Nikebiz Responsibility Essay

The company I am presenting is Nike which was founded in 1965 by the athlete Phil Knight. Nike is a well known brand which is selling its products worldwide and has 36% of the market share.


TASK 1:

I. Understanding customers needs

Understanding customer needs will help Nike to define new market opportunities and drive innovation and revenue growth in every aspect of its organisation. The most basic concept underlying marketing is that of human needs. Human needs are states of felt deprivation (Kotler and Armstrong, 2006). Customer logic is derived from evaluation of a company and its product based upon customer needs, customer benefits, and product features. For branded athletic shoes, Nike has to understand customer needs on a global level as the products are sold worldwide. Nevertheless, as being sold in different countries, consumers have different needs as they view the product differently. It is on a regional level that Nike performs its market researches to determine the demographic profile of the consumers (i.e. maturity and cultural outlooks or standards, maturity). For example, in America, Nike's Air Jordan basketball shoes are considered for their performance characteristics, their association with a popular U.S. sport, and the endorsement from the pre-eminent star of that sport (Michael Jordan). Yet, in Europe, although awareness of basketball exists, the identification and technical aspects of the shoe are lost. The Europeans are known for their desire of things with a Western culture association and like fashion with trend associations. Therefore, because of this regional level of logic, marketing strategy becomes the focus as a key success factor in going global.

II. Keeping ahead of competition

The main rivals for Nike have always been Adidas and Reebok. As their products are not so different, Nike differentiated itself by creating and marketing well designed athletics and non-athletic footwear and clothing. The company managed to distinguish and establish its products by using a different marketing approach from its competitors and by improving its brand identity and consumer awareness. However, in 2006, its two rivals merged to get a 22% market share while Nike had 36%. The organisation, then, developed a new strategy to get ahead its rivals. They coupled sport icons such as Michal Jordan to endorse the brand and it was such a success that they decided to use Tiger Woods, the no.1 golf player, to introduce its new golf apparel and equipment. The association of a motivational slogan "Just Do It" with athletes that emphasize competition, fitness and sportsmanship, helped the company to position its product on the market as being of high-quality. The advantage Nike has is the competitors' incapacity of replicating its quality products and benefits. Moreover, the company is always trying to introduce new product in the market which help them staying ahead while giving a positive influence.

III. Communicating effectively with customers.

Promotion is largely dependent on finding accessible store locations. It also avails of targeted advertising in the newspaper and creating strategic alliances. Nike has a number of famous athletes that serve as brand ambassadors and who represents positive relationships in the public eye. Customer awareness, loyalty and brand management are directly associated to the price, as a result preservation of the relationship between the price, quality and the brand reputation has to be consistent (Johnson and Scholes 2004).

Nike's brand images, the Nike name and the trademark swoosh, make it one of the most recognizable brands in the world. Nike's brand power is one reason for its high revenues. Nike's quality products, public relations, loyal customer base and its great marketing techniques all contribute to the success of the company. By sponsoring local sporting events, Knight managed to offer customers a personal experience and to prove them how valuable they are by asking to athletes for feedbacks on how to improve the shoes. This showed to the public the company commitment to them. Moreover, Nike tries to extend its personal relationships by sponsoring events which are unrelated to the company and by participating to philanthropic causes worldwide. To better understand customers' needs, Nike uses its customer's information to send them personalised direct mail, invite them to events or to let them know of any new product release or sales.

IV. Social and ethical marketing.

Kotler (1998) define corporate social responsibility as "a commitment to improve community well-being through discretionary business practices and contributions of corporate resources". Thus, corporate social responsibility includes the following:concern for the environment,commitment to ethical behaviour, respect for people, and concern for society at large.Some of the benefits of being socially responsible include: enhanced company and brand image, easier to attract and retain employees, increased market share, lower operating costs and easier to attract investors. A socially-responsible firm will care about customers, employees, suppliers, the local community, society, and the environment. Of course, a company has an obligation to be concerned about its stockholders. Phil Knight, owner of the company, is the one responsible of the corporation image and Nike suffered a backlash from its uses of offshore subcontractors' poor working conditions and extremely low wages. Some consumers demanded greater accountability and respectability by engaging in boycotts and letter-writing complaint. Nike ultimately responded to the growing negative publicity by changing its practices. They understood that the customers' perceptions of product attributes and corporate image features that lead to consumer willingness to purchase goods and service was falling into the negative. Nike began then using traditional advertising methods to broadcast its production practice in response to activist criticism. Nike now requires all of their suppliers to pay workers at least the locally mandated minimum wage and benefits. Since, they developed a Corporate Responsibility Policy which is released annually as part of the company's commitment to reporting and transparency in order to help tackle these issues which now became their priorities.



