Globalization And Its Challenges Marketing Essay

globalisation And Its Ch aloneenges merchandiseing EssayIntroductionGlobalization is a surgical procedure of integration and interaction among the people, organizations, and g all all overnments of different countries. It is in like manner a process driven by international cope and investment and aided by information technology (Smith Doyle, 2002). This process has significant impact on political systems, on economical development, on culture, on the surroundings, and on gentle right hands just slightly the world (Smith Doyle, 2002).Globalization is a neb that could help you nurture your trade foreign countries (Tapper, 2000). When a go with decides to go global, it will often present an summation in profitability. Nevertheless, non any(prenominal) air will upbeat from globalization. Some organizations whitethorn experience a strong growth in global market, but close to would have to overcome many a nonher(prenominal) challenges in the fixning establishi ng a successful personal line of credit in a foreign inelegant (Zboch, 2009). Wages, pip-squeak fag out laws and outsourcings effect on sale ar salient issues for doing business overseas.Nike is the worldwide global corporation that has its manufacturing factories on hold reason around the world. Although Nike is the global leader in the athletic footgear industry, it has had a great deal of bad publicity receivable to its repel practice. The scandals convoluted child get, slave engrosss, excessive on the job(p) hours, laboured overtime, and bad functional conditions. Bad publicity related to Nikes labor practice had ruined its constitution and grease image. Some criticized that Nike did non enforced its figure of conduct with the manufacture procedures.After receiving many complaints of its unhonorable practice, Phil Knight, the CEO of Nike realized the proficientness of the matter. He visited Nikes contract factories and delivered a variety of speeches reg arding his upcoming actions to improve the gentle right situation (Hobbs, 1998). However, many people doubt his sincerity, and fear that he could not deliver on his promises of providing a healthy surround for thespians. Even up until now, Nike lifelessness struggling to recover from its negative image as a human rights violator. Would Nike be able to solve this problem in prospective? Has Nike improved the labor conditions in Asia? The purpose of this paper is provide an beneathstand of the various difficulties and complexities companies faces in to twenty-four hour periods global world. This paper will describe the accusations brought against Nike labor practices and all of the corrections that Nike formulated to suffer a healthy and dear working(a) environment effectively. This paper will in addition provide some recommendations for Nike to improve their performance in future.I. Globalization and Environmental ForcesGlobalization is usually understood as the spread of influence of culture, religion words, communication, technology, trade, media, and transportation. That spread of has involved the intertwining of economic and non-economic activity across the borders (Smith Doyle, 2002). Today, many companies move their business trading trading operations to foreign countries by going global (for instance, Apple, Coca-Cola and Dell) and they have different reasons for doing business internationally. These reasons include expand to new markets, diversify business, and increase market sh ars and brand value. Other reactive or defensive reasons for globalization including trade barriers, client demands, globalization of competitors, and regulations and restrictions (Okolo, 2008).Reduction of live is the major reason for companies going to global. Today, occupation soulfulnessify has been change magnitude tremendously in developed countries. Many companies have outsourced its undefiled production operation to developing countries or tierce world, bid China, Cambodia, Brazil, India, Vietnam and Indonesia. They think that production or service offshoring will flattually dismount their production, labor and utility cost.However, doing business overseas has its benefits as puff up as its challenges. Companies may face legal, ethical, and cultural challenges in global business. Since every country appears to have its own law and regulation, companies essential understand the standard get or stripped-down rent requirement to avoid all conflict of interest. honourable issues in globalization ar those related to environmental protection, and concerning relation surrounded by different countries (e.g. industry espionage and hostile take over). When companies operate internationally, most of them are facing great challenges in cultural differences. Cross-cultural issues may turn off when people within companies have different culture, language, religion and belief begin working together are not skilled or deft en ough to deal with effectively.II. The Athletic footgear IndustryRecent economic crisis has affected the athletic footgear industry. The athletic footgear sales post a 1.4 percent decline in 2009, and in 2008, sales were coldcock 3.2 percent. (See Appendix A).Footwear is considered less cyclical than apparel when consumer spending is under pressure. Analysts are expecting the footwear market will continue to grow over the next few years (PRlog press release, 2009).The retailer market of card-playing goods is