| 2012 | | OUR LADY OF THE LAKE UNIVERSITY
David R Hurtado |

NIKE IN SOUTHEAST ASIA | |

Nike in Southeast Asia

Is it ethical for a company to move its manufacturing jobs from country to country looking for the best price to pay for its product? Can Nike afford to ignore the five forces outlined by Harvard University professor Michael Porter? No they can’t! If they do, they will end up like all those before them that have, closed! Before we take a look at why Nike is such a “Bad Guy,” let’s take a look at the American worker. For many decades now, they have been complaining about the loss of jobs and the lack thereof and blame large corporations for this. The fact of the matter is, the American worker has been pricing themselves right out of the job market for decades now. Nike is doing nothing different than its consumers do when they go from store to store or website to website trying to find the very best deal that they can. Why does the consumer act in this manner? Well I can tell you for me it is to keep as much of my money in my pocket at the same time getting what I want from the store. So why it is then, when corporations like Nike moves its jobs around the world trying to get the best price it can, get chastised for the very behavior that we as consumers partake in every day? I am not too sure of this but it might be because of our self-righteous-judgmental nature. The truth is Nike doesn’t employ the people in these so called sweat shops in Southeast Asia but merely buys product from independent factories that operate in these countries (Boatright, 2009). I personally can’t fault Nike for moving jobs overseas, a process called outsourcing today. They might just have taken heart to a history lesion provided by the like of buggy whip manufactures, railroads and US steel. The railroads might not be in the trouble they are in today if they had not let their customers be absorbed by others, such as cars, planes and trucks. Instead they assumed that they were in the railroad business instead of the transportation business (Levitt, 2004). Another example that professor Levitt might have used is Hostess. To simplify matters Hostess had two major problems, they lost sight of their customers and the unionized work force priced them right out of a job again! When U.S. Bankruptcy Judge Robert Drain imposed contract concessions opposed by 92 percent of the union’s members, the employees went on strike and Hostess’s hand was forced and filed for chapter 11 bankruptcy protection putting 18,000 workers out of work (McCarty,Dawn; Milford,Phil, 2012). Essentially companies should focus on the needs of their customers and not on a specific product. Us steel is probably a better example of what Nike is not exposing themselves to. The USW have recently ratified an agreement with US Steel to raise wages and bonuses by 4.5% over the next 3 years (Miller, 2012). The steel workers see this as a victory but I see this as the beginning of the end. US Steel’s Earnings per Share in the last quarter was a penny and bonuses alone will have a pre-tax price tag of 35 million dollars (Miller, 2012). So as I see it just like many other industries in America the steel workers are well on their way to pricing themselves right out of the market. Nike by purchasing their product from manufactures abroad don’t have to deal with a unionized work force but merely have to negotiate price per unit purchased. Even with lower manufacturing costs Nike still has challenges ahead. In china alone their sales have gone down while their main competitor Adidas has gone up. This is more an inventory management issue than a manufacturing cost issue (Redl, 2012). This problem is basic as I see it, a business’s job is to reduce costs while increasing profits so that they can sustain investors and in turn they can keep the doors open. In this end everyone wins, the consumer gets a good product at a good price, workers get to keep their jobs and the corporation makes a profit. Nike has approximately 91% of their manufacturing in Asia employing 800,000 people in 600 factories across 48 countries (Connor, 2010). Not to mention the potentially millions of other support workers that can be linked to Nike’s survival as a company. As an American company Nike has a certain responsibilities to operate at a level of ethicacy far above that of the countries that it deals with if only as an example of how to behave instead of teaching them to use any and everybody and resources to its own benefit without regard to the people and resources that it affects and possibly destroys.
The challenge however is how to do this without destroying the company because I believe the world is a much better place with multinational corporations than it is without them. One way that this might be possible is that Nike is not the only company using these factories. There are many other manufactures using the same factories and putting extreme demands on the factories such as amounts and too many different styles for a single factory to manufacture without overtaxing the workers. By collaborating with the competition and standardizing, limiting the amount of styles in anyone factory, and adopting lean practices (Connor, 2010) Nike will be headed in the right direction to a better tomorrow. The world is changing and today’s challenges are very different than those of yesterday and though I believe that Nike’s first responsibility is to the success of the company which in today’s business climate also includes how they treat their employees and do business. Whatever direction Nike decides to go in it might be prudent for Nike to heed the lesions of these struggling or defunct companies and listen to the customer. If the customer is crying out for the human treatment of workers abroad then Nike cannot afford not to listen to them or else they might just become another buggy whip company.

References
Boatright, J. R. (2009). Ethics and the Conduct of Business. Upper Saddle River: Prentice Hall.
Connor, M. (2010, January 10). Business Ethics. The magizine of Corporate Responsibility. Retrieved November 15, 2012, from Nike: Corporate Responsibility at a “Tipping Point”: http://business-ethics.com/2010/01/24/2154-nike-corporate-responsibility-at-a-tipping-point/
Levitt, T. (2004). Marketing Myopia. Harvard business review , 1-90.
McCarty,Dawn; Milford,Phil. (2012, November 27). Hostess Chapter 11 Trustee Sought by Bakers’ Union. Retrieved November 27, 2012, from Bloomberg.com: http://www.bloomberg.com/news/2012-11-27/bakers-union-asks-hostess-judge-to-appoint-trustee.html
Miller, J. W. (2012). U.S. Steel, UnionMake a Deal. The Wall Street Journal , 1.
Redl, N. (2012, November 8). Adidas Is Fast Catching Nike in China. Retrieved November 8, 2012, from The Source: http://blogs.wsj.com/source/2012/11/08/adidas-is-fast-catching-nike-in-china/