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Ashley Brett Higginbotham
Accounting 2102 -- Financial Accounting
Section 101 Spring Semester 2014
Manufacturing in Bangladesh: Nike’s Controversy
American companies manufacturing at cheaper costs in foreign companies is not a new practice. Companies have been using overseas factories to produce goods for years due mainly to cheaper manufacturing costs. Not only are labor and material costs less expensive, foreign countries often do not have as strict of labor laws as the ones enforced in America. They also do not have a sense of responsibility to the community. Companies can come into a remote area in another country and provide substandard pay and working conditions to underprivileged workers who typically do not have many opportunities for work. In such cases, there is usually no local regulation enforced and global companies like Nike can take advantage of impecunious workers while increasing their profits.
An article recently published in The Wall Street Journal focused on the effects of Nike manufacturing products overseas, specifically in Bangladesh. The focal point of the article was how Nike was attempting to achieve the lowest possible manufacturing costs while still maintaining worker safety and producing high-quality products. Both consequences and benefits of manufacturing in foreign companies was discussed in the article. In addition to how manufacturing costs affect the financial outlook of the company, the article addressed how having factories in less-developed countries has an impact on public opinion of Nike.
Manufacturing in foreign countries typically means cheaper production costs resulting in higher profit margins. Nike operates manufacturing plants worldwide, with most of their clothes and shoe...
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...orking environments for their factory employees. Even with international groups and organizations keeping a constant watch on companies who outsource work to impoverished countries, there is often little that can be done to control these companies. Lack of local enforcement and overlooked international law makes it easy for money-hungry companies to get away with morally wrong behavior. By bringing attention to these types of situations and not supporting companies who do not treat their workers fairly, executives will be hit where it hurts them the most, their pockets. When their profits decrease, they will be forced to look for alternatives to manufacture their products.
WORKS CITED
Banjo, Shelly. “Inside Nike’s Struggle to Balance Cost and Worker Safety in Bangladesh.” The
Wall Street Journal 21 April 2014. Web. 22 April 2014.
Corporations in the United States have proved time and time again that they are all about profit and not about what is good for America. One example of this is the fact that many corporations have factories in other countries, or buy from other corporations that do. Nike (an athletic shoe and clothing company) produces most of their shoes and apparel in factories in other countries, including Japan, South Korea, Indonesia, China, Vietnam and Malaysia. According to Nike’s factory disclosure list released May 2011, only 49 of it’s over 700 factories are located in the U.S. (Nike, Inc.) This means that thousands of jobs that could be filled by needy Americans are instead being filled by workers in other countries. This reason that Nike and other corporations outsource is very simple, it is very cheap to do so. In an excerpt from Jeffrey St. Clair's book “Born Under a Bad Sky” the author describes the vast differences between Nike’s production costs and retail prices. “In Vietnam, it costs Nike only $1.50 to manufactu...
Large corporations such as Nike, Gap, and Reebok and many others from the United States have moved their factories to undeveloped nations; barely pay their employees enough to live on. Countries such as China, Indonesia, and Haiti have readily abundant cheap labor. There should be labor laws or an obligation of respecting workers to provide decent working conditions, fair wages, and safety standards.
In Nike’s SEC Annual Report, Nike discloses that independent contracted factories in China, Indonesia, and Vietnam produced approximately 94% of the total Nike Brand footwear and 58% of the Nike apparel. (Nike, Inc. 10K Report, 2016) The independent factories overhead in China, Indonesia, and Vietnam are considerably lower than those of the United States. Nike veteran, Steve Bence stated that it costs Nike “about $28.50 to manufacture a pair of shoes in Asia and have it shipped to the United States. That includes $25 for labor and factory costs and $1 in shipping.”(“The cost breakdown of a $100 pair of sneakers”, 2016) The import price of 30 pair can be recouped after one pair of sneakers. Here Nike profits are substantial compares to the money to the cost of the imported
Since its creation, Nike has proven itself as a popular brand and it has created niches by selling products such as footwear, apparels and various types of sports equipment. This paper will attempt to trace the product development of Nike shoes from its origins in conception and design to the manufacturing and production process located in contract factories in developing countries to advertising and marketing of Nike as a cultural commodity and finally, the retailing of the footwear around the world.
Nike has been under a great deal of pressure to correct the misdoings that have been done regarding production facilities in the East. As Nike is responsible for these plants, their reputation has been tainted with increasing public debate about ethical matters. While Nike still promotes itself as one of the industry leaders in corporate social responsibility, workers in Asia are still forced to work excessively long hours in substandard environments and are not paid enough to meet the basic needs for themselves or their families. They are faced to a life of poverty and are unfortunate subjects to harassment and violent threats if they make any attempt to form unions or tell journalists about labour abuses in their factories. Phil Knight’s speech regarding Nike’s steps to improving human rights in Asian countries was a step in the right direction for Nike, but it would have been much more effective had Nike fully followed through with these initiatives.
