Case Analysis of Nike in South East Asia

The paper aims at highlighting the major issues faced by the global shoe maker giant Nike in their south east Asian business diversification. A number of criticisms regarding labor practices and wage management have clouded the reputation of Nike and the company was forced to make some operational changes in its overseas manufacturing units. An in-depth analysis of the various criticism that were made is done and how Nike responded to them is discussed in the paper. The strategic moves made by Nike are mentioned and the impact on sales and revenue is also considered.

Running Head: CASE ANALYSIS OF NIKE IN SOUTH EAST ASIA
Case study- Nike in South-east Asia
Student name
University name
Author note

2NIKE IN SOUTH EAST ASIA
EXECUTIVE SUMMARY
The paper aims at highlighting the major issues faced by the global shoe maker giant Nike in
their south east Asian business diversification. A number of criticisms regarding labor practices
and wage management have clouded the reputation of Nike and the company was forced to make
some operational changes in its overseas manufacturing units. However, company spokesperson
has not accepted the criticisms and have said them to be superficial and falsely acclaimed. They
said some minor issues were there which were mitigated effectively and no other issues are there
in Nike’s operational business. An in-depth analysis of the various criticism that were made is
done and how Nike responded to them is discussed in the paper. The strategic moves made by
Nike are mentioned and the impact on sales and revenue is also considered. A critical overview
of the Vietnam and Indonesian units are provided as most criticism was from these two south
east Asian units.

3NIKE IN SOUTH EAST ASIA
TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................4
COMPANY BACKGROUND........................................................................................................4
DISCUSSION AND CRITICAL ANALYSIS................................................................................5
NIKE IN SOUTH EAST ASIA...................................................................................................5
CRITICISM IN INDONESIAN SUPPLIERS’ FACTORIES.....................................................6
CRITICISM IN VIETNAM SUPPLIERS’ FACTORIES...........................................................6
STRATEGIES AND MEASURES TAKEN BY NIKE..............................................................7
RECOMMENDATION AND CONCLUSION..............................................................................9
BIBLIOGRAPHY..........................................................................................................................10

4NIKE IN SOUTH EAST ASIA
INTRODUCTION
Nike is one of the most trusted shoe brands used by various sport organizations and sport event
sponsorship. The brand name of Nike itself is very influential and so if any criticism comes in its
way the impact is deep and impactful. Nike faces serious criticism from media and press
regarding its HRM policies of labor management and wage structure. It is claimed that Nike
provides its workers a very minimum salary even lower than the average base salary and ill-treat
the labors during their work hours. The Indonesian and Vietnam workers were humiliated and
were forced to work extra hours in order to achieve the market standards and supply targets (Bies
& Greenberg, 2017). The sales figures have remained unaffected till now but the seriousness of
the issue may have adverse effects on the company’s bottom-line in coming future. The paper
will find out the seriousness of the criticism in Nike’s supplier factories in Indonesia and
Vietnam. The aftereffects in sales figure impact will also be considered and such criticism will
turn down Nike’s reputation from market or will it remain unaffected is also a major area of
analysis of the paper.
COMPANY BACKGROUND
The company background of Nike needs to be understood before evaluating the concerned areas
of the paper. Nike is an American multinational corporation. The major business areas covered
by Nike is design, development, manufacturing, marketing and sales. The key products include
apparel, footwear, equipment, accessories and services. It is the largest supplier of athletic shoes
and apparel in the world. It is one the major sport equipment manufacturer globally. A number of
high-profile athletes and well-known sports teams are being sponsored by Nike. The trademark
of Nike is globally recognized and goes as “Just Do It’. The Swoosh logo is also globally
acclaimed and recognized. The current brand value of Nike is almost $30 billion, which is one of

