Duong Tran

University of the People

BUS 2207

Unit 1 Written Assignment

Professor Diana Figueroa

June 22, 2021

 In its 45 years of existence, Nike has developed from a small operation to a household

name, present on all continents. However, in the 1990s Nike came under scrutiny for various

unethical practices.

Introduction

Globalization is about the growth and interconnectedness of the world. This process helps

increase the interaction as well as profit for the organization. However, great opportunities

usually associated with great risk. In order to promote a certain brand in given country, the

business must research carefully their cultures and ethics. The standards and rules can be

different in different places. But in general, ethics issues must be put into careful consideration.

One of the most successful names in the global is Nike. The organization has developed into a

multinational corporation. In this process, there are lots of challenges and scrutiny that any

business should be aware of as they step into broad marketplace.

·         Explain how Nike came to that situation through its expansion strategy.

Nike started as a small operation with total investment of $1000 from the founders Phil

Knight and Bill Bowerman in 1964. While attending Stanford Business School, Knight saw the

potential of Japanese producers as it comes with cheap prices but high quality. This is the

beginning of the growth of an empire of shoes. In the early 1970s, there were nearly $2 million

spent by consumers. In 1972, the Nike brand was launched and eventually became Nike, Inc. in

1978. It only took Nike over a decade to become the world’s most popular athletic shoe company

(Richard, 2002).

Due to the rapid growth of the company, an expansion strategy must be made in order to

respond to market’s demand. The company had decided that globalization is the solid factor for
their success. Based on the principle of outsourcing, the organization has established firm

business relationship with two Japanese shoe manufacturers. Unfortunately, the oil crisis in the

1970s has forced Nike to find cheaper labor sources like South Korea or China. The target is

minimized cost in order to maximize profits, Nike eventually moves their factories to develop

countries such as Vietnam or Malaysia since the labor in old location is no longer competitive

(Richard, 2002).

·         Explain what the positive and negative impacts of this strategy were.

Economically, Nike had helped developing countries create sources of income for

citizens. Furthermore, the globalization progress increases competition between business and

force them to make high-quality product with affordable prices. However, there were multiples

reports at the time that shown Nike couldn’t provide a safe environment for its workers.

As mentioned above, the most significant sign of Nike located in developing countries is

creating jobs. The economic benefits are visible. But that’s not everything. Some sources

reported that Nike has heavily violated the ethics and regulation in countries where its factories

are located. Reports by NGOs accused that Nike’s workers must work in poor and hazardous

environments with low wages as well as many human rights problems. The shreds of evidence

have shown that the workers don’t even receive a minimum daily wage. Employees hardly pay

for their basic needs for an individual. It’s hard to imagine all the health and safety risks the

workers must take with little pay. Moreover, the document also mentioned Nike even used child

labor to minimize working expenses. Phrases like “slave wages, forced overtime, and arbitrary

abuse” was used at the National Press Club in May 1998 by Phil Knight to emphasize Nike’s

perils. The image of Nike at the point was created by Nike itself (Richard, 2002).
 ·         Explain how Nike responded to this situation.

At this point, Nike’s subcontractors were the ones who took the blame. It has been stated

clearly by company’s general manager in Jakarta in Nike was only marketers and designers. The

subcontractors were in charge of the manufacturing. It means Nike had no responsibility towards

people who weren’t its employees. However, Nike realized that changes must be made if they

still want to keep up with the image that the organization aims to. Plus, the covered criticism

would slowly take down a business, no matter how large it is. Therefore, code of conduct for

suppliers was established by Nike. The suppliers must sign it if they want to work with Nike.

The working-age had been raised from 16 to 18 years old. New divisions about safety measures,

attitudes of management, and environment programs were also introduced. Also, the suppliers

must pass the examinations and surveys to land their contracts (Richard, 2002).

·         In your opinion, how could the company have responded differently? Suggest

at least two alternative responses.

First, the company should take a part of the responsibility and work with relevant

authorities to solve the problems. This would partly help their public relations. Assume that Nike

responds quickly to the situation, the company's reputation would not be heavily damaged as

they were. The second alternative response would be to immediately speak up about the situation

instead of challenging the crowd. Regardless of the responsibility they take, the organization

should hold a meeting to talk about this and future actions. In this meeting, terms and conditions

to become Nike’s suppliers are given to the public. It’s important for the world to see that Nike

listens to their opinions. However, this is only from my perspective.

·         What would the consequences have been then?

 The consequences of taking responsibility are surely criticism and potential lawsuit.

However, Nike’s public image is the most important thing to keep. As long as the public voice is

heard and Nike’s action had been made, the multinational company can still survive in the

international market. Nowadays, the policy and regulation have been stricter, business that tries

to ignore or violate those tend to have higher chance to be eliminated.

Conclusion

Businesses must remember that the code of ethics is extremely important, especially for

multinational organizations. The lesson has been shown by Nike’s case. This experience also

remains company to set standards and exam their contractors closely before closing a deal. Even

though the company might avoid lawsuits but the company’s reputation is still affected by it. It’s

hard to survive in the world of business without scheme but it’s vital to follow certain standards

of ethics and law. 

References:

Richard M. Locke. (2002). The Promise and Perils of Globalization: The Case of Nike.

Retrieved from https://ipc.mit.edu/sites/default/files/2019-01/02-007.pdf