TASK 2a

A PEST analysis (see Figure 1) is merely a framework that categorizes environmental influences as political, economic, social and technological forces. The analysis examines the impact of each of these factors the business. The results can then be used to take advantage of opportunities and to make contingency plans for threats when preparing business and strategic plans (Byars, 1991). Kotler (1998) claims that PEST analysis is a strategic tool for understanding market growth or decline, business position, potential and direction for operations. PEST also ensures that company's performance is aligned positively with the powerful forces of change that are affecting business environment (Porter, 1985).

The economic recession had a large influence on Nike's revenues and sales, as it has been observed by the decline in profit as compared to 2008. It is important for the company to understand the scarcity of employment and credits will give less opportunity to consumers to buy goods. As a result, competition will be higher and competitors would have to engage themselves in a promotional war to gain revenues. As Nike is an international company, analysing the state of the trading economy is essential. Factors such as the level of inflation employment per capita and the interest rate are important element to look at if the company wants to improve its marketing performance. Nike will have to increase turnover to keep up with the increasing demand if the economy recover. If it continues, a cutting back on costs will have to be done (i.e. reducing advertising costs and labour). All businesses are affected by economical factors nationally and globally. Interest rate policy and fiscal policy will have to be set accordingly. Within the UK the climate of the economy dictates how consumer may behave within society. Whether an economy is in a recession, boom or recovery it willaffect consumer confidence and behaviour.The understanding of the economics conditions will help the organisation to employ the best strategies and tactics.

During the 1990s, Nike suffered much bad publicity about poor labour conditions in its externally contracted supply companies which it initially denied responsibility for. Since suffering drops in sales due to media criticism, Nike has worked to improve conditions for labourers and has introduced a code of conduct and an auditing system for all suppliers (Locke, 2003). As cultural and social behaviour and mentality vary from one country to another it is important for the company to examine considerably the age distribution, the population growth rate etc. For instance, an ageing population may imply a smaller workforce, which would increase the cost of labour. For those reasons Nike may want to change several management strategies to adapt to these social trends.

While Nike presently employs state-of-the-art technology in its production, there is a chance another company will invent better and cheaper methods of production which could result in loss of sales for Nike. Technological factors include environmental aspects and ecological, such as automation, activity, technology incentives and the rate of technological change. They can determine barriers to entry, minimum efficient production level and influence outsourcing decisions. Furthermore, technological shifts can affect quality and cost and lead to innovation. Changes in technology is changing the way business operates, Moreover online buyers can shop 24 hours a day from their homes so the Internet has huge impact on the organisation. Having an adequate and reliable Information system is a must if the company wants to keep up with changes and exchange information quickly within the operating environment.


TASK 2 b

The threat to the new entrants is low for the company. Nike who has a huge market share is able to control its costs to maintain performance advantage over emerging competitors in the industry. If a company wanted to enter the market, they will have to possess a very large capital investment to open new shoes factories and stores and conduct research to create an attractive line of product. Start-up companies may struggle to survive as it will be difficult for them to get a shelf in the major shoe retailers. However, a company could easily override those threats if they already possess a large and strong relationship with its customers. That could be the case of shops such as Aldo and San Marina who could use their connections to easily access the athletic shoe distribution channel. Also, buyers are usually afraid to buy new products from new competitors once they have a good relationship with the company they are used to.

The bargaining power of buyers is high as this industry counts a very large number of buyers. Therefore Nike must regularly market their products and personalize their brands against rivals to increase market share and sales. Personalisation and accessibility of the customers were helped by the utilisation of the online tools. For instance, the "nikeid.com" link allows customers to design and customize their own pair of shoe by allowing clients to individualize the desired colours and the option to personalize the footwear by putting their own name. The brand itself has a critical role in the customer buying behaviour; customers' loyalty and trust will be quickly gained if the brad has a strong identity. A multitude of online shoppers are price sensitive and switching cost is low for them.

