The sweatshop case is about the deplorable working conditions of workers who used to work for Nike subcontractors or franchises around the globe. The poor working conditions that are an issue in the case include exposure to high concentrations of toxic chemicals beyond the permitted exposure limits, working in factories without protective clothing such as gloves, the usage of child labor, and selection of these subcontractors in countries that do not respect human rights, and therefore they do not allow workers to organize. Other concerns include the extremely low wages paid to these workers as well as the violation of overtime rules where women and children were subjected to long hours of work under inhuman conditions (Bachman 2003,p.1). Most of these subcontractors who were responsible for all these misdeeds were located in China, Vietnam, and Indonesia.
Another dimension of the case is the battle that was staged by human rights organizations and other non-governmental organizations that came out to speak on behalf of these thousands of employees who were toiling under these harsh circumstances. There is also the angle of the actions taken by Nike in its attempt to defend its position and repair its image. For example, it appointed independent auditors, Ernst and Young to carry out a careful audit of its subcontractors. This report was later leaked to the public and it confirmed that workers were indeed doing their jobs under difficult conditions. This increased the pressure resulting in the various conferences held by the officials of Nike who tried to explain to the public the actions they had taken in trying to change their mode of operation. For example, they cut links with four Indonesian subcontractors due to their unwillingness to pay reasonable wages to their workers. In all this mess, the governments of the various countries in which these subcontractors were located had a role. What role was it that the governments of Vietnam, Indonesia, and China play in this case?
To begin with the government of China, there has always been a concern about the rampant human rights abuses in China. Therefore it is definite that the Chinese government did not provide workers with a comfortable climate for organizing and negotiating for better wages. This is characteristic of most repressive regimes. This is why the workers in Chinese subcontractors were paid peanuts and worked in uncomfortable surroundings. Also, the government of China did not pay attention to companies that were not obeying the minimum wage rule. This is why there were subcontractors in China who were paying their workers to lower wages than even the minimum wage set by the Chinese government. In addition to these, the government failed to enforce the child labor laws leading to the employment of children in the factories.
Vietnam and Indonesia present a case that is similar to China in that the governments in these countries failed to reinforce the minimum wage laws; they failed to ensure that children were not employed in these factories and failed to protect their workers from poor working conditions. These poor working conditions included exposure to higher concentrations of chemicals and the violation of overtime rules whereby the workers worked for longer than allowed (Jennings 2009,pp.234-236). The United States government did its art by forming a commission to look into the operations of global companies with American roots. This was a step in the right direction. In this case, all the incidents covered present unique strategic and operational challenges to managers of global enterprises such as Nike. What are these challenges?
The first strategic challenge that global managers face is the identification of business partners. In the case of Nike, the selection of subcontractors is a big issue since the labor laws practiced by the subcontractors end up reflecting either negatively or positively on Nike as a brand. The managers have a difficult time investigating all the subcontractors as well as other partners in trying to establish whether they uphold what the company considers important or not. It is also possible that a subcontractor can stage one clean act for purposes of getting accepted but go back to dark market practices once the deal is done. This, therefore, calls for continued monitoring and inspection, an undertaking that calls for more resources.
An operational challenge that global managers have to grapple with is the enculturation into a new business culture. The world is too different that for a manager to understand how franchises in different settings function will take more than a day’s observation. It is important to note that the understanding of this foreign culture holds the key to smooth operations for the franchise. In terms of operations, this creates a difficult challenge that calls for patience and dedication. To use the Nike case to illustrate this point, there is a clear difference in currency values between the United States, the home of the parent company and the other countries where the subcontractors are stationed. This creates a shock when the amount of money an employee is paid for an hour’s work is mentioned. It will take a manager’s patience and humility to understand all these details and know where changes are supposed to be made, how they are supposed to be made and by who.
Another strategic challenge facing the global managers as shown by the Nike case is the issue of public relations. The human rights organizations came out to tear Nike apart and whether Nike was able to hold them back or not, it is not clear. But it is important that managers understand how to deal with subjects that can create controversy and negative publicity for the business in all the countries where the businesses are located. This is not easy for managers.
Bachman, S., (2003). Nike Versus Sweatshop Critic: Back to California. Web.
Jennings M., (2009).Business Ethics: Case Studies and Selected Readings. New York: Cengage Learning.