I was reading the Wall Street Journal earlier tonight and an article about Nike popped up on the page. The title of it is “Nike Posts Higher Profit, Sales” and it talks about how Nike’s sales and profits have increased about 15% in the first quarter of the fiscal year. It says how Nike’s sales increases were not really expected by anyone and how great it is that they are doing so well. Further into the article, I found this quote to be very interesting especially after our discussion today about the Nike case: “Executives have warned that the cost pressures would continue to weigh on margin in the first half. Nike increased prices last fiscal year and is considering more increases for later this fiscal year to offset the higher costs.”
I found these both to be very interesting after today and after reading the case. I know there are a lot of costs associated with running a business and operating a company, but what I first thought when I read these was how they could have cost pressures when they are operating in low-income areas of the world? Maybe they are being pressured to raise the wages in the factories or use different products or services? The article talks about how product costs have increased and that is most likely the costs they are talking about, but in my mind, I just think right back to the sweatshops where their shoes are made.
I wonder, also, about the operations of the business. If they are paying workers less than $10 a day to make their products, and even if product costs are rising and will continue to rise, wouldn’t that cancel out in some sort of way? Since they aren’t paying full wages for any of the workers and are cutting their labor costs immensely, I don’t see how Nike would necessarily need to increase prices of their merchandise. Sure, they want to make as much money as they did last year, or even more, but I am a bit baffled by the whole situation after reading the case about Nike and talking about it today in class. It is troubling to me knowing that Nike is paying much, much less for labor outside of the U.S. and still they are increasing their prices of merchandise because of “higher products costs.” I don’t think it’s fair for them to use sweatshops and underage labor (maybe not anymore) and pay next to nothing for labor overall and still increase their product prices because those costs went up. It seems a little ridiculous, despite knowing about businesses and finance and what every business is aiming to do, but that is just me.