The “Swoosh” represents one of the biggest footwear and apparel companies of the world. Nike is the world’s leading manufacturer of sports apparel and shoes. Established in 1964 the company is US based with its head quarters in New York. The revenue for the company in 2008 was around US$18. 6 billion. The Swoosh has a complete story behind it as the manufacturing as the Nike products have been a hot topic for the human activists around the world. Nike has around 900 factories operating in various parts of the world which includes various Asian and South American countries.
(Bhatnagar & Rathore, n. d. ) The country that has been selected for the paper is Vietnam where Nike has been operating its factories since 1995 which is known as the Tae Kwang Vina Factory where more than 10000 people are employed. The company has been following various practices that are against the legal and ethical laws of the country and even the human race. It has been recently faced with a lot of criticism due to which it has now come up with a code of conduct for 2010 where it has stated to act more responsibly. (Bhatnagar & Rathore, n. d. )
The study provides a clear insight on the unethical practices of Nike in Vietnam where it has been seen indulging in child labor, unsafe working conditions and various more offensive crimes. This all has surrounded Nike with various controversies and challenges that have been discussed along with Nike’s way of combating them. The paper has basically identified how the MNE and the third world country are both important for each other and are taking advantages as well. Having said that, one cannot ignore the fact that the MNEs takes more advantage as it exploits the country and the local employees working for the company.
Nike Labor Practices: The labor practices of Nike has been under debate by various human activists and NGO’s in Vietnam who have blamed Nike of not providing proper working conditions to the employees. The Tae Kwang Vina Factory which is a Nike sweatshop has employed more than 10,000 employees out of which 85% are women. Various studies have brought the working conditions of the factory into light which have showed that the company is not following the International Labour Practices and is taking advantage of the poverty in the country and is not providing the labors with the sufficient labor practices.
(Murphy & Mathew, 2001) The factory has been ill reputed by the activists who claim that the working conditions in the factory are not safe enough for the people to work. The workers in the factory are forced to work more than the legal working time almost everyday. The monthly salary is considered to be very low to prove sufficient for the survival. The company is blamed to not provide sufficient hygienic conditions to the workers. The managers of the factory are seen abusing the workers verbally and physically due to which the locals do not prefer to work at factory.
The workers are mostly the people who have migrated from the northern or the central part of the country. The audit by Earnest and Young identified that 104 workers at the factory were below the age of 18 which is violating the local labor laws. Child labor is one of the most important issues that the factory is facing as it employs huge number of children and is not providing them with the proper working condition which is affecting the health and the lives of the children.
The giant MNE has also been seen violating the national laws regarding the environment and even the government was seen pretty helpless in this case as it has not been able to take any action against the ill practices of the multinational. (Responsibility, n. d. ) Benefits of the MNE: Multinationals are considered as the blessing for the third world countries who considers it to be the most important avenue for the flight of the capital in the country. The investment by the multinational brings in a lot of investment in the country.
The company has been contributing immensely to the GDP of the country as the percentage contributed was 5% of the overall GDP in the 1999. For countries where the economic conditions are not sound such multinational contributions are taken as the gift from the God. Nike contributed around 5% of the exports of Vietnam by 2000. Another advantage of getting an MNE placed in the third world country is the employment opportunities that it creates. The factory in Vietnam has created employment for more than 10,000 people in the country who have been living under poverty before the factory was placed in the country.
The employment level has risen in the country after the factory has been placed over there and the poverty levels have decreased. Though the working conditions remain an issue but still one cannot ignore the fact that the MNE has made the economic conditions better in the country as the poverty levels have reduced and the living conditions have also become better as compared to the period before that. Multinationals when operating in the underdeveloped countries are seen spending for the Corporate Social Responsibility where the multinational invest for the betterment of the society.
The notion behind a CSR activity is to give back to the society. Nike is working for CSR in Vietnam as well and is funding development and micro- loan projects in Vietnam. Other than that the company is also working along with the Vietnamese Women Association for the alleviation of poverty and the Population and Community Development Association. (Responsibility, n. d. ) Costs of the MNE: There are various costs that the host country that is Vietnam is facing due to factory that Nike is operating over there.
