Nike and International Labor Practices in an Asian Country, Research Paper Example

Executive summary

This is a report that seeks to provide an insight into Nike and its International Labor Practices in an Asian country. Nike has sought entrance into an Asian country given its bad publicity in the past. The country chosen is done on the basis of pursuing corporate policies of the corporation. The country chosen is China whose profile will be provided below. The report will provide the profiles of both Nike and China and also give an insight as to why the country is chosen. The report also provides an explanation of the corporation’s economic issues as well as the ethical concerns that the firm should take into consideration. The paper will also provide recommendations that the firm should follow and include in their policies for the purpose of improving and enhancing their brand name. The conclusion will aim to provide a summary of the report findings.

Nike’s profile

Nike is a multinational corporation based in America. It is engaged in the development and design, as well as, selling and marketing of equipment, footwear, accessories, apparel and services. It is the world’s leading manufacturer of sport equipment and is also a leading supplier of apparel and athletic shoes. The name Nike means the goddess of victory. Marketing of its products is done using their brand name as well as Nike Pro, Nike Golf, Nike Skateboarding and Air Jordan. It also has its subsidiaries, which include Converse, Cole Haan, Umbro and Harley international. The corporation also operates several retail stores under its brand name. It also sponsors many sports teams and high-profile athletes. Promotion of Nike’s products is done through sponsorship agreements with college athletic teams, celebrity athletes and professional teams. The use of international athletes as its promoters has led to worldwide recognition of the brand and consumers have the brand instilled in their minds.

China’s profile

China is the Asian country that is in question here. It is a sovereign state hat is located in East Asia. Most of the business people in China think and act about their potentials. Consumers in the United States and the Euro zone are becoming laid up indefinitely. The result is the world turning to China to take up the slack and opportunity. It provides an untapped market that has all the potential for any corporation that is keen on expansion. China has a voluminous population whose buying power is emerging which is an inevitable result for incomes that are rising. The Chinese market is unique and vast. China’s economy has been noted to be the world’s fastest growing since it is the world’s largest importer and exporter of goods. China also boasts of its foreign relations and is considered an advocate for the developing countries.

China was once a manufacturing partner of Nike, but was changed to the scandals that later erupted (Mujtaba, Cavico & Jones, 2005, p. 3). The scandal had to do with the way the corporation used low cost labor pool especially in the developing countries. With this information about China, it is evident that any investor can venture into the country and realize exceptional sales. The more reason why Nike is best suited to pursue its policies in the country. Nevertheless, reinvesting is an option for China in developing a full time sister company of the original Nike. The opportunities available are reason enough to set up business in the country.

Options that Nike realistically has when sourcing products from emerging nations

One option that the corporation has been is to go into partnership with another corporation. This is what we would call strategic alliance. Such an alliance can lead to the improvement of the organization’s competitiveness and operations. After bad publicity, the alliance can be used, by the corporation, to gain access to specific markets (Elmuti & Kathawala, 2001, p. 206). The alliance can also enable the firm to reduce political risk, reduce financial risk and also obtain technology, which will then enable it to ensure and achieve competitive advantage. The competitive edge achieved will mean that the company will enjoy the benefits of venturing into a competitive market. The result will be increased sales and profits for the corporation whose name will slowly come to live again.

China is the base country in this case, and with its technology and skills, Nike can be able to compete with other markets out there. Today’s world economy is rising rapidly, and it is for this reason that an alliance with an existing firm is very appealing. The corporation can partner with an international firm in order to make an expansion into unfamiliar environments and territories (Elmuti & Kathawala, 2001, p. 206). Therefore, the expansion will be less stressful and a lot easier for the company. Partnering can also provide opportunities to outsource functions of business. The functions could include sales, marketing, accounting and production to another company that can do it cheaply and in a better way. The collaboration can also ensure that research and development costs are shared hence financial and political risks are shared. A multinational company like Nike cannot ignore global responsibilities and ramifications that are associated with its business activities. Research and development will aid with information of cultural profiles of the area of the company with vast venturing opportunities.

Nike’s economic issues and ethical concerns

Many nations present differences from a political, social, economic and cultural point of view but there is a resemblance in the ethical concerns manifested by the transnational corporations. Many international corporations resort to disrespect human rights, corrupt various state officials, use underage employees, exercise waste of natural resources, industrial espionage, deliberate pollution and sexual discrimination (Gangone, 2010, p. 190). Competition in international business is so stiff and important that ethics may appear to be handicap if not irrelevant. There are several sources of ethical concerns. The sources include relation with the consumers, relation with the environment, relation with the employees, corruption and industrial espionage.

