Summary of case facts
Nike is an athletics feet wear company, which was founded in 1964 by Phil Knight and Bill Bowerman. The company made immerse profits and in 1966, leading to the opening of its first retail shop in California, with the first shoe sold being Nike IN 1971. The company produces different sport shoes models at different sizes.
Generally, in the industry, larger few companies like Nike, addidas and Reebok dominate the brands; in fact, these large companies control over 70% of the footwear market. Today, Nike’s products are sold globally and the company is able to employ 500,000 workers in 51 countries.
The success of Nike came from taking advantage of global sourcing opportunities to produce lower cost products. However, this motive led to great criticism of the company implying that Nike sources its products in countries whose factories experience the challenges of low wages, poor working conditions, and human rights problems, Such as underpaid workers and child labor, these issues almost tarnished the company’s image. Nevertheless, the company dealt with these challenges immediately and declared that these practices have been halted.
Statement of the Problem
One of the negative ways that the company affects the environment is through pollution, fossil fuel, raw material consumption, and increasing its water deficit. Another problem that was facing the shoe company is the rumors of child labor in related industries in Pakistan, low wages in Indonesia, health and safety problems in Vietnam, and outsourcing effects on sales.
In Thailand, workers were exposed to toxic isocyanates in the footwear industries, which could cause asthma allergies. As per the report, workers with skin and breathing problems as well as those who dealt with dangerous chemicals did not wear protective masks or gloves. With such, it was evident that Nike Company was breaking the human rights policies in these countries. However, drastic measures had to be put in place to avoid severe tarnishing of its image.
Despite the fact of the company’s negative impact on environment, Nike has been praised for its Nike Grind program, which closes the product life cycle. The company has also tried to manufacture a basketball shoe made from manufacturing waste from a shoe-recycling program. Nike also began a program called “Nike’s Reuse A Shoe”, a program that benefited the environment since it involved collecting all old athletics shoes and then recycling them.
Nike could have avoided the problem of low wages in Indonesia by paying the workers living wages that can meet their daily needs. In addition, the company should also provide an environment in which workers are motivated to do their best, which results in benefiting the company and attracting more customers. Nike should provide a system where its employees are compensated and rewarded depending on their abilities. Moreover, it is ethical to provide a healthy, safe and secure working environment for employees.
Each human being is not only a product of his biological inheritance, but he is also a result of his interactions with the environment. People also come to work with different motives such as to earn, to be employed, to have a better future, and to be treated like human beings. In addition, employees trade their labor for reasonable wages and other benefits. These employees provide knowledge through which organizational objectives are accomplished.
Providing favorable working conditions by an organization, is of more benefit to the organization since it actually reduces, the rate of labor turnover, as employees appreciate their jobs, and stay longer. This is a plus to the company, since less turnover means less costs of hiring and recruiting.
Another advantage is that, employees’ retention enhances availability of experienced and competent workers, the result of which is rise in productivity and work standards. In addition, motivation is paramount as it allows workers to solve most job-related issues on their own and the do not need follow up, while cases of absenteeism are reduced significantly.
Nike could avoid such critisms involving unfavorable working conditions, child labor, and less pay in the future if it adheres to the labor laws of each country it operates in. This will also act as a shield to its reputation risk, given the fact that a tarnished image affects productivity, as customers lose faith, trust, and confidence in the company. For the Nike Company to obtain maximum productivity, it should try to implement a conducive working environment in all its related industries globally.
Nevertheless, Nike is taking measures to implement a grading system for its suppliers, which will be used to improve the working conditions of employees as well as the relationship of the company with its suppliers.
The company is also exploring incentive schemes that reward good corporate relationship among its suppliers in order to ensure that there is sustainable interaction between the company and suppliers, with sustainable trade benefits to both. Importantly, the managers responsible for the supplier factory that improves the labor, environmental and health practices standards will be rewarded. Nike has also encouraged auditing of its company by external firms to enhance transparency and accountability.
Nike has also been working hand in hand with the different international and non- profit organization aimed at improving working standards for workers in developing countries. Such organizations include the United Global Compact, which was formed in 2000 by the then united secretary general, Kofi Annan.
This global compact ensures citizenship among multinational companies. Generally, companies interested in the global compact must ensure standards in human rights, labor rights, and environment sustainability. As a result of audits and inspection in Nike firms, Nike eliminated the use of petroleum–based chemicals in production of shoes and tackled the issue of poor compensation.
Given that human beings are affected by the environment they interact with, providing favorable working conditions by an organization is of more benefit, as it allows employees to be more productive and satisfied with their job, thus reducing the rate of labor turnover. The impact of this to the organization is reduction in operating costs especially those that could otherwise have been incurred in hiring and recruiting.
In the expectancy theory, people will put their greatest effort to work if it will lead to performance that in turn leads to reward. This theory helps the manager to motivate employees; for example, rewarding an employee as an individual will boost his morale and productivity. Employees should also be given proper training since it will lead to a spectacular performance.
The employees should also be presented with credible evidence that good performance surely leads to anticipated rewards. Rewards should also be closely associated to those actions that the organisation sees as worth to its objectives.