The bargaining power of suppliers is low. Indeed, there are plenty of suppliers in this industry; therefore there is very little differentiation among them which makes suppliers' bargaining power non-existent. Corporation like Nike who has a definite advantage and power over them drive these latter's to be dependent of their consumers to survive. Moreover, Nike has regulated its input procedures which are associated to the materials used, their labour force, services and logistics. Additionally, inputs are readily substituted and there are an abundant number of suppliers available. The presence of very low price labour worldwide assent consumers like Nike to switch rapidly and at a bargain price between suppliers.

Buyers' ability to substitute is low. Indeed the only alternatives to the footwear are sandals, boots or bare feet. Therefore the presence of substitutes is very low as the reasons of a consumer buying footwear are due to the performance specification of the good. For instance, a tennis player would not wear sandals to play tennis. For those reasons there are no real substitutes for athletic footwear.

The competition between the rivals in this industry is entirely high. Indeed organisations like Adidas, Rebook and Nike have expanded hugely over the last 20 years. The apparition and development of the Internet and E-commerce has hugely contributed to the global expansion of the market. Online selling has enlarged the reach for these firms allowing them to increase sales while minimizing operating costs. Most of the competitors have a web site and the utilisation of the high speed internet has made of the online shopping the new trend of the twenty first century. Rivalry is intense in the footwear industry and those who govern the market have a strong powerful brand identity, huge capital and brilliant marketing strategies (see Figure 2).



REFERENCES

BOOKS:

1. Kotler, P & Armstrong, G. (2006) 'Principles of Marketing'. 11th Edition. New Jersey: Pearson/ Prentice Hall.

2. Johnson, G & Scholes, J. (2004) 'Exploring Corporate Strategy'. 6th Edition. Newburg: Financial Times/ Prentice Hall.

3. Kotler, P. (1998) 'Marketing Management - Analysis, Planning, Implementation, and Control'. 9th Edition. Englewood Cliffs: Prentice-Hall.

4. Byars, L. (1991)' Strategic Management, Formulation and Implementation - Concepts and Cases'. New York: HarperCollins.

5. Porter, M. (1985) 'Competitive Advantage'. New York: Free Press.

6. Locke, R.M. (2003) 'Management: Inventing and delivering it'. Edition. Cambridge: MIT Press: Cambridge.

INTERNET WEBSITES:

1. 'Company Overview', Nikeid [online]. Available at: http://www.nikebiz.com/company_overview/ (accessed 20 February 2010).

2. 'Global Brands', Brand Powers {online}. Available at: http://brandpowers.blogspot.com/2008/12/nike.html (accessed 24 February 2010).

3. Kiley, D, 2005 'Reebok and Adidas Merger Looks Good. But Will It Be Good?' Business week [online]. Available at: http://www.businessweek.com/the_thread/brandnewday/archives/2005/08/_on_paper_the_a.html (accessed 24 February 2010).

4. Martin, R, 2010 'Branding and Celebrity Endorsements' Venture Republic [online]. Available at: http://www.venturerepublic.com/resources/Branding_celebrities_brand_endorsements_brand_leadership.asp (accessed 20 February 2010).

5. Cuizon, G, 2009 'Audit on Nike's Marketing Strategies' Suite101 [online]. Available at:http://corporate-marketing-branding.suite101.com/article.cfm/audit_on_nikes_marketing_strategies (accessed 3 March 2010).

6. 'Shop and customer service', Nikeid [online]. Available at: http://www.nikebiz.com/customer_service/ (accessed 20 February 2010).

7. 'What is the market strategy of Nike', Blurtit [online]. Available at: http://www.blurtit.com/q173791.html (accessed 20 February 2010).

8. 'Strategy analysis of Nike, Inc' [online]. Available at: http://condor.depaul.edu/~aalmaney/StrategicAnalysisofNike.htm (accessed February 2010).

9. 'Corporate Social Responsibility', Academic Brooklyn [online]. Available at: http://academic.brooklyn.cuny.edu/economic/friedman/mmethics.htm (accessed 23 February 2010).

