Human Resource Management Issues: a case study of NIKEIntroduction

Generally, firms have a tendency to focus much into profit making process of its
business, asit becomes more important to maintain the growth and development of
a company. On theother hand, many fail to maintain various aspects
of firms
responsibility like human capitalmanagement over its employees (Fei QIN, et.al,
2007) and outsourcing management. Thisreport illustrates the human resource
issues of labour working conditions in the event of globalization through a case
study of NIKE Company. Nike is the largest athletic shoecompany in the world.
Even after the merger between Reebok International Ltd and AdidasAG, Nike still
controls more than 36 per cent of the athletic shoe market in the United
Statesand more than 33 per cent of the global athletic footwear market (Petrecca
and Howard,2005 cited in Fei QIN et.al, 2007). Even though, primarily known as
Shoe Company Nike hasmoved into apparels and many other sport equipments. From
th
e Nikes last five fiscal years
(2007-2011) the Compound Annual Growth Rate (CAGR) based on fiscal year 2006
hasmoved from US$ 14,955 million to 20,862 million (NIKE,inc. revenue
performance 2011)with a 7% increase in revenue (Nike. inc annual report, 2011).
The
company involvesoutsourcing its HR practices, as all the
Nike products were manufactured by more than800,000 workers in its contracted supply chain
around the world
(
Nikebiz
. Com, workers andfactories)3 the word document on human resource problems
Source of problem
Locke says that, Nike has been able to develop long-term relations with several firms aroundthe
world, even with some of the large suppliers Nike designers create and then rely onsuppliers,
who further produce the prototype of the product and then the production takesplace immediately
once the specifications about the product are distributed to the rest of thesuppliers around the
world. In apparel, given short product cycles and volatile trends, thesituation is completely
different, as among its many supplier most of them generally workingfor other companies (most
often being competitors) and frequent shifts in consumerpreferences or fashion trends could
change into very short-term contracts with limited ordersfrom Nike (2002).
Disturbing the relationship between Nike and its supplier
that in turnreduces the
Nikes
ability to monitor on a regular basis the production processes and workingconditions of these
factories (Locke, 2002)
Outsourcing the route of problems

Nike's global supply chain is a complex network that directly connects and impacts a widerange
of people around the globe: consumers, buyers, suppliers, workers and communities
2

.Debora (2002) says that, Nike from the beginning had the strategy of signing contract
withsuppliers in countries like Taiwan and South Korea ,
where costs were lower and production reliable
.In 1982, 86% of their shoe productions were from these countries and as the economical stateof
these countries have developed, Nike moved to new low cost regions of china andIndonesia that
in particularly had six factories that supplied NikeAs Nike for decades being involved in huge
outsourcing networks of suppliers, it involves inoutsourcing human resource heavily with an
interest to reduce the firms cost over labour,capital, technology, and resources. And this activity
of the firm does appears to be the mainsource for all the human resource issues like need for
improvement in labour workingconditions and issues regarding child labour. And sev
eral of the firms labour practices are
based in countries that are in developing phase, were cheap labour along with lack of effective
government rules over human rights prevailed (Locke, 2002). (Debora)As thecompany would
save costs by outsourcing all
manufacturing, there w
ont be any in
-houseproduction. Thus all the products are made through many independent contracting
factories,creating Nike as one
of the worlds first virtual
corporations manufacturing firm with nophysical assets. Meanwhile, the company pour the saved
money in to marketing by celebrityendorsements, using high-profile athletes to establish an
invincible brand identity around theNike name (2002)
International labour problems
For long time Nike has been well known for it habit of sourcing its products infactories/countries
where low wages, poor working conditions and human rights problems were rampant, as a

result, the firm faced some serious issues involving

underpaid workers
in Indonesia,
child labour
in Cambodia and Pakistan, and poor
working conditions
in China
and Viet Nam, that combined to tarnish Nikes image (
Locke, 2002).
A study of working conditions
Nike in regards with its various problems the firm developed monitoring systemsto
gain an insight and to measure the actual workplace of the suppliers factory
conditionseffectively, by which all the potential suppliers of the Nike has to
undergo the differentaudits. That involves a basic environmental audit, health and

safety based audit and an in-depth management and working condition audit called
M-audit was designed with periodic
inspection by NGOs like Fair Labour Associations. An earlier phase analysis of
the datashowed that Nikes suppliers vary tremendously in terms of their
working conditions andlabour rights, those factories that are located in regions of
high human rights were found to bewith high score in the audits and the others in
regions of less human rights and
authoritarian
government were found with small score facing problems like poor wages and
excessivework hours (Locke and Romis, 2007). However, On the other hand a
critical factor by Locke(2002) in his comparison between a two Nike plant of same
region of Mexico explained thatthe over all average of the score of a location was
found to be above 50% in general, since itincludes the good scores of other firms
that are located mostly in regions of high humanrights and government laws
. It further stresses the need for Nikes development over its code
of conduct.
Issues of wages
Labours in developing countries are generally paid very small wages that are
mostly smallerthan the workers effort and final price of the good they produced
(Debora, 2002)
Nikes
policy of competing on the basis of cost encouraged contractors to mistreat their
workers.
Although Indonesia had worker protection legislation in place, but widespread
corruptionmade the laws essentially useless.
Child labour