Question

Nike has experienced demonstrations by university students against their procurement in developing countries. Some athletic teams have threatened to no longer purchase from Nike, because of the concern over very low wages, safety standards, working conditions, child labor, and the like, by the factories in these developing countries. There are claims, that some of these workers make less than $100 per month working six days a week for 10-12 hours per day. However, factories in developing countries are not owned by Nike. Rather, citizens who are from and live in these developing countries, wholly own these companies.

• What responsibilities do you believe a U.S. business has for these issues when considering sourcing in developing countries?
  • Consider the following aspects in your analysis:
    • Without these jobs the workers would make less than $35 per month and, because of these $100 per month jobs, they can now afford better housing, food, and healthcare that was not possible at $35 per month.
    • The governments in these countries believe these worker issues are a matter between the factory owners in their country and the employees.
    • All of your competitors are buying in developing countries. If your business does not, will you be able to be competitive?

• What do you believe should be done if anything about procurement in developing nations?
• Do you believe that a Christian Worldview has anything to say, add, or take away from this discussion?

Answer 1

The issue is surely alarming to call the least.

One must see that a companies profitability is not only as a result of sales but it is directly dependent on cost. One should understand that most of these developing countries have human capital as a primary source of income and thus as a result the labor is available as low fares.

This is an advantage exploited by almost all the multi-national and is in a way a symbiotic relationship wherein the company gets the product at a cheaper cost and the employee earn, directly impacting the GDP of that particular nation.

This being said we should not forget PPP i.e the purchase power parity is not constant across globe rather based on the inflation, buying power and economy strength there is a PPP of approximately 3 i.e to say 100$ in US and someone earning 300 rupees in India can be equivalent, with this point in case a 100$ wage isnt very unreasonable

Also without these job they would be earning far less.

On the other side safety standards,working conditions and child labor are of utmost importance for Nike to be held at high standards, even though it is a third party executing the manufacturing a life loss due to irregularity in the above mentioned practices can harm the reputation of Nike. Nike should look at improving these conditions and making it a standard for selecting a a manufacturing partner.

Thus on the wage front Nike can continue with same practices, but Nike should look at improving it working condition, safety norms and put a stop to child labor and this can be put in place by establishing stronger standards for on-boarding a manufacturing partner.