10. 'Marketing Ethics' [online]. Available at: http://college.cengage.com/business/modules/marktngethics.pdf (accessed 20 February 2010).

11. 'Workers and Factories', Nikeid [online]. Available at: http://www.nikebiz.com/responsibility/workers_and_factories.html (accessed 20 February 2010).

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Nike Sweatshop History: Should Action be Taken?

Few emblems are recognized on a global scale to the extent of the tiny check mark that constitutes the Nike Swoosh.  The multi-billion dollar company in its thirty-two years of business (“NikeTimeline”) not only occupies “the premier position in the American footwear industry” (Moskowitz, Levering, and Katz, 95), but has grown to be a global leader and trendsetter in the footwear and sports apparel industries.  Nike prides itself on its connection to such positive images as a healthy lifestyle, optimal performance, competition, a love of the game and sports icons such as Michael Jordan and the Brazilian World Cup champion soccer team.  Nike’s positive image has further been enhanced through their generous endowments to various universities and their charitable donations of sports equipment to programs to increase the activity of today’s sedentary youths (“NikeTimeline”).  Yet despite this positive PR, Nike’s Swoosh has made unsavory connections in the latter half of the 90s. Nike’s sweatshop manufacturing practices have been an area of increasing public awareness and a glaring black spot on Nike’s “good guy” image.  The following essay will further shed light on some of Nike’s sweatshop history.   2003 was a record setting year for Nike. The company earned “$10.7 billion in revenues” (Parker).  From the humble dream of men at the University of Oregon, Bill Bowerman and Phil Knight (Moskowitz, Levering, and Katz, 96) Nike has grown into a thriving multinational corporation. They envisioned importing lightweight running shoes from Japan and in the mid sixties realized this dream with the company Blue Ribbon Sports (“NikeTimeline”). Bowerman and Knight became more involved in the design, including developing rubberized soles in waffle irons, and in 1972 launched a new company under the name of Nike, complete with the legendary Swoosh logo (“NikeTimeline”). Nike’s renown grew quickly on the global scale throughout the 80s with the help of endorsements from athletes such as Steve Prefontaine and Michael Jordan, a catchy slogan like the “Just Do it” campaign and success at the Olympic level. In the 1984 games, 65 Olympic medals were won by the 58 athletes sporting Nike athletic shoes (Moskowitz, Levering, and Katz, 95).  A visual testament to the success of Knight’s and Bowerman’s dream is evident in the abundance of the Swoosh in every gym, arena and field.

Today Nike practices “out-sourcing,” meaning other companies operate and own the factories and plants in which Nike goods are produced (“Our Business Model”).  Nike merchandize is manufactured in 50 countries in over 900 factories employing over 660 000 workers, most of which are women ("Our Business Model”).

The Nike Code of Conduct states, “We are driven to do not only what is required, but what is expected of a leader. We expect our business partners to do the same” (“Just Stop It”). The reality of working conditions inside the factories that produce Nike goods is unfortunately much different from what those glorified words would lead the public to believe.

Nike has been accused of producing many of its goods in third world sweatshops. Although Nike has factories located around the globe, most of its manufacturing is located in China, Indonesia, and Vietnam (“Frequently”). Nike chooses to locate the majority of their production in such countries because of the abundance of cheap labor. In these countries, Nike has more complaints filed against them from workers and labor organizations than any other American corporation (“Frequently”).  Some of the human rights charges include the following: the use of child labor in factories, physical, verbal and sexual abuse from superiors, unsafe working conditions including exposure to toxic chemicals and the use of machinery without the proper safety precautions, pay below minimum wage and forced overtime hours.

While Nike’s Code of Conduct states that Nike “opposes child labor” and that Nike has “set age standards at 16 for apparel and 18 for footwear factories,” (“Code of Conduct”) many cases of children working have been reported.

Physical abuses in Nike factories reported by CBS News include workers being struck on the head, pinched or being forced to stand, kneel or run in the hot sun as punishment (“Fact Sheet”). There have also been numerous cases of workers being sexually molested by supervisors within Nike factories.

In factories in Vietnam, workers were exposed to Toluene, a reproductive toxin, at 177 times the legal limit (“Nike’s Labour Practices”). They were also exposed to other chemicals and glue without proper safety equipment.

