Critical Thinking 1st ASM Ngo Tuan Anh

TO: Sandy Hilton, Human Resource Manager FROM: Anton Ngo, Market Research Supervisor DATE: September 4, 2015 SUBJECT: Jacket Purchase for Employee Retreat

To Mrs. Sandy Hilton,

This is a short memo to represent my thoughts on our jacket purchasing program this year for our company’s employee retreat. For several recent years, it is our company’s norm to purchase Nike-brand jackets and then pay Pentti - a local company to sew on the company’s logo. After spending time researching on this issue, I recommended that our company should switch from Nike to Puma.

The problem is that Nike has garnered a tainted corporate image by choosing to outsource foreign partner factories which have been criticised by social activists for their sweatshop conditions and labor abuse. From Nike’s perspectives, the goal for Nike to outsource manufacturing activities to vendors in countries with low labor costs (China, India, Thailand, Indonesia, Mexico) is to reduce overall production costs and focus on its core competencies. From our company’s perspectives, we aim at connecting employees into one tight-knit community through the retreat while simultaneously reinforcing company’s culture and image with the our logo on each employee’s jacket. To that end, we need to seriously consider other options we can find because if we continue to promote corporate culture and team spirit through employee jackets, employees and various stakeholders from our consulting clients, advertising partners to investors will undoubtedly raise doubt over our corporate ethics and social responsibility (guilt by association).

Let me back up my claims with my research.

First, as early as 1995 Nike has been decried for abysmal human right infringement and appalling labor mistreatment. (Nike, 2010:33). “The Nike product has become synonymous with slave wages, forced overtime, and arbitrary abuse,” Knight said. “I truly believe the American consumer doesn’t want to buy products made under abusive conditions.” (CEO Phil Knight, in his 1998 speech). The company certainly can afford to pay much higher price to its factories partners to give worker decent wages and working environment. In response to those prevalent charges, Nike has announced plans to gauge labor right compliance and performed audits of the foreign partner’s factories, but recently Nike representatives have announced that their endeavours haven’t reap much fruits as they have expected. (www.nikebiz.com). Even though the company has initiated to publicise outsource facilities’ working condition and proceeded to address issues of health and safety, work pays and terms of work (www.nike.com), we should take a cautious approach and remain skeptic about whether Nike has put its real effort and resources to redress the problem and revive its floundering image.

Second, there have been floods of boycott campaigns against Nike products. For example, under the impacts of the student union’s activists, the Minneapolis Board of Education adopted in 2002 a sweat-free purchasing requirement (Plimpton, 2003). In 2010, University of Winconsin-Madison raised concerns over the questionable practice of Nike’s contractors over refusing to pay severance aid to redundant workers of closed factories; in the end, the university decided to terminate its apparel licensing agreement with Nike (Lucas, 2010). It seems that Nike can shatter the bad image it has earned very soon: "The sweatshop perception was one of the biggest challenges Nike has

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Critical Thinking 1st ASM Ngo Tuan Anh

faced. It seemed impossible they could ever shake the perception”, said branding expert and University of Southern California professor Jeetendr Sehdev.

Now let’s comeback to our guiding principles. As stated in our company’s code of conduct, our decision criteria to choose any partner is that it has to adhere to code of conduct, which stipulates work wages, work hour, overtime pay, child labor, forced labor, health and safety, labor abuse and full public disclosure of factory locations. With the criteria in mind, what should our company do with Nike? Of course, our company can lobby Nike to find solutions that may improve working conditions for workers; but again, it helps to know that UW-Madison chancellor gave it a try with no material cooperation from Nike, from writing to Nike asking for a remediation plan, following up with letters, phone calls, face-to-face meetings with Nike executives, to giving Nike 120 day window to work on effective approach.

I think the best practice is to sever our tie with Nike. That is how we protect our corporate image from getting tarnished by our apparel partner Nike, secure a decent number of contracts with our clients down the road, and save our company from hours of useless persuading in impasse. The transition involves paperworks by informing Nike about our decision, sending it our statements on reasons we do so and then establishing and negotiating contracts with a new company. The pros outweigh the cons, and I think it’s well worth it.

Now here’s the hard part: we should seek for an alternative. I propose that we should switch to Puma. Why so?

Here’s a few quick strokes of the bid industry picture. For sports brands like Nike, Adidas, Reebok, Fila, Puma …high turnover of product within short time frames are still the norm, indicating that workers’ rights are a low priority. Their business model was based on outsourcing its manufacturing, using the money they saved on aggressive marketing campaigns. Take Adidas for an instance. Adidas has long been on the same boat with Nike, having a quite bad record on upholding trade union rights. Thousands of workers endure poverty salaries and severe sweatshop conditions to make Adidas their beautiful sports shoes. In 2006, the company was accused of forcing employees into working in sweatshops in Indonesia, providing inadequate basic necessities such as electricity, water and food. For its profit of 1185 million dollars, each worker only earns 30 dollars a week (Maquila Solitary Network).

Aware of this harsh, industry-wide reality, we can see the light in the end of the tunnel with Puma’s step in the right direction. The company’s effort at auditing all of its suppliers and committing to worker rights has culminated into Ethical Clothing Australia accreditation for its Australian-made products (Ethical Clothing Australia, Accredited sports brands. Retrieved 20 January 2011.) We cannot be sure of Puma’s other factories worldwide, but the Australia-based Puma factories may be the best choice out of all available options that satisfy our decision criteria for choosing partners.

In summary, I propose that our company switch from Nike to Australia-based Puma for our employee jackets because this switch helps us protects our corporate image, urge the giant Nike to implant changes itself and encourage industry-wide changes in other companies, and reinforces our code of conduct and work ethics among our stakeholders. The change will prove well worth it!

Sincerely, Anton Ngo - Market Research Supervisor

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Critical Thinking 1st ASM Ngo Tuan Anh

References

Lucas, J. (2010, 9 April) ‘UW-Madison to End Nike Licensing Relatioship,’ University of Wincosin-Madison News. Available from http://www.news.wisc.edu/17937 [Accessed on 5 September 2015]

‘Nike’ (n.d) Oxfam Australia. Available from https://www.oxfam.org.au/explore/workers-rights/nike/ [Accessed on 5 September 2015]

Plimpton, B. (2003) ‘Sweat-Free School Purchasing Resolutions: A New Trend?’ Special to CorpWatch. Available from http://www.corpwatch.org/article.php?id=5488 [Accessed on 5 September 2015]

Case adapted from Oldenburg, L. E. and Wolcott, S. K. (2011) Cost Management: Measuring, Monitoring, and Motivating Performance (2nd edition), John Wiley & Sons.

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