very competitive and highly fragmented. Intense competition will good drive weak companies out of the market. Thus, many retailers reducing their presence in underperforming markets or restricting store growth in saturated markets.The costs of production have been rising in the U.S since 1990. The rapid rise in production costs has resulted in many U.S companies move theirs manufacturing works to Asia. Countries want Vietnam, Indonesia, and China has become a major outsourcin g destination for the U.S. apparel and footwear manufacturers (Locke Siteman, 2001).Nike and Adidas have dominated the global branded athletic footwear markets. Market leader Nike has a significant lead over Adidas in footwear market for the last few years while otherwise competitors like Reebok and New Balance is still lagging behind in the sales. (Locke Siteman, 2001)III. The Globalization of NikeNike was founded in 1964 by Phil Knight and Bill Bowerman. The guild initially was an importer and allocator for japanese specialty running shoes. The companys profits grew quickly and it opened its foremost retail shop in California in 1966. While other footwear companies still manufacturing their own shoes in high-cost countries, Knight determined to outsource its shoe production to unkepter-cost Japanese producers during the 1970s. By the early 1980s, as costs continued to increase in the U.S, Nike closed all its U.S and Japan factories, and it outsourced its production to Korea and Taiwan. When these countries began to develop and the net incomes increased significantly, Nike urged its providers to shift their production to even lower-cost countries like Indonesia, China and Vietnam. The company found that these countries have no restrictive labor laws and labor union at that time. Moreover, these countries provided huge supplies of cheap labor. By 1992, Nike sourced almost all of its shoe production from Asia. The company has placed its employees at its outsourced factories to help monitor production processes and product quality (Locke Siteman, 2001).Today, Nike has successfully naturalized an intensive network of footwear factories throughout China and Southeast Asia. Nikes operations are divided into three product lines footwear, apparel and equipment. Their products are fabricate by nearly 600 supplier factories, employing over 800,000 workers in 46 countries around the world (Nike, Inc., 2010). In addition, Nikes sales have grown over 50% sinc e 2005 to and reaching US$19 billion in 2009. (See Appendix B).Footwear is Nikes largest product category, 30% of shoes are sourced from China and Vietnam, 22% from Indonesia, and 6% from Thailand. Nike has manufacturing agreements with independent factories in India and Latin America like Brazil, Mexico and Argentina to produce footwear for sale primarily within those countries (Nike, Inc., 2010). Nike contracted 618 factories to manufacture its products in 2009, only 71 out of its suppliers are producing footwear. Most of these suppliers are fit(p) in North Asia. (See Appendix C). In contrast, Nike apparel products are make in 391 factories and the majority of these factories are distributed in Southeast Asia. These differences are due to both to the rules governing international trade in the industries (Locke Siteman, 2001, pg7). In the mid-late 1980s, footwear quotas were eliminated whereas trade in garments is still control by the Multi-fiber Agreement (Locke Siteman, 2001). Nike has excessively developed and markets footwear and apparel products under the Converse, Umbro Inc., Hurley International, and Cole Haan brand names. The company sells its products through its own retail in over 180 countries worldwide as well as through internet sites (Nike, Inc., 2010). Today, Nike has become the world leader in the design, distribution and marketing of the athletic footwear (Locke Siteman, 2001). The wash logo has become one of the most recognized in the world.IV. Nikes unethical Labor PracticesAre you willingly to work to a greater extent than 70 hours every week, or send your raw children to work in a manufacturing plant? Many of us will not do that, but for many people who want to eat, the obvious answer is Yes.. That is a reality Nike confront when it first started outsourcing the production of sports apparel and shoes to external companies in the third world. There are many controversies over its labor practices in Asia. In the 1980s, Nike was accuse d of exploiting cheap labor and exposing them to destructive working environments. The company had also faced criticism for use of children to make its sport gears in Pakistan factories. As a result, Nike was labeled as forcing children to slave away in hazardous conditions for below-subsistence wages (Hill, 2009, pg2). In what follow, the paper will provide an overview of the various abuses of which Nike and its suppliers had been criticized in the past decade as well as the problems that the company has confronted. child Labor in PakistanChild labor is spread all over Pakistan. Sialkot, a city in Pakistan, is also a centre for the production of export-oriented goods, particularly sporting goods (Locke Siteman, 2001). About 70% of the worlds soccer balls are do in Sialkot and companies like Nike, Addidas, Reebok and Mitre imports soccer balls from this city. In 1990s, Nike contracted for its soccer ball production with SAGA Sports. Both companies benefited with the access to chil d labor in