Term Paper: Nike and Labor Laws

Pages: 4 (1551 words)  ·  Style: MLA  ·  Bibliography Sources: 2  ·  Level: College Senior  ·  Topic: Business  ·  Buy This Paper

Rebranding Sustainable Practices

Nike's sustainability strategy was to create jobs in the poverty stricken economies and meet its own business needs of reducing costs to maximize profits, something every business strives to do. Hiring subcontractors to do the work cut set up costs in the countries completely as the subcontractor had that cost instead of Nike. The agreed upon price to the subcontractor would yield substantial profits for Nike, adequate profits for the subcontractor, as well as meet the purpose of job creation in a poverty stricken economy. As economic conditions proper, Nike would be forced to move to another poverty stricken country to maintain the level of profits being made in the previous country. In these terms, a substantial increase in cost of production abroad would not damage the financial position because the profits were substantial enough to cover the added expenses.

Nike could continue this strategy until very late in economic gain because governments did not enforce their own laws and births were hard to verify to prove ages of workers (Boggan). Even though Nike had legal obligation under U.S. And international law to govern the practices of the subcontractors, their country's government chose to ignore claims of child labor in spite of having laws that prohibited the practice of child labor. Regardless of what claims were made to authorities, Nike knew it would be ignored and nothing done about it. Therefore, it was easy for Nike to enjoy substantial profits in spite of law.

Another reason for continuing the practice was the idea that it was hard to prove age status of workers with inadequate country documentation standards. Some births were not recorded and the ones that were had inadequate documentation of the births. Not all people born in a third world country are born in hospitals. Some are born in homes, streets, etc., and are cared for by other women in the same positions. Therefore, it was hard for anyone to prove the child labor practice that plummeted the country, even though it was well-known internationally. Nike could use the justification that the subcontractor was the one they hired, not children or the subcontractor's employees, in spite of having international obligation to oversee the practices of the subcontractors. It made for easy justification in spite of international laws that governed Nike.

Under the terms of poor government enforcement and inadequate country documentation of birth records, Nike could continue to stick with agreed upon terms with the subcontractor for the low wage requirements of the agreement. The biggest requirement for Nike was to monitor profits. As the economic conditions remained poor, Nike had no problem in maintaining high levels of profits. The biggest expenses came with marketing to sell the products, such as the use of celebrities. Nike could budget small for manufacturing under these terms and higher for marketing to sell its products. but, as the country's economy begin to grow, Nike's profits would gradually decrease until it would become harder to maintain. As profits began to fall, Nike looked at the next step in the ongoing strategic plan, which was to seek out other poverty stricken economies to do business.

As critics raised more public awareness, Nike's brand reputation began to suffer from the strategic decisions. To save the firm reputation, rebranding is a good option. Correcting business problems is a huge part of success (Sternal). It tells investors and the public that the company is willing to admit and rectify mistakes to bring processes back into compliance and do the right thing. The first step is to look at strengths and weaknesses to identify and make clear what the problem actually is, which in this case, is the legality of child labor and unethical strategy issues. Another issue with this problem was the tone from the top. The executives did not consider ethical issues when making strategic decisions.

Asking customers, investors, and employees opinions and suggestions helps to come up with a plan that would satisfy all shareholders. The biggest step to creating a plan is to change the mindset of the executives at the top. Ethical standards need to be determined to create policies that could be enforced to meet company objectives, missions, and values in ethical ways. The ethics considered need to be based around fairness to all employees regardless of the country they live and operate in, including poverty stricken communities. Both country and international laws also need to be considered. Where Nike had hiring standards, the question was to how they were going to ensure the standards were practiced and enforced, regardless of where the operations were located.

A big part of the plan would be to monitor the subcontractors to ensure they are in compliance with country and international laws as well as company missions, standards, and values. Doing periodic visits and inspections enables the ability to keep up with how processes are designed and operated. As violations are found, they could be addressed immediately by company officials instead of critics bringing about public awareness of issues. Renegotiating wages paid to workers is also a viable option to ensure fairness. Even if wages are lower in the third world countries, Nike should still ensure they are fair.

A part of assurance in compliance would be for the subcontractors to be aware and follow Nike company policies, including hiring standards. Measures need to be taken to ensure the validity of the hiring processes. For one measure, if they do not look old enough, they probably are not. For workers with no birth records, a requirement of looking 20 years old or above could be put into a policy implementation. To ensure that subcontractors are aware and know the policies, a statement signed by the subcontractor after reading and understanding policies serves as a valuable tool for compliance measures.

After developing a rebranding plan, it is necessary to communicate the plan in a clear manner to shareholders and the public (Brown). It needs to tell the story of why a rebranding is necessary, mistakes of child labor, including admitting to the mistakes and how they are being corrected. The plan needs to be publicized with a clear understanding of how the problems are being rectified, including policy implementation and how it is being enforced. By publicizing the plan, stakeholders understand the company means business in providing ethical standards of business practices and places high values on the ethics it implements and enforces.

Nike has a history of doing manufacturing business in third world countries with poor economic conditions where poverty is high, child labor is particularly high, and governments are extremely lax in enforcement of laws. but, when economic conditions increase, Nike moves operations to another third world country that has the same conditions the other country started off with. At present, Nike may be doing business in Indonesia, but when the economy starts to prosper, Nike will look for another country to move operations.

Other countries that Nike may consider are North Korea, Ethiopia, (McKenna), or New Delhi (Goldberg). These countries have no government enforcement of child labor laws and high numbers of child labor. Where most of the children work agriculture, street vending, and domestic workers, North Korea has reports of children still working in factories. Where children have factory experience in North Korea, Nike may choose North Korea because of knowledge about manufacturing already known to the children.

The strategy of Nike paying millions of dollars in marketing and only averaging $1.14 per worker per day is not a sustainable strategy. For one, it does not show Nike as placing high value on employees as company assets. When investors analyze Nike's financial statements, these numbers show bad management practices in the way management values assets and people. The second reason is that labor should be one of the… [END OF PREVIEW]

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