Nike continues to be a profitable company with horrible morals

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.

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5 Responses to Nike continues to be a profitable company with horrible morals

  1. ALXLIONS says:

    I agree with you about how ridiculous it is that Nike is raising their prices because the production cost are supposedly increasing. But can you really blame them? It is a shame that people are so obsessed with Nike products like the Michael Jordan shoes that they are willing to pay extra couple dollars. Nike wants to maximize their profits and if people are willing to pay $10-20 more for their products than why not? I know people that buy their Jordan shoes and never even wear them. That’s how highly regarded their products are to some people.

  2. Along the lines of what you were saying, Alex, I noticed that several students in our class were wearing Nike shoes while we were discussing the case in class last Thursday. I recently bought a pair of Nike running shoes as I didn’t know about Nike’s unethical offshore “sweatshops”. Between their highly regarded product and ignorance about their manufacturing strategy, the demand for Nike shoes is still strong.
    (Also, very unrelated…I have a german shephard too!)

  3. jwhite17 says:

    I have a slightly different viewpoint. While I don’t like Nike’s use of sweatshops that are not in full legal standing in the country which they operate in, I have no problem with them outsourcing labor. In a globalized economy with mobile factors of input it only makes sense to outsource that labor to parts of the world with a cost advantage. This gives them an operating advantage, and if they did not their competitors would. There is also nothing wrong with Nike passing on increasing input costs to the customer. In fact, if they weren’t the management team would not be doing a proper job in not preserving margins.Where Nike went wrong is in not doing due diligence in its suppliers. Using some of the types of factories they did is unconscionable.
    (Also, while we’re on the subject of dogs, I actually have two shepherds myself…boss dogs)

  4. mnickels says:

    I was recently online looking at a pair of Nike running shoes that I wanted, but now I feel horrible about buying a product from a company that I know has had a bad past with underage labor and sweatshops. I agree with what you are saying also, Jason, and the management is doing their job in terms of preserving their margins. On an ethical side though, it all seems a bit bizarre to me. I know there must be many other companies who are doing the same thing and we might just not know about it, but Nike is one company we know has an ethically wrong past. I hope that in the future companies can bring together ethics and maximizing stakeholder value, but maybe right now it is hard for executives or companies to wrap their heads around that concept. It might not also produce to most profit or minimize many of their costs, but I think in some situations, having a better reputation or standing in the public’s eye might be worth it.

  5. Pingback: 21. Nike ID | My Blog

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