Tag Archives: low labor cost

It is Nike’s responsibility

In recent article, Wall Street Journal told a story about how multinational company, in particular Nike, search suppliers worldwide in searching for least possible cost. One of the countries featured the cheapest production cost of apparels is Bangladesh.

However, the last year tragedy of Rana Plaza, where more than 1100 persons dead in the site has sent an effective message to the world about safety standard in many factories around developing world where most of stuffs sold in developing countries produced.  Some corporations relocate their productions while many others still stay in the country. Many multinational retailers such as Walt Mart, Hennes & Mauritz AB, and 170 others that decided to stay collaboratively funded a project in a search to improve factory safety in their factories the country. Unfortunately, Nike was not participating in that effort by saying that it can better use of its resources somewhere else where it has a bigger investment.

On the issue, Nike cut a tie with its partner in the country Liric Industries, with which Nike had worked for more than a decade, after a team visited the factory and found that the company could not guarantee a safe working condition. Nike is not a new player in outsourcing practice to developing countries in an effort to produce quality footwear at lower cost.  Since it was founded in 1964, it has done such practice when only 4 percent of U.S. footwear was imported, compared to recent figure at 98 percent.

Thus, its reason that it has not known the poor working condition in its partners seems implausible. Multinational companies such as Nike are known with tight quality control over their products even though all are produced in many locations all over the globe. Certainly they have required their partners to comply long list of procedures and systems in order to meet their standard. So, if Nike looks like surprised with the fact just found in its long-time-partner’s factory, no one will trust it. It is weird. It seems that Nike has only tried to clean its hand from that matter.

It is the responsibility of multinational companies operating in developing countries to set a minimum standard of sound production management and they cannot just blame their partners. Their search for low cost production for sure benefits both parties, but they cannot pile up profit while putting their labors in danger. Again, it is part of their responsibility to fix the problem. Just leaving the problem to be fixed by local government or industries is not a good idea since low labor is just a comparative advantage for them.