Pakistan (Haider, 2007). In 1996, Life magazine published an article about child labor that occurring in Pakistan, which included a photo of a young boy sewing a Nike soccer ball. (See Appendix D). This article displace the public attention to all human rights and fundamental freedom. Various activists groups, trade unions and NGOs called for boycotts Nike soccer balls because of development child labor.The Atlanta Agreement has signed by The Sialkot chamber of Commerce with the ILO, UNICEF and several leading sports goods associations to implement a platform to stop using child labor in Pakistan (Locke Siteman, 2001). However, the government carries lack of willingness to do anything. Consequently, the same problem still exists in the country and Nike is still importing its soccer balls in million quantities from Pakistan.Slave Labor in AsiaMore than 80% of Nikes supplier factories are located in Asia. The Asiatic governments prohibited workers from forming indepen dent unions and set the minimum wage at reel bottom. Labor activists criticized that the workers in Nike factories were being paid below the minimum effortless wage. For example, Nikes suppliers paid workers in Indonesia less than US$3 a day (Medea, 1998), and the wage did not meet the basic needs of one individual. In 2006, the Worker Rights Consortium calculated that a livable wage in Indonesia is about US$8 per day (Bose, 2008).Global Exchange, an international human rights organization published a key on working conditions in four Nikes supplier factories in Southern China. The report found that children cured 12 to 13 years old who worked in one of the supplier factories (owned by a Korean company) earned only 10 cents per hour. These children were forced to work up to 17 hours daily and were not allow talking during work. Supplier paid Chinese workers US$1.80 a day that was lower than the Chinese minimum wage of $1.93 for an eight-hour day. The report stated that Nike labo r practices had violate Chinese labor law but Nike denied the accusation and claimed that the report falsely stated the wages of workers (Locke Siteman, 2001).In Thailand and Vietnam, workers earned even lesser (less than US$1.5 a day) compared to the workers in Indonesia and China. jibe to Vietnam Labor Watch, a livable wage in Vietnam is about US$3 a day whereas the minimum wage in Thailand is US$4.50 a day (Medea, 1998).Health and base hit Problems in VietnamIN 1994, the Ernst and Young conducted audits on Nikes contract factories in Vietnam. According to its report, Vietnamese workers at the Tae Kwang Vina factory were often exposed to chemical, 77% of them had serious health and refuge problems. Workers with breathing or skin problem had not been transferred to departments free of chemicals and most workers who dealt with dangerous chemicals were not provided personal contraceptive equipment such as masks or gloves (Zboch, 2009). This report revealed that workers were ex posed to toluene (a chemical issue can cause permanent damage to brain, nausea, and skin irritations). Toluene parsimony had exceeded 177 times acceptable standards in parts of the factory. This report had tarnished Nikes image since the report came from Ernst and Young, an auditing firms hired by Nike to assess its suppliers factories. In addition, Nike commissioned former embassador to the United Nation Andrew Young to assess working conditions in its contract factories. In Youngs report, there is no mention of serious health and safety issues in the Tae Kwang Vina factory. This reports had casts doubt on Nikes honesty and commitment to labor and environment standards (Locke Siteman, 2001).Although Indonesia, China, and Vietnam have minimum wage laws on the books, the government of these countries was still allowing Nike to open wages well below the minimum rate. Nike further circumvented wage laws by paying new employees an apprentice rate for several months into an employee s tenure (Turner, 2008). In 1997, more than 10,000 Indonesian and 1,300 Vietnamese Nikes contract factories workers went on glitter to withstand low and unpaid wage. In 2000, 3,000 Chinese workers from Nikes contract factories protested dangerous working conditions and low wages. All of these protests took place in spite of the fact that these sorts of worker strikes are illegal in these countries (Turner, 2008). In addition to labor protests issues, legion(predicate) critics of Nikes practices had created a major public relation problem for the company. (See Appendix E traces the number of negative articles about Nikes practices.) The company has become a orient for the anti-globalization and anti-sweatshop movements. The Anti-Nike campaign that organized by consumers and human rights groups has enrolld the awareness about sweatshop labor in third world countries.V. Nikes ResponseAt the beginning, Nike denied all the violations of labor rights and they blamed their suppliers o r the host government for its failures of enforcement. The company claimed that workers rights were regard despite the fact that Nike had failed to pay its workers with fair wages as well as to provide a safe working environment. In addition, Nike reluctantly to take responsibility for the labor, health and environmental problems found in its supplier factories. Nike claimed the company does not own these factories therefore, it has no responsibility towards the workers (Avery, 1999). In reaction to