5NIKE IN SOUTH EAST ASIA
the largest sports business brand value in the world. Most of the Nike factories are located in
south-east Asia mostly in Indonesia, China, India, Vietnam, Thailand, Malaysia, Pakistan,
Philippines and Taiwan. Nike is criticized for contracting with factories (Nike sweatshops) in
these countries and claim that Nike has violated minimum wage rule and overtime laws (Misra,
2014). Criticism has also been received in areas of poor working conditions and labor
exploitation. Paradise Papers have claimed that Nike use offshore companies in their
manufacturing processes in order to curtain tax burden and thus increase cost effectiveness
which is not legal.
DISCUSSION AND CRITICAL ANALYSIS
NIKE IN SOUTH EAST ASIA
Keeping other issues aside the main focus is given to south east Asian operations of Nike. The
company collaborated mainly with Taiwan and Indonesian counterparts and manufacturing units
have been set up there. Cheap labor availability and easy climatic conditions help the company in
making quality products at the most affordable prices. The profit margin increased as a result and
recorded a total revenue of $6.5 billion in the year 1996. On one hand the profit margin made
everyone happy on the other hand the strategic management was under pressure of their
reputation as a series of criticism from the media has questioned their overseas labor practices.
The human rights group activists condemned Nike of poor working conditions and wage issues
in the Asian suppliers’ factories. Nike never owned a factor there but only took ownership of the
finished goods and services. Thus, sourcing shoes from low wage countries like Asia is one of
the most profitable business strategies devised by Nike. The visibility of the company increased
with time and so is the scrutiny of its labor practices (Tsing, 2016). Allegations increased and it

6NIKE IN SOUTH EAST ASIA
was claimed that shoes sold at $140 were manufactured by the Asian workers whose daily wage
is barely $2.
CRITICISM IN INDONESIAN SUPPLIERS’ FACTORIES
Audit reports have revealed that several mismanagements on Nike’s part have been considered
and the major issues are discussed below,
 Some managers are considered to be strict and abusive in their approach. They punished
workers, humiliated them and even shouted at them for bad work and tardiness. One
worker claimed that he ahs to run laps around the factory premises for defect shoe
assembly.
 Underpayment of wages is other burning issue for labor unrest and workers protest by
initiating a mass protest and strike. The labors demanded pay of the revised basic
monthly wage of 172,500 rupiah. The company agreed but their terms and conditions
included the attendance wage which results in the minimum wage remaining same as the
last year. But the labor class was not aware of this mis-representation (Misra, 2014).
CRITICISM IN VIETNAM SUPPLIERS’ FACTORIES
 In Vietnam workers’ humiliation rages protest both in worker class and media. It was
claimed that 15 Vietnamese women were beaten on their face with an unfinished shoe as
the forewomen was angry on their quality of work. She was found guilty and was fired
the same day.
 Another Taiwanese manager forced around 56 employees to run laps and a dozen fainted.
Their reason for punishment was slow work. Physical abuse of workers is one of the
major concern areas for the Vietnam suppliers’ factories.

7NIKE IN SOUTH EAST ASIA
 The monthly minimum wage in 1997 in Vietnam was $45, but Nike was accused of not
giving the minimum wage for the first 3 months of work. This practice is illegal in regard
to labor practices.
 The human rights group at Vietnam claim that the average per-capita income, value of
workers, benefits, cost of living of workers are below standards but Nike did not agree to
it anyhow.
STRATEGIES AND MEASURES TAKEN BY NIKE
The depth of the criticism has spread like wildfire and Nike’s market reputation came under
scrutiny. Various social organizations and labor associations are examining the facts and myths
of the various causes of labor unrest in Nike’s Indonesian and Vietnam supplier factories. The
after effects of the mass protests cannot be denied by the organization and the management has
taken some major steps to control the situations and favor the end results in their support
(Mudambi & Puck, 2016). In 1992 Nike had its first ‘code of conduct’ for the overseas supplier
factories mainly for the south east Asian factories. The MoU signed clearly mentioned that all
contractors need to comply with all occupational health and safety rules of local governmental
bodies. Nike also banned the use of forced labor in its overseas manufacturing units and devised
policies supporting environmental responsibility, equal opportunity practices and non-
discrimination. The rights to association and collective bargaining practices were also guaranteed
by the management. The production managers started to monitor the working conditions of
workers on daily basis. The accounting firm Earnest and Young audited the Indonesian plants on
basis of workers safety, pay issues and job attitude. The report mentioned 4 firms not paying
minimum wage to the labors and Nike, for the very first time, fired all four contractors of the
firms for non-compliance with company’s code of conduct. In 1996 Nike also established a

