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Nike and Sweatshop Labor

Group Members:

Captain: 宋双 Extra Question & Print Members: 谭一末 Translate & Composing

朱赫 Question No.1 张逸鹏 Question No.2

杨力宣 Question No.3

Nike and Sweatshop Labor

Nike, a company headquartered in Beaverton, Oregon, is a major force in the sports footwear and fashion industry, with annual sales exceeding $12 billion, more than half of which now come from outside the United States. The company was co-founded in 1964 by Phil Knight, a CPA at Price Waterhouse, and Bill Bowerman, college track coach, each investing $500 to start. The company, initially called Blue Ribbon Sports, changed its name to Nike in 1971 and adopted the “Swoosh” logo-recognizable around the world-originally designed by a college student for $35. Nike became highly successful in designing and marketing mass-appealing products such as the Air Jordan, the best selling athletic shoe of all time.

Nike has no production facilities in the United States. Rather, the company manufactures athletic shoes and garments in such Asian countries as China, Indonesia, and Vietnam using subcontractors, and sells the products in the U.S. and international markets. In each of those Asian countries where Nike has production facilities, the rates of unemployment and under-employment are quite high. The wage rate is very low in those countries by U.S. standards-the hourly wage rate in the manufacturing sector is less than $1 in each of those countries, compares with about $20 in the United States. In addition, workers in those countries often operate in poor and unhealthy environments and their rights are not particularly well protected. Understandably, host countries are eager to attract foreign investments like Nike’s to develop their economies and raise the living standards of their citizens. Recently, however, Nike came under worldwide criticism for its practice of hiring workers for such a low rate of pay-“next to nothing” in the words of critics-and condoning poor working conditions in host countries.

Initially, Nike denied the sweatshop charges and lashed out at critics. But later, the company began monitoring the labor practices at its overseas factories and grading the factories in order to improve labor standards. Nike also agreed to random factory inspections by disinterested parties.

Discussion Points:

Do you think the criticism of Nike is fair, considering that the host countries are in dire needs of creating jobs?

Obviously, Nike’s investments in such Asian countries as China, Indonesia, and

Vietnam were motivated to take advantage of low labor costs in those countries. While Nike was criticized for the poor working conditions for its workers, the company has recognized the problem and has substantially improved the working environments recently. Although Nike’s workers get paid very low wages by the Western standard, they probably are making substantially more than their local compatriots who are either under- or unemployed. While Nike’s detractors may have valid points, one should not ignore the fact that the company is making contributions to the economic welfare of those Asian countries by creating job opportunities.

Discussion Points:

What do you think Nike’s executives might have done differently to prevent the sensitive charges of sweatshop labor in overseas factories?

? Internal operation:

?

Improve the working condition, increase employees’ income and raise the minimum employment age;

? External operations:

?

Public Relationship: Nike should invite some social figures who at least hold moderate attitude towards this issue to inspect their factories and make advantageous comments on it; ?

OEM Standard: The so-called “sweat factory” refers to OEMs instead of Nike headquarter. Nike is only responsible for designing and selling shoes, and outsourcers the parts production and assembly work to OEMs. Nike may set some standards to OEMs on payments and working conditions, etc. Only those who have met the standards can cooperate with Nike; ?

Corporate Image: Nike can promote their positive popularity and improve their image by subsidizing schools and other NGOs, as well as taking part in more charity activities for the sake of reducing the bad influence on this issue.

Discussion Points:

Do firms need to consider the co-called corporate social responsibilities in making in investment decisions?

Yes. Because “corporate social responsibilities” are not only aiming at maximizing

the profit of shareholders, but also in charge of caring and increasing other social interests at the maximum extent, including interests of consumers, employees, creditor, small and medium-sized competitors, local communities, environment, so long as the total social public interests, and so forth. So that as a globally reputed enterprise, Nike not only has to consider their profits, but also take their social obligations into consideration when it is going to make investment decisions. Nike should care about other social interests, especially of those exploited overseas workers. By taking these steps, Nike would response to the questions, establish positive image and take their social responsibilities.

Extra Question:

What’re the advantages and disadvantages to those cheap-labor countries like China that MNC set their factory in their countries?

? Advantages:

? ?

Increase capital for these countries and partial interests for governments; Boost employment opportunities and tax revenue.

? Disadvantages:

? ?

Bring competition to the local corporations; Exploit local labor.

Extra Question:

What’re the advantages and disadvantages to those cheap-labor countries like China that MNC set their factory in their countries?

? Advantages:

? ?

Increase capital for these countries and partial interests for governments; Boost employment opportunities and tax revenue.

? Disadvantages:

? ?

Bring competition to the local corporations; Exploit local labor.

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