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Hitting the Wall: Nike and International Labor Practices

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Kristen Azarelo

on 10 November 2011

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Transcript of Hitting the Wall: Nike and International Labor Practices

Nike became a Key target The formula had 2 main parts
1. Shave costs by outsourcing all Manufacturing
2. All money saved would go to the marketing sector. Minimum wage in Indonesia was ~ $1 when compared to South Korea's $24.40 and U.S. hourly wage of $8/hr.
These costs in Indonesia were %50 lower than the costs in Taiwan and South Korea. Celebrity endorsements were very popular. Celebrities such as Michael Jordan and Tiger Woods were associated with the "swoosh" and shortly Nike became a global symbol of athleticism and one of the worlds best known brands. Nike felt that Labor conditions in its contractors' factories were not Nike's responsibility.
Nike could not be held responsible for independent contractors' actions
Nike is a target of an uninformed media campaign.
Nike Hired Andrew Young to conduct an independent evaulation of the code of conduct.

Conclusion: " It is my sincere belief that Nike is doing a good job... But Nike can and should do better." and that 3rd party monitors were necessary.

This report had a negative effect on Critics

Step 1 of "Taking Care of it" Who is Responsible? Damage Control Hitting the Wall: Nike and International Labor Practices January 1992 Indonesia raised minimum wage from 2100 rupiah to 2500 ($1.24)
Still only provided 70% of required minimal physical needs
Many factors ignored the new wage
Strikes still continued So.... Strikes began to arise in 1991creating a lot of news and attention toward unfair labor practices which Nike landed right in the middle of. So, back to outsourcing Nike began in Beaverton, Oregon in
the 1970's. Known for it's fashion and the wide
range of athletic gear Nike's revenues grew
from $60,000 to $49 Million in a matter of 10 years. How? -
Nike was able to beat out it's competitors such as reebok,
adidas, and new balance due to its strategy created by CEO - Phil Knight. Nike outsourced specifically to parts of the world with very low costs. Contracts were started with Japan, then shifted to South Korea and Taiwan. Once costs began to rise, Nike moved over to Indonesia. Jeff Ballinger - Labor Activist It would take an Indonesian worker 44,492 years to equal Michael Jordan's endorsement contract Vietnam
most of the income was used to buy special items 91% claimed to be able to support themselves individually.
82% either saved their wages or contributed it to their families
Indosnesian famililes put their wages in a bank while Vietnamese workers held their savings in the form of rice or cows Saving the Swoosh Step1
Knights confession marked a turning point
Step 2
Get involved with AIP and government reforms
Fair Labor Standards Association

Full transcript