Nike Outsourcing Case Study

(Introduction)

Nike is the multinational leader in the world of sports with 40% of the market of the sneakers in 2000, before Adidas (15.1%) and Reebok (10.9%). The founding company is created in 1964, in the United States by Phil Knight and Bill Bowerman, under the name Blue Ribbon sports (BRS). Contrary to Adidas, which are manufactured in developed countries, high labor, Phil Knight thinks he can enter this market by producing sporting goods in countries with low-cost labor work, in this case Japan.

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In the early 1970s, BRS began designing his own line of footwear, made by

Japanese contractors, including Nippon Rubber and Nippon Koyo. In 1972, the firm achieved a turnover in the order of $ 2 million. In 1974, the firm has 250 direct

Productive activities are located in countries where labor costs are low. To be and remain competitive in terms of costs, Nike has developed a strategy of outsourcing in mainly Asian countries (55% of production units and 84% of indirect labor in South-

East Asia). Nike employs indirectly at the level of its subcontractors, about 550000 people. The substantial profits made by Nike through the low cost of labor resulting from a policy of subcontracting activities of production and a policy of aggressive marketing, are not free of adverse effects. Indeed, this strategy has relatively well worked, until it became the subject of violent criticism by activists, denouncing the practices of subcontractors, considered as non-compliant to the ethics commonly accepted in developed countries. The number of contested practices included mostly the noncompliance with certain international conventions on, union organization, freedom of

Association, working conditions, forced labor, child labor and wage issues.

The first real response by Nike is a strategy of inactivity (silence). Nike is

Nike argues that if abuse is proven, they relate to subcontractors but not Nike itself. Also Nike tries to defend its business focusing on the fact that they are to adapt to laws and local standards that they try to apply in their own environment, recognizing that this is not a perfect exercise.

Nike also, explains that the wages of workers of subcontractors are higher than those of other companies in the country. On the problem of low wages of workers