Running head: Nike The Sweatshop Debate

Nike: The Sweatshop Debate

By

XXXXXXXXX

MGT/448

XXXXXXXXXX

January 31, 2014

Nike: The Sweatshop Debate

2
Nike: The Sweatshop Debate
With globalization and increased drive towards free trade across the different regions of
the world companies can seek ways to tap into cost benefits and wider markets to expand and
grow, but they must also put up with challenges of operating in a different cultural and ethical
environment while also subjecting to the local laws and customs. In the following paragraphs,
this paper will look into Nikes global operation with sole focus on the sweatshop scandal that
has rocked the company for years and the legal, cultural and ethical challenges that Nike as a
company faces operating in foreign countries along with other relevant issues.
Ethical, Legal and Cultural Challenges
Nike specializes in the design and marketing of sports wares across the globe, the
company which was established in 1972 is not involved in the manufacturing process of the
wares it markets; rather it outsources it to contract manufacturers in countries like Vietnam,
China and Indonesia (Hill, 2013). This allows the company to take advantage of extremely low
labor cost and in turn generate huge profits. Part of the ethical challenges that arises with such
model is the documented evidence that Nike is indirectly exploiting workers in these countries as
most workers who make Nike products that retail at a premium are being paid wages that are less
than the daily livable wage and are made to work in appalling conditions (Hill, 2013). In
addition, they are exposed to toxic materials that affect their health; a situation that would not be
allowed in the United States (Hill, 2013).
Legally, the company has also been faced with some challenges that arise as a result of it
mode of operations as it concerns its outsourced manufacturing process. Some of the factories in
which the Nike products are manufactured have workers who are way below the age limit

Nike: The Sweatshop Debate

3
imposed by the national legislation of the countries concerned. For instance, China has set the
age of 16 as the minimum age for factory workers but it is common to see young kids around age
10 working in these factories; which is a clear case of child labor, a global menace that the world
is seeking to tackle (Hill, 2013). Culturally, Nike has also experienced some challenges with its
global operations in foreign countries. With regard to this case study, one cultural challenge is
the way some cultures treat contractual agreements compared to the American culture. Nikes
claim to have set out minimum standards as it concerns the workers welfare is clearly
contradicted by the actions of the contractor. This could point to the fact that contracts are not
taken seriously in these cultures and it will continue to pose a challenge to Nikes operations.
Role of Host Government
Government has a role to play in the business environment, as it is responsible for
policies and legislation that help promote trade. In a global business environment, the host
government to a foreign business is responsible for putting in place legislation that guides the
operations of foreign businesses. Issues of workers welfare, minimum wage, health and safety of
employees are to be well spelt out by the host government in a bid to protect its citizens while
still being able to promote investment. In Nikes case, the failure of the respective host
governments to put in place legislations or enforce it where it exists created the room for
exploitation of workers in their countries.
Strategic and Operational Challenges
Nike as a global company is exposed to some strategic and operational challenges one of
which is to ensure compliance with established codes imposed to ensure workers welfare and
safety in the countries its products are manufactured. Ensuring that corporate responsibility is

Nike: The Sweatshop Debate

4
transferred to the operations of its partners in the countries in which it operates is also a major
challenge for Nike considering the battering that the companys image has received in recent
times this has to be given proper operations.

Nike: The Sweatshop Debate

5

Reference
Hill, C. W. (2013). International business. Competing in the global marketplace (9th ed.). New
York: McGraw-Hill .