 Nike has been accused of not paying a “living-wage.” A living wage is considered a pay that is able to supply basic necessities for a small family (Connor).  In Vietnam, workers receive about  $37US a month, which is below the minimum wage of $45US a month (“Fact Sheet”). In Indonesia, Nike has increased wages for workers to above the minimum wage set by the government.  While this is seen as a step in the correct direction, worker’s pay is still roughly one half of what would be considered a “living wage” for this country (“Frequently”).

In China, it is common for workers to engage in a 10 to 12 hour work day before working another two to four hours of overtime (“Nike’s Labour Practices”). In Vietnamese factories, workers making Nike merchandize have been found to be forced to work over 600 hours of overtime a year, which is more than 400 hours a year above the legal limit in Vietnam (“Fact Sheet”). Workers have reported being coerced into the overtime hours through threats of unemployment or forced indirectly by the low pay to volunteer for the hours in order to support their families.    

Numerous organizations have taken it upon themselves to bring such human rights violations to light and to pressure Nike into changing their labor practices.  Among these are the Global Exchange, Oxfram Community Aid Abroad, the Workers Rights Consortium (WRC) and numerous student groups.  These groups stage protests in front of Niketown stores, distribute flyers, organize sit-ins and boycott Nike products produced in sweatshops in order to raise public awareness. Several universities have also become involved in the fight for workers’ rights by joining the WRC. In joining the WRC the universities ensure that merchandize bearing the university’s name or logo, a lucrative market, is not produced in sweatshops (Street). While the human rights organizations would like Nike to make a number of changes to their manufacturing practices, their main goals are as follows: ensure living wages for workers, increase the safety inside of the factories, reduce the number of hours workers need to work and to allow outside organizations to monitor the factories.

Workers have also taken part in the fight for their rights, staging strikes, most notably in Indonesia when 10, 000 Nike workers walked off the job in April 1997 (“Frequently”).

Nike is not the only corporation charged with such human rights violations in the manufacturing stage of their business practices, yet Nike remains the main focus of a number of human rights organizations for a number of reasons. As stated above, the sheer number of worker complaints has mobilized groups against the footwear giant (“Frequently”). Secondly, as Nike itself states, it is an industry leader (“Frequently”). Not only do they set trends in the market but also in labor practices.  By targeting Nike, organizations can influence the labor practices of many smaller companies through positive peer pressure. Thirdly, the success of Nike makes the cost of changing their practices and increasing worker wages seem like pocket change to the multi-billion dollar company.  Nike can afford to elevate wages and implement new safety measures without increasing the price of their products (“Frequently”).

Nike has made some positive changes since the scandal of their sweatshop practices became public in the late 90s. In Indonesia, Nike has increased workers’ pay to above minimum wage. Nike has also begun to make changes in the safety of many Vietnamese factories, reducing the number of toxic chemicals used, changing to safer solvents (“Frequently”) and improving ventilation systems in main plants. Though these actions have been commended by human rights organizations as  positive steps in the right direction, critics of Nike still feel that the company has a long way to go before its labor practices allow it to be truly worthy of the positive image it tries so hard to promote. 



Annotated Bibliography of Works Consulted

"Code of Conduct." Nikebiz: Responsibility. Jan. 2004. http//www.nike.com/nikebiz/nikebiz.jhtml?page=25(1 Feb. 2004).

This article was taken from an assemblage of articles concerning Nike sweatshops.  More specifically, this article provides an informal outline of Nike’s Code of Conduct, which is an overview of Nike’s compliance to better working conditions.  The article makes a strong statement in favor or Nike, saying that Nike is in “compliance with standards” that are conducted in an “ethical and lawful manner.”

Conner, Tim. "Still Waiting for Nike to Do It." Global Exchange. May 2001. http://www.globalexchange.org/campaigns/sweatshops/nike/faq.html.pf(25 Jan. 2004).

Tim Conner’s article, “Still Waiting for Nike to Do It,” is a credible work that describes the reformation that Nike has made, over the last few years, towards improved labor practices.  The article is a well-constructed timeline of the challenges and revisions that Nike faced and implemented in 1998.  Accordingly, the article discusses many of the accusations brought against Nike labor practices and all of the corrections that Nike formulated to effectively produce a healthier working environment.

"Frequently Asked Questions." Global Exchange. 13 Aug. 2003. http://www.globalexchange.org/campaigns/nike/codes.html (1 Feb. 2004).

This site contains an uneducated and informal list of frequently asked questions and answers about Nike sweatshops that are of relevance to the public.  The article addresses both questions concerning Nike’s labor practices as well as issues that question the validity of whether such strong accusations against Nike are reasonable.  In short, the article provides a general idea of Nike’s history, labor conditions, and significant improvements.

“Just Stop It.” Oxfam Community Aid Abroad. 1997.http://www.caa.org.au/campaigns/nike/codes.html(1 Feb. 2004).

This article provides a comprehensive summary of information that explains the alterations made in Nike’s Code of Conduct.  The article gives a clear and visual bulleted list of Nike’s original Code of Conduct, up until February 1997, and Nike’s current Code of Conduct, as of March 1997.

Moskowitz, Milton, Robert Levering and Michael Katz. Everybody's Business. New York: Doubleday, 1990.

This book is an educated and informational book that is full of essential facts relative to Corporate Giants.  The book contains factual information that concerns such things as global presence, industry and product rankings, numbers of employees, profits and losses, etc.  The book also address the true character of each Corporation and its influence on modern life.  Therefore, this source provides a wide variety of information that is useful in determining the efficiency and effectiveness of major Corporations.

"NikeTimeline." Nikebiz: Responsibility. Jan. 2004. http://www.nike.com/nikebiz/nikebiz.jhtml?page=50 (1 Feb. 2004)

This site is a formal and knowledgeable timeline that outlines the ups and downs that the Nike Corporation has faced throughout its existence.  The timeline is a chronological line of dates, dating from when Nike was first created to the present day.

“Nike – VN Fact Sheet.” Boycott Nike. 30 Jan. 1999. http://www.saigon.com/~nike/factsheet.htm(1 Feb. 2004).

This article is made up of a bulleted list of facts that argue and exemplify how Nike sweatshops have violated several Vietnamese laws and also its own code of conduct.  This article is reliable due to the research of both Vietnamese and American lawyers regarding Nike’s Code of Conduct.  Although the list of facts does not go in to details it is still very informative.

“Nike’s Labour Practices.” Red de Solidaridad de la Maquila Solidarity Network. 1998. http://www.maquilasolidarity.org/campaigns/nike/labprac98.htm (25 Jan. 2004).

This article is an essay on Nike’s foreign affairs.  The article is written with a biased look at the horrendous working conditions in sweatshops located in Indonesia and Vietnam.  Within the essay, the poor labor conditions and working environments found in these alienated sweatshops is exposed.

"Our Business Model & Its Challenges." Nikebiz: Responsibility. Jan. 2004. http://www.nike.com/nikebiz/nikebiz.jhtml?page=25&cat=businessmodel (1 Feb. 2004)

This article was taken from an assemblage of articles concerning Nike sweatshops.  More specifically, this article provides a knowledgeable background of the initial construction of the Nike Corporation.  Accordingly, the article informs the reader of the whereabouts of Nike headquarters and the location of its many factories.

Parker, Mark G. and Charles D. Denson. “Chaitman’s Letter.” Nikbiz: Responsibility. http://www.nike.com /nikebiz/nikebiz.jhtml?page=15(1 Feb. 2004).

This article is a direct replica of a letter sent to all Nike shareholders signed by Presidents Mark Parker and Charles Denson’s of Nike Brand.  The letter is a testimonial of how Nike conveys a passion for success.  Within the letter no where does it refer to the allegations against Nike’s working conditions in its sweatshops.  Rather, the letter emphasizes all of the positive aspects surrounding the company and what Nike stands for.

Street, Paul. “The Anti-Sweatshop Movement.” Z Communications. http://www.zmag.org/ZMag/articles/streetjune2000.htm (1 Feb. 2004).

This article is an educated outlook on all anti-sweatshop movements.  The article discusses not only the positive aspects of anti-sweatshop movements but also the negative aspects of the movements.  Purposely, the article uses a lot of factual detail and credible examples of how sweatshops can be both beneficial and detrimental.



Related Links

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Global Exchange

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