Nike and International Labor Practices Case Study

Nike and International Labor Practices - Case Study Example Nike experienced some problems in the 1990s with respect to their labor policies primarily in Indonesia and China. Unions and NGOs accused them of paying wages that were insufficient for subsistence and using child labor. Activists continued to press Nike for action to resolve the labor disputes, but Nike refused to take responsibility. An onslaught of bad publicity resulted in falling sales, plummeting income, and reduced stock value. In 1998, after Nike revenue fell, they began to accept the responsibility for the contractors in their outsourced business model. The financial cost to Nike has been estimated at $400 million for failing to address the issue promptly. Nike is secure in its market sector for the near term. There are only a few companies that can match Nike's ability to advertise and market their product. They have the largest market share and even a merger between number 2 and 3 could not exceed them. Adidas-Reebok and New Balance combined still come in behind Nike. New entrants are not likely to take on these formidable competitors. The large market share that Nike enjoys is also a challenge for them. They can not grow through increased market share. For the near future, they are forced to enter new international markets to sustain the levels of growth they have seen in the last 3 years. Markets in China and India are their primary targets and they have made some progress there. India has contributed substantially to their revenue and they have gained the sponsorship of the Beijing Olympics. Nike has considerable brand recognition and customer loyalty. They have made use of leading sports figures to market their products with great success. Their well-known logo, the 'Swoosh', is easily one of the most recognized symbols in marketing. In concert with their strong financial position Nike is well positioned. However, they must continue to be vigilant to avert the public relations disaster of the past. Nike should be a world leader in the movement in international worker's rights movements. Their recent recovery indicates they have the confidence and the support of the market when they take action to correct the faults of the past. However, they will be subject to public scrutiny. They need to be pro-active at correcting and improving their image with the public through community charity programs. With their market position, their history of innovative marketing, and their ability to set trends they should be well positioned to overcome any damage that their reputation has suffered. CASE ANALYSIS Throughout the 1990s, Nike was repeatedly accused of violating fair labor practices through their affiliation with international contractors. Nike consistently denied any wrongdoing and contended that any violations were the fault of the contractor and not Nike. Several groups formed alliances to come to the aid of the workers primarily in Indonesia and China. These groups came from international rights groups, competitors, US activists, students, and possibly even the Indonesian government. International watchdogs accused Nike of failing to pay an adequate wage. They allied with religious groups on ethical grounds. As early as 1991 the Asian American Free Labor Association (AAFLI) and the Institut Technology Bandug (ITB) had published reports critical of corporate practices in Indonesia (Spar 153-154). They had an international responsibility to bring these issues to light and