Nike is seen exercising its bargaining power over the country. Due to its immense power it has exempted itself voluntarily from the various laws and regulations of the country. Some of the most important costs are: Unhygienic working conditions: Vietnam is paying a huge environmental cost due to Nike which is not following the laws that are imposed by the government. The factory during the manufacturing uses various toxic solvents and glues that are very harmful for the employees and the environment as well.
These toxic agents cause dizziness, nausea, and respiratory ailments among workers. The unsafe conditions that are provided by the factory cause regular accidents in the work place. The company is not seen compensating fairly for the damages that are caused by the unsafe conditions in the factory. Nike is not following the laws that have been regulated by the country and is not providing safe working conditions for the employees. Environmental Cost: Nike has been constantly violating the environmental laws and is seen emitting various hazardous gases in the environment.
The factory during its manufacturing uses various products that emit gases and wastes that are harmful for the environment. The factory is located in the middle of the industrial areas and is damaging the environment due to which people are not able to live in the near by areas. All the people living in the near by areas are facing various diseases and problems due to the hazardous effects of the Nike factory in Vietnam. Cost to the youth of the country: The company is employing children in the factories and paying them very minimal amount.
This is causing a huge amount of youth of the country to refrain from their basic right which is education. The children are not able to study as they have to work and are also working in the worst conditions which affecting their lives. Cost to the country as a whole: MNE’s due to their immense power are able to dictate the local government who does not have enough power to force the MNE’s to follow their laws. In Vietnam Nike is not following various laws which include the environmental, labor, child labor and other local laws of the country.
Nike is enjoying its full power as it is cutting its cost by paying less to the employees even below the minimum level. Other than that the company is also seen cutting its costs by not following the environmental laws and the local laws of the country. Nike is also able to bargain more power in terms of the taxation and other related payments that it has to make to the country. The country is seen helpless in front of the MNE and has to bear the conditions that the MNE is providing. (Rugman, 2005) Cost Benefit Analysis:
Doing a cost and benefit analysis of an MNE in a third world country is the most difficult task because though the costs are more serious in terms of the benefits that the company is providing to the company. But this seriousness is just on the social grounds while the benefits that the country is enjoying are very important for the third world countries which they cannot deny at any cost. Thus both the costs and the benefits are equally important but one cannot just out weigh either of them. In order to analyze it one would have to know how important the investment is to the country and how much intangible cost is there.
Challenges for Nike: Nike is facing various challenges in Vietnam which includes ethical, legal and cultural views according to which various NGO’s and activists in the country have made it difficult for Nike to survive in the country. It has been a constant victim of major criticism by the human activists who have constantly been calling it as an unethical company who is risking the lives of more than 10,000 people directly and even more than that indirectly by their malpractice. (Nazeer, 2009) Nike has been attacked by the NGO’s and the activists due to the low pay rates that it is paying to the employees.
Nike has been brought into the lime light by various activists who have warned the company to pay the employees properly or they would retaliate. The example of one of the ways of retaliation was the strike that was observed in the factory in Vietnam. (Nike Shoe Plant in Vietnam Is Called Unsafe for Workers, n. d. ) Nike also has to face problems due to the overtime that it requires from its labors. It is been constantly forced to reduce the working time that they have in their factory which is more than the legal working time while the employees are paid less even for the overtime.
Child labor is another major issue which the company has to face. Nike is constantly criticized for employing children and then providing them providing them with dangerous working conditions. Various federations working for the development of women and children have accused the company for abusing the females and specially the children physically and verbally and torturing them immensely. (Marshall, 2009) These all criticism now is not only restricted to the Vietnamese media but now has become global as everyone is seen discussing it.
Nike is now not only criticized on the local level but has to face major issues as people around the world are seen discussing it and writing about it at various forums. A lot of case studies have been written on the issue and even a lot of documentaries have been made in this regard. This has caused a lot of dissonance in the global consumers as everyone around the world have disliked it and a lot of people in various parts of the world are also seen boycotting Nike which is affecting its global image and also its revenues. (Andrews, Didow, & Peacock, n. d. ) Nike overcoming the challenges:
Nike has taken all these challenges very seriously and is seen working towards making its image better in front of the world. Nike has come up with its own code of conduct which they have made a point to follow to overcome any sort of criticisms that they have gone through a lot in the 90’s specially. The code of conduct emphasizes on providing fair labor practices and safe working conditions for the employees. Other than that in order to combat the criticism about their undue advantage against the Vietnam government the document also contains a fair trade policy that the company wishes to follow.