The corporation should invest more money in research and innovation since this is what has helped them to make a product that rivals their competitors. At the same time, it is imperative for them to improve their machinery for cheap labor costs which will help the company increase its production allowing it to meet the demand in the market. By improving production leading to lower costs of making shoes, apparel, and equipment, Nike will achieve higher demand assuming a quality product is maintained in that process. They will stand a better chance of competing in the industry (Hill, 2009). The organization is already in a better position for meeting the demand, customer taste, and needs. The company should improve quality by focusing on developing lightweight products that are more durable compared to those offered by the competitors. Also, Nike can keep up their success by continuing to reinvent and improve their items and continue to meet the current demand by using new technology. It can also use the Internet to communicate with consumers (Hill, 2009). By developing new technology, Nike will allow the customers to suggest and design their shoes online. To achieve this goal, it is fundamental to enhance areas such as their website to make it more user-friendly. Finally, the company should pay attention to small startup organizations that enter the
Only a week earlier, on June 28, 2001, Nike had held an analysts' meeting to disclose its fiscal-year 2001 results.1 The meeting, however, had another purpose: Nike management wanted to communicate a strategy for revitalizing the company. Since 1997, its revenues had plateaued at around $9 billion, while net income had fallen from almost $800 million to $580 million (see Exhibit 1). Nike's market share in U.S. athletic shoes had fallen from 48%, in 1997, to 42% in 2000.2 In addition, recent supply-chain issues and the adverse effect of a strong dollar had negatively affected revenue.
In addition, Nike is a worldwide known company and it is among the top empires just as Adidas and Puma. It has more than 900 factories which are located in an estimated 50 countries, they also have more than 660 000 workers which most of them are women. However, although they have a lot of factories around the world, their main manufacture factories are located in China, Indonesia, and Vietnam which are basically countries with the most minimum salaries rate given to the workers. Nike chooses these locations for their production of their merchandise because of the cheap ...
...rible situations for people who do not have the laws like U.S. workers have. Even though NIKE has implemented different methods to improve the companies’ image, there have still been many reports that show there has not been much change at all. At a net worth of 67 billion dollars and expected to grow, loyal customers is what allows this multi billion dollar company to grow in profit, the only way there will be an impact on those working in NIKE sweatshops is if today’s society takes action.
Nike Incorporated is the number one leading sportswear and equipment provider in the world. They manufacture anything from casual clothes to sports equipment, shoes to socks, and basketballs to golf balls. As a result of its massive success, Nike employs nearly 30,000 people worldwide while manufacturing in 700 shops around the globe and has 45 offices outside the United States. Its extensive reach into the global market has Nike producing more exclusive products than any other manufacturer in the world. Nike’s headquarters is located in the metropolitan area of Portland, Oregon.
Many global companies like Nike, Inc. are seen as role models both in the market place as well as in society in large. That is why they are expected to act responsibly in their dealings with humanity and the natural world. Nike benefits from the global sourcing opportunities, therefore areas such as production and logistics have been outsourced to partner companies in low-wage countries like China, Vietnam, Indonesia and Thailand. As a result the company is limited nowadays to its core competencies of Design and Marketing.
Phil Knight started his shoe company by selling shoes from the back of his car. As he became more successful in 1972 he branded the name Nike. In the 1980’s Nike Corporation quickly grew and established itself as a world leader in manufacturing and distributing athletic footwear and sports' attire. The Nike manufacturing model has followed is to outsource its manufacturing to developing nations in the Asia Pacific, Africa, South and Latin Americas; where labor is inexpensive. It quickly became known for its iconic “swoosh” and “Just do it” advertisements and products. Its highly successful advertising campaigns and brand developed its strong market share and consumer base. But, the road has not always been easy for Nike; in the late 1990’s they went through some challenging times when their brand become synonymous with slave wages and child labor abuses. During this period, Nike learned that it paramount that the company understands its stakeholders’ opinions and ensures their values are congruent with their stakeholders. Nike learned that their stakeholders were concerned with more than buying low cost products; their customers were also concerned with ethical and fair treatment of their workers. Because Nike was unwilling to face the ethical treatment of its employees, the company lost its loyal customers and damaged its reputation. Nike has bounced back since the late 1990’s and revived its reputation by focusing on its internal shortfalls and attacking its issues head on. Nike nearly collapsed from its missteps in the late 1990’s. They have learned from their mistakes and taken steps to quickly identify ethical issues before they become a crisis through ethics audits. This paper is based on the case study of Nike: From Sweatsh...
Nike’s Asian operations had previously continued to soar generating US$300 million in 1994 in revenues to a whopping US$1.2 billion in 1997. However based on the Asian economic crisis, this had adversely affected revenues, while regional layoffs were inevitable. Nike also performed well in the European market generating about US$2 billion in sales and a good growth momentum was expected, however, some parts of Europe were only slowly recovering from an economic downturn. In the Americas (Canada and the U.S.A.), Nike experienced a growth rate for several quarters. The U.S. alone generated approximately US$5 billion in sales. The Latin American market at this point was exposed to economic volatility; however Nike still saw them as a market with “great potential for the future”.
One of the main attractive reason Sport Shoes Inc. manufactured in China is because low labour costs. is home to approximately 1.35 billion people, which makes it the most populous country in the world. The law of supply and demand tells us that since
Another problem that New Balance has been facing is manufacturing costs. With its competitors outsourcing most of their manufacturing to other countries such as China, Nike, Adidas and Reebok have been able to cut their manufacturing costs significantly. New Balance on the other hand only outsources 75% of its U.S. volume while retaining the remaining 25% for final assembly in one of its five factories.