How Nike Solved Its Sweatshop Problem

Taken from: Business Insider

By Max Nisen

It wasn't that long ago that Nike was being shamed in public for its labor practices to the
point where it badly tarnished the company's image and hurt sales.
The recent factory collapse in Bangladesh was a reminder that even though Nike
managed to turn around its image, large parts of the industry still haven't changed much
at all.
Nike was an early target for the very reason it's been so successful. Its business model
was based on outsourcing its manufacturing, using the money it saved on aggressive
marketing campaigns.
Nike has managed to turn its image around. Nike hasn't been completely successful in
bringing factories into line, but there's no denying that the company has executed one of
the greatest image turnarounds in recent decades.
Here's the timeline of how Nike became a global symbol of abusive labor practices, then
managed to turn things around:
 After prices rose and labor organized in Korea and Taiwan, Nike urge contractors to
move to Indonesia, China, and Vietnam.
 1991: Problems start in 1991 when activist Jeff Ballinger publishes a report
documenting low wages and poor working conditions in Indonesia.
 Nike first formally responds to complaints with a factory code of conduct.
 1992: Ballinger publishes an exposé of Nike. His Harper's article highlights an
Indonesian worker who worked for a Nike subcontractor for 14 cents an hour, less
than Indonesia's minimum wage, and documented other abuses.
 1992-1993: Protests at the Barcelona Olympics in 1992, CBS' 1993 interview of Nike
factory workers, and Ballinger's NGO "Press For Change" provokes a wave of
mainstream media attention.
 1996: Kathy Lee Gifford's clothing line is shown to be made by children in poor labor
conditions. Her teary apology and activism makes it a national issue.
 1996: Nike establishes a department tasked with working to improve the lives of
factory laborers.
 1997: Efforts at promotion become occasions for public outrage. The company
expands its "Nike town" retail stores, only to see increasing protests. Sports media
begin challenging spokespeople like Michael Jordan.
 Abuses continue to emerge, like a report that alleging that a Vietnamese sub-
contractor ran women outside until they collapsed for failing to wear regulation
shoes.
 Nike tasks diplomat and activist Andrew Young with examining its labor practices
abroad. His report is criticized for being soft on Nike. Critics object to the fact that he
didn't address low wages, used Nike interpreters to translate, and was accompanied
by Nike officials on factory visits. Since Young's report was largely favorable, Nike is
quick to publicize it, which.
 1997: College students around the country began protesting the company.
 1998: Nike faces weak demand and unrelenting criticism. It has to lay off workers,
and begins to realize it needs to change.
 The real shift begins with a May 1998 speech by then-CEO Phil Knight. “The Nike
product has become synonymous with slave wages, forced overtime, and arbitrary
abuse,” Knight said. “I truly believe the American consumer doesn’t want to buy
products made under abusive conditions.”
 At that speech, he announces Nike will raise the minimum age of workers;
significantly increase monitoring; and will adapt U.S. OSHA clean air standards in all
factories.
 1999: Nike begins creating the Fair Labor Association, a non-profit group that
combines companies, and human rights and labor representatives to establish
independent monitoring and a code of conduct, including a minimum age and a 60-
hour work week, and pushes other brands to join.
 2002-2004: The Company performs some 600 factory audits between 2002 and
2004, including repeat visits to problematic factories.
 2004: Human rights activists acknowledge that increased monitoring efforts at least
deal with some of the worst problems, like locked factory doors and unsafe
chemicals, but issues still remain.
 2005: Nike becomes the first in its industry to publish a complete list of the factories
it contracts with.
 2005: Nike publishes a detailed 108-page report revealing conditions and pay in its
factories and acknowledging widespread issues, particularly in its south Asian
factories.
 2005-Present: The Company continues to post its commitments, standards, and
audit data as part of its corporate social responsibility reports.
Nike wasn't the only or worst company to use sweatshops. But it was the one everybody
knew.
Transparency doesn't change ongoing reports of abuses, still-low wages, or tragedies
like the one in Bangladesh.
But by becoming a leader instead of denying every allegation, Nike has mostly managed
to put the most difficult chapter in its history behind it and other companies who outsource
could stand to learn a few things from Nike's turnaround.

QUESTIONS:
1. What is the term “Sweatshop” used to describe?
_____________________________________________________________________
_____________________________________________________________________
2. Explain how core competencies are related to outsourcing.
_____________________________________________________________________
_____________________________________________________________________

3. Describe Nike’s core competencies and Non-core activities:

core competencies Non-core activities

4. Describe the risks of outsourcing for Nike:

_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_______________________________________________________

5. Describe the advantages and disadvantages of outsourcing in the middle – east for
Nike.

Advantages Disadvantages
6. What are the main ethical issues identified in the case study:
_____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
___________________________________________________________________

7. Rate International risk factor for Nike in South America:

8.Rate outsourcing provider for Nike: