Week 9 - Role of TNCs, Nike Case Study

Transnational Corporation (TNC)

A large business that operates in multiple countries, often with headquarters, production, and sales in different locations globally. 

Spatial Organisation

TNCs will often have their HQ in a HIC, where all the important decisions are made and most the profit comes back to.

They will then have most their production lines set up in LICs/NEEs, where they can get cheap labour and abuse poor working regulations.

TNC Case Study - Nike

Nike was established in 1972. It’s HQ is in Beaverton, Oregon USA where they employ 5500 people. This is a very small amount compared to how many they employ elsewhere (directly and indirectly).

Impacts on Country of Origin

+

• Nike outsource their work to subcontractors, paying $18 a shoe. They then sell a pair for $72 on average. This is a mark-up of 100% per shoe.

• They also employ 5,500 at their HQ, where there are many high-paying corporate positions. This gives lots of taxable income.

• Very diverse employment at the HQ - more than 60% of employees from non-white ethnic backgrounds, 30% of whom are women.

—

• Recently announced an axing of 500 jobs in Beaverton with very little compensation for those losing work.

• A lot of the profit made through Nike is kept in offshore tax havens - the US misses out taxation.

Impacts on Host Country (China)

+

• Nike contracts with 180 manufacturers in China, providing work for 210,000 people.

• Provides some opportunities for people to learn new skills and training.

• Promises to use sustainable materials and manage waste properly.

—

• Accused of causing pollution to rivers and other natural habitats.

• Allegations of extorting people - cheap labour, long hours, poor conditions.

• Thought to be using poorly sourced materials - Kangaroo leather.

Nike’s responses to issues in China

• In 1992 the company set up a Code of Conduct for all its factories which included protection of workers' rights and monitoring environmental impacts to make sure companies followed regulations on fire safety, air quality, minimum wage and overtime limits.

• In 2001 it introduced the Corporate Responsibility Report which set and monitored targets towards improving working conditions and hours, paying fair wages, increasing workers' skills and making them feel more valued to the company. The report also set environmental targets on reducing greenhouse gas emissions and increasing renewable energy use.

• From 2012 the company has inspected and monitored the performance of all factories.