NIKE VS' REEBOK

1
NIKE VS. REEBOK
NIKE Standards Compliance to local laws But
Global standard for CFCs Approach to
Compliance Keep documents on file Summary Complia
nce approach
REEBOK Standards Compliance to local laws But
48/60 hour week 14 years as cutoff for child
labor Approach to Compliance Undertake
independent audit Summary Integrity approach
2
MNCs Responsibilities

• An MNCs primary duty is to its shareholders
• An MNC should adopt local standards
• An MNC should have one worldwide standard of
  conduct

3
Sourcing Issues

• Gouging and Exploitation
• relative to industry practices?
• measured by firm profits or by worker treatment?
• whose definitions apply?
• Implications of shifting production among
  Countries
• 1 per day in Indonesia vs. 24 per day in S.
  Korea
• Labor component of cost of sales is significant
• Is there any obligation to preserve existing jobs?

4
Global Manufacturing Strategies in the
Internationalization Process

• Global sourcing implies that companies need to
  determine where parts and components will be
  manufactured and where final products will be
  assembled
• Five elements of the competitive strategy that
  affect the manufacturing strategy
• Efficiency/cost
• Dependability
• Quality
• Flexibility
• Innovation

5
Global Manufacturing Strategies

• Manufacturing decisions include
• Location and scale
• Choice of process
• Control of the system
• Degree of vertical integration relative to
  out-sourcing
• Coordination of RD
• Licensing of technology

6
Global Manufacturing Strategies

• Manufacturing systems
• Single plant
• Multiple plants
• Manufacturing interchange
• Rationalization
• Offshore manufacturing often is done in low-cost
  locations and followed by importation into the
  home market
• Ex a maquiladora is an operation in Mexico to
  which components are shipped from the United
  States duty-free for assembly and the goods
  re-exported to the United States
• Plant Location
• Layout Planning

7
Quality

• TQM is designed to eliminate all defects and to
  ensure customer satisfaction
• ISO 9000
• ISO 9000 is a European set of quality standards
  intended to promote quality at every level of an
  organization
• Non-European companies operating in Europe need
  to become ISO-certified in order to maintain
  access to that market

8
Figure 18.3 Continuum of Characteristics of
Manufacturing and Service Organizations
9
Can (or should) all MNCs take Reeboks approach?

• How severe is price competition?
• Can we afford to terminate contractors because
  of human rights?
• What are our operating margins?
• Do we have the money to conduct audits?
• Is our product differentiable?
• Will our actions result in any greater sales or
  other company-
• specific benefits?

10
Conclusion

• Managing a MNC means managing differences among
  countries. Often this leads to exploitation.
  Are some types of exploitation worse than others?
  Whats the bottom line?
• Nike and Reebok exemplify two common
  international sourcing strategies compliance vs.
  integrity.
• Even Reebok did not hesitate to relocate vast
  production operations. Does this mean Reebok is
  unethical?
• What are the implications of this case at the
  individual level of analysis? What if you were
  sent to manage a work group
  in a country whose business ethics were not in
  synch with yours?