The way managers in international corporations deal with the sources will depend on how well they know the consequences of unethical behavior. The managers must make ethical decisions with no compromise (Gangone, 2010, p. 193). Nike should understand that employees will get involved into their work, for the successful achievements of the organization, only when they have a fair salary, proper working conditions, liberty and intimacy. Nike should recognize that engaging in unethical will represent a continued source of expenses in order to conceal the act. The act will also make the corporation weak and vulnerable in the face of competitors.

Unethical behaviors will have a negative image and reputation of the firm. This is especially in the developed markets where there is so much potential (Gangone, 2010, p. 195). This was the source of Nike’s problems as the behaviors they had engaged in came to haunt them later. Nike’s economic status grew at an impressive rate for decades. This was because they were taking advantage of global sourcing chances to produce products at low cost. The savings were then invested in innovative marketing campaigns and designs (Locke, 2002, p. 9). The economic conditions were good until their undercover behaviors were uncovered. This created serious problems for the company which suffered low sales, as well as, reduced market share.

The country that Nike should enter in pursuit of its corporate policies given the result of its bad press

Nike’s problems started when it was accused of using low cost labor pool especially in the developing countries. Its reputation and growth was jeopardized. The main reason being the fact that it became the target of labor activists. It also became the target for global press as oppressive labor practices, safety concerns and human rights were uncovered in its manufacturing partners. Strikes began to hit the industry, and it was further accused of encouraging the business partners to mistreat employees through the use of long hours at work, low wages, employing underage workers and unhealthy working conditions (Mujtaba, Cavico & Jones, 2005, p. 3). Nike tried to ignore the criticisms, but it was evident when it began to record low sales. It also began to lose its market share and major contracts to its competitors.

Global competition has advanced, and it has reached a point where competition policy in the more advanced regions and countries is rapidly assuming international and cooperative character (Elmuti & Kathawala, 2001, p. 214). It is for this reason that Nike should venture into the Asian country so that it can realize voluminous sales due to the business opportunities available. Nike should enter into the country and establish its business having in mind the policies that govern its operations. Policies of the company should be laid down as well as the code of conduct that will govern the behavior of employees and management. Policies should be drafted having in mind the country’s acts that are put, in place, to control how businesses conduct their businesses. Code of conduct should also conform to the culture of the country.

Recommendation

• Nike as a multinational company needs to recognize its status. It should start moving towards transnational mentality. It should also be able to comprehend the significance of being responsive and flexible to country-level operations.
• Nike also needs to make a move towards geocentric orientation and also set global standards. The corporation should also come up with greater identification with national interests of the country it intends to venture into for expansion purposes.
• Nike also needs to move towards an integrated business approach instead of sticking to its protectionist posture or internal-oriented nature. It needs to be able to develop personal relationships with its employees in the countries it has ventured into to promote their interests.
• Nike also needs to review its compensation practices especially in the developing countries in which it operates. The guidelines governing how workers will be paid and compensated should be included in the contracts.
• The corporation should be aware of the instability of governments hence it should be able to understand the culture and the way of life in any country they venture into. This will lead to the development of personal relationships with the people and also government officials. Nike’s image and reputation will be enhanced, which will in turn, lead to greater market share and increase sales in the long run.
• Nike should also continue to improve its labor conditions so that supply chain risks can be mitigated. Another way would be to review the wage issue for employees so that they feel welcomed and cared for by the firm. The result will be workers will give their whole to the firm and will be more dedicated to achieving better results.

Conclusion

No matter how established a firm is in the market, its reputation can come tumbling down if they are not careful with the way they carry on their activities. Nike operates around the globe and is guided by a code of conduct. Contractors are also bound by the principles. However, it is tragic when a company lays down principles and decide to go in the opposite direction. What Nike should consider is the economic implications of unethical behavior. This is because of the clear consequences of their actions that saw the company lose its image and reputation, as well as, its economic status. The decision to venture into the Asian country will only be profitable if they follow the proper ways of business in the country. The principles set often establish the spirit of partnership which is also bound by a specific set of standards of the mode of behavior in the business sector.

References

Elmuti, D, & Kathawala, Y. (2001). An overview of strategic alliances. Management Decision 39 (3), 205-217.

Gangone, A. (2010). Ethical issues in international business: The annals of the Stefan cel Mare University of Suceava. Fascicle of the faculty of economics and public administration, 10.

Locke, R. (2002). The promise and perils of globalization: The case of Nike. Cambridge MA: MIT.

Mujtaba, B., Cavico, F, & Jones, C. (2005). Global labor practices and corporate social Responsibility. International business and economic research journal, 4 (9).