the ongoing criticism, Nike formulated its code of conduct for its suppliers. Every supplier must agree to abide this code in order to get a contract. (See Appendix F for the latest version of this code). The Code of Conduct in theory condemns and prohibits child labor, requires that workers be paid fair wage, imposes caps on the long time and hours that a worker can be forced to work, prohibits mistreatment or variety of workers in any form, and states that factories must implement p rograms that benefit workers health and safety, and recognizes and prise the workers right to freedom of association (Avery, 1999). In addition, Nike has trained its internal observe team to ensure all suppliers comply with its code of conduct. The company has also hired auditing firms to assess and monitor its suppliers regularly.RecommendationsThe majority challenges Nike has to overcome involved ethical and cultural issues. Even up until now, Nike is still facing allegations and criticism from labor groups and human right about its overseas labor practices. In answer to these criticisms, Nike should work closely with its suppliers to improve working conditions and create safe and healthy environments for its workers. Workers should be provided some type of health insurance or protective wear. Nike can offer strong incentive to its suppliers, to ensure they adopt companys code of conduct. Lack of worker awareness of basic code of conduct aliment is a major challenge for the co mpany. Hence, Nike should provide human rights training to workers, to raise their awareness of their rights.Communication problem arose in Nikes overseas factories due to language barrier and little knowledge on cultural. In Vietnam, all factories are owned by Korean and Taiwanese suppliers, thus they may not understand local language and culture. To overcome communication challenges in workplace, Nike should throw out its suppliers to recruit local manager or people in quaternary language ability. Furthermore, training program should be provided regularly to both instruction and workers in order to improve communication between workers and management.The recent suicides of Foxconn workers in China are raising concern about ethical issues in supplier factories. (Foxconn is a key supplier to big tech companies.) In June 2010, a dozen of Chinese workers went on strike over wage violation. The Chinese government has increased the minimum wage due to the strike in many provinces (Kan g, 2010). In future, China may not be the most attractive low-cost countries for foreign companies as more and more Chinese workers urge their employer to increase wages. This in turn, may cause a rise in manufacturing wages in China and that would substantially increase Nikes costs of production as most of its products are made in China. Nike can urge its suppliers to relocate their operations to other low cost countries in Latin America without compromising product quality.Nike assures the public that its suppliers pay the countrys minimum wage however, in many countries minimum wage does not equate a living wage. The Indonesian government has admitted that the minimum wage only covered 70% of the basic needs of one person (Locke Siteman, 2001). Some countries like Vietnam and Indonesia arbitrarily set minimum wage low to lure foreign investments. Being an ethical employer, Nike must ensure every worker is being fairly paid. In addition to providing livable wages, the company sho uld take the long-term cost of image damage into account quite a than pursuing low cost strategy. After all, brand name is their sterling(prenominal) asset and Nike should take immediate action to clean up its vision instead of blaming the host governments or its suppliers.The development of a strict monitor system in its factories overseas is still a challenge for Nike. Nikes factories are controlled by absentee owners, so the company should continue to hire independent firms to do the regular monitoring of the factories.ConclusionToday, more and more companies expand their business by going global. Globalization has brought a culture of free labor. Nikes waylay sweatshop stigma is a case in point. The companys worldwide image was tarnished aft(prenominal) a wave of public criticism for its labor practices. Many human rights groups felt that Nike was using slave labor as a tool to lower their production costs, and the workers were not receiving proper wages. Moreover, Nike had also been accused of using child labor in its factories and had failed to provide a safe working environment for its workers. In response to these criticisms, Nike formulated its code of conduct that require its suppliers to observe some basic labor and environment standards. The company also expands its internal and external monitoring to keep up with factory base. In summary, most companies may face legal, cultural, and ethical challenges when doing business overseas. These environmental forces are perceived as uncontrollable and could pose challenges for your company if they have not been well handed. The case of Nike demonstrated how difficult it could be for company to get going in global business market because of the different culture, laws and regulations of the host country. Therefore, increasing globalization of business is requiring managers to have global perspective and an understanding of the environment forces of the markets in which they operates (Dr C, 2005).