8NIKE IN SOUTH EAST ASIA
universal Labor practice Department that will constantly monitor the facilities of subcontracted
manufacturing units and will also upgrade working conditions of the factory workers all over the
world. The department will help Nike in fulfilling its commitment towards business and
employees as well. Focus on Indonesia, China and Vietnam was laid the most for their disturbed
labor workforces. In the next year Nike hired a civil rights activist, Andrew Young who was in
charge of reviewing the labor practices of Nike. The report was a fair report in support of Nike
and shows no labor discrepancies. Though it does not cover any wage issues. A number of labor
organizations criticized the report and claimed it to be one of the company’s strategies to
promote their own image and said Young has done as he was asked to do. A Nike spokesperson
after continuous criticism, finally said that they are all about sports and not some manufacturing
unit only (Lee & Tang, 2017). Problems will do arise but Nike have learnt to move on and they
have tried to solve the issues to the extent possible. So, it has been aptly remarked that whether
one likes Nike or not is not an issue because corporations like Nike are responsible for leading
poor countries out of poverty. Nike also claims that when they operated in Japan it was below
poverty line but today Japan is one of the richest countries in the world (Banjo, 2014). The same
things are going to repeat in Korea, Indonesia and other south east Asian countries. The sales of
Nike will remain undisturbed as it was able to show its strategic measures in combating the labor
issues to the extent possible. Market research show that the sales remain unaffected as
production level touched the benchmark set up to. So even after huge criticism received from
media and social activists Nike continued to rule the sports market.

9NIKE IN SOUTH EAST ASIA

10NIKE IN SOUTH EAST ASIA
RECOMMENDATION AND CONCLUSION
The seriousness of the criticism was no doubt deep because Nike was forced to change some of
its operational strategies and also implemented some newer laws. The labor laws and policies
were upgraded. Nike fired some abusive operational contractors, laywomen and mangers from
overseas factories who were threats to labor safety and security. Constant monitoring and
auditing became part of overseas operations and feedback of labor forces were collected at times
to have fair picture of the work scenario. For big corporations like Nike labor issues are not
important in hindering its bottom-line but the market reputation may be under the lens which is
not good for the overall performance of the company. Moreover, if media start to write bad about
a company then the issues need to be addressed because media is one of the main factors that
help in upgrading the reputation of business biggies.

11NIKE IN SOUTH EAST ASIA
BIBLIOGRAPHY
Banjo, S. (2014). Inside Nike’s struggle to balance cost and worker safety in Bangladesh. The
Wall Street Journal, 21.
Bies, R. J., & Greenberg, J. (2017). Justice, culture, and corporate image: The swoosh, the
sweatshops, and the sway of public opinion. The Blackwell Handbook of Cross‐Cultural
Management, 320-334.
Lee, H. L., & Tang, C. S. (2017). Socially and environmentally responsible value chain
innovations: New operations management research opportunities. Management
Science, 64(3), 983-996.
Misra, S. (2014). Corporate responsibility for sustainability in Post-Globalization: The Nike Inc.
Lesson. International Journal of Management, IT and Engineering, 4(10), 501.
Mudambi, R., & Puck, J. (2016). A global value chain analysis of the ‘regional
strategy’perspective. Journal of Management Studies, 53(6), 1076-1093.
Tsing, A. (2016). What is emerging? Supply chains and the remaking of Asia. The Professional
Geographer, 68(2), 330-337.