Nike Business Model Case Study

My argument is that Nike’s business model has always been to design footwear but to contract out the manufacture of the product to countries where it could be done more cheaply.

(Locke, 2002, pp.4)

When purchasing a product in a ‘free market’, as defined by Adam Smith, that market is regulated to prevent theft and fraud, and the purchasers have full knowledge of the product which they are buying. If those assumptions are approximately true, then market forces drive down prices everywhere - so the manufacturers cannot take an unreasonable profit, and the market operates efficiently. But those ideal assumptions are never fully realised in the real world. And when we are trading globally, we are not in a single market. So they’re not even

It must be good that the economies of countries such as Indonesia and Vietnam received some capital when building the Nike factories. By default, we disagree with thinkers such as Gandhi or William Morris who believe that the costs of industrialization are just not worth paying. But I don’t think we’re obliged to follow the right-wing view that the exploited sweatshop workers of this generation are paying an essential price for Indonesia and Vietnam to become developed economies. For completeness, I’ll mention that consumers in the developed world getting ‘nice’ footwear cheaply is an economic ‘good’. But if they came with a non-removable label with a picture of a sweatshop worker and their dates of birth and death, those consumers would drop their estimate of the ‘niceness’ of those shoes. For life expectancy in the countries making those shoes is a couple of decades shorter than in the countries where the shoes are sold. For Nike, the negative impacts of this strategy were that the working conditions in their factories were exposed by investigative journalists and they became the corporate face of globalized malfeasance. (Nisen, 2013.) They suffered a lot of reputational damage - because they were one of the earlier adopters of globalisation, and became a symbol for a more widespread

If Nike had chosen not to move its production from Korea to Indonesia, just to avoid the horror of unionised labour, then perhaps one of those two governments could have been pressurised to attract foreign investment by providing a less oppressive regime for their labouring class, rather than being pressurised to turn a blind eye to their existing labour and safety laws. If Nike had chosen to set up an organisation like their Fair Labor Association in the early 1980s instead of 1999, then the industrialisation of Indonesia and Korea might have gone a lot more smoothly and rapidly. Consumers in the West might have had slightly fewer ‘bargain’ shoes. But Nike’s sales might have been higher: because the shift of production from developed to transition economies might not have been so savagely sudden. And then it might not have demolished the retail markets where American and European workers were thrown out of work. For those workers cease to be free spending consumers. And they become the disenfranchised, disgruntled supporters of