policies on working conditions in its supplier factories. Knight made six commitments:
1st Promise: All Nike shoe factories will meet the U.S. Occupational Safety and Health Administration’s (OSHA) standards in indoor air quality.
2nd Promise: The minimum age for Nike factory workers will be raised to 18 for footwear factories and 16 for apparel factories.
3rd Promise: Nike will include non-government organizations in its factory monitoring, with summaries of that monitoring released to the public.
4th Promise: Nike will expand its worker education program, making free high school equivalency courses available to all workers in Nike footwear factories.
5th Promise: Nike will expand its micro-enterprise loan program to benefit four thousand families in Vietnam, Indonesia, Pakistan, and Thailand.
6th Promise: Funding university research and open forums on responsible business practices, including programs at four universities in the 1998-99 academic years.
In 2002, Nike issued a company Code of Conduct to all its factories, regulating the conditions and safety requirements that work should be conducted by. The Nike Code of Conduct states, “We are driven to do not only what is required, but what is expected of a leader. We expect our business partners to do the same”. The company’s 2004 Responsibility Report established further health and labour standards, and described increased monitoring plans. This 2004 report was considered a major victory for workers and many human right’s groups, because Nike included a full list of its factories and their addresses throughout the world. This has allowed for independent monitoring and investigations.