The code of conduct also implies that the company would abide by the laws of the country and follow any rules that would be set up by the government. The purpose of this code of conduct is to calm down all sorts of negative vibes that the locals have against the company. (Butler, 2010) In an answer to all those environmental laws and other ethical laws the company has decided to be more concerned regarding the environment and have decided to minimize the environmental cost to the country.
Other than that it is also working closely with various NGO’s and other human right activists to promote various causes like child education and women development in the country. This is not only a way to give back to the society but by doing so the company has managed to somehow be on good terms with the Vietnamese and the amount of criticism on the local and the global level has decreased. The company is now working to change its image to a more society friendly country that does care for the society.
(Frank, n. d. ) Recommendations for Nike: Nike cannot afford to have bad relations with the Vietnamese and the government as the country is costing it very low in terms if the labor cost and other related costs. Thus it has to make sure that it works together with the country and the people. The foremost thing that it should do is provide safe conditions for the employees. This might cost a little to the company but by doing so it may be able to become one of the aspiring employers where people may want to work.
This would also save the company from portraying any further negative images that it might, if there would be any incident related to the unsafe working conditions. Nike should not risk its image as the brand image has become really important in impacting sales of the organization. Nike should spend more for the Corporate Social Responsibility (CSR) as it would also help it in positioning itself as a society caring organization. In order to invest the money that is to be spent in the CSR the company should invest in a way that ultimately benefits the factory in the long run.
It should go for educating children and females in the way that is beneficial to the factory operations in the long run. This would portray a positive image and would become an investment in the human resources of the factory. Nike should work on making a pay scale which is acceptable according to the Vietnam laws. It should not overpay the employees but should make sure that it is paying enough for the survival of the employee. This may serve as the motivator for the employees and more skilled people may want to work for the company.
This would also combat the criticism that Nike has to face. Recommendation for Vietnam: Nike though is not following the local laws but still the country cannot take any strict measures against the giant because of two major reasons which are that Nike holds more power to dictate the country and secondly the existence of the gigantic multinational is a benefit to the country as well. If Nike decides to leave Vietnam the country would have to pay heavily as there would be a massive unemployment in the country and the economic indicators would fall with huge numbers.
In such a situation the country should negotiate certain terms with the company and support it in its operations. The country should not compromise on the basic rights of the employees which include the pay scales and the working conditions and force the giant to fulfill the necessary requirements. The MNE could bring in a lot of revenues for the country and along with it, it may even invest in the infrastructure for its own benefit but would also be beneficial for the country.
The MNE may get in new technologies and techniques in the country and would educate the local people about those new technologies. Thus the country should not compromise on the basic regulations but along with it should also support the MNE in various other aspects which would help the company to prosper. By this not only Nike would flourish but even other MNE’s would find Vietnam a better place to invest which will be good for the country in the long run. Conclusion:
Similar to all the MNE’s even Nike is taking undue advantage of Vietnam by imposing its harsh policies to the country and the locals. Vietnam is currently paying a huge cost due to this MNE but the current code of conduct document of the company looks like a hope for the country where Nike has decided to follow the policies that would be beneficial for the country and the employees. The recent controversies have created a lot of problem for the company due to which it has decided to work more ethically and make sure that it does not harm the reputation that it has built in years.
Thus now it could be hoped that Nike in the coming years would be more ethical and legal in its practices in Vietnam and would co operate with the government for the betterment of the country. Bibliography Andrews, Didow, N. , & Peacock, J. (n. d. ). Economics, Ethics, and the Impacts of the Global Economy: The Nike Example. Retrieved May 16, 2010, from Economics of World Shoe Production Trends: http://www. unc. edu/~andrewsr/ints092/clark. html Bhatnagar, D. , & Rathore, A. (n. d. ). NIKE IN VIETNAM: THE TAE KWANG VINA FACTORY.
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