3. STRATEGIC PROFILE
1
• Factories in China were in spotlight – China factories export to United States and
European Union
2
• Substandard wages, long working hours, poor working conditions, deficiencies in
safety & health conditions, child labor.
3
• Accusation focused on firms that contract local plants instead of global corporations
with own off-shores factories.
4
• Criticism by human rights activists tarnish firm’s reputation.
5
• Efforts taken to counter criticism includes implementation of supplier’s code of
conduct.
6
• Firms in scrutiny: Walmart & Nike
5
4. • The nation's number-one retailer.
• Walmart Supercentre - redefined convenience and one-stop shopping,
Every Day Low Prices went international
• In 1992, Walmart employed 371,000 associates in 1,928 stores and
clubs.
•In 2000, Walmart.com was founded, allowing U.S. customers to shop
online.
• In 2012, Walmart celebrated 50 years of helping people save money so
they can live better.
•The company employs 2.2 million associates worldwide and serves 200
million customers each week at more than 10,000 stores in 27 countries
Walmart
Overview of Compnay
5. Nike : Nike's Code of Conduct for Its Suppliers and Contract
Manufacturers
1. rights of all employees,
2. Minimizing impact on the environment
3. safe and healthy work place
4. Ensuring the health and well-being of all employees
> Forced Labor
> Child Labor
> Compensation
> Benefits
> Hours of Work/Overtime
> Environment, Safety and Health (ES&H)
> Documentation and Inspection
6. Nike's System for Monitoring Contract
Manufacturers
Basic monitoring or SHAPE inspections:
factory 's overall compliance performance,
including environment, safety, and health.
SHAPE audits on each active factory each year,
In -depth M-Audits: deeper measure of the working conditions within contract
factories.
MAV Audits:
focused on finding
root causes of noncompliance issues that most
impacted workers, specifically work hours,
Wages/benefits, grievance systems, and freedom of associations.
root cause identification
42 MAV audits through year
Independent external monitoring:
member of the Fair Labor Association (FLA), conducted
independent audits of factories
The FLA applied a common set of
7. Rivalry among
competing sellers:
Medium – High
- Competitors have similar sizes.
- Industry growth is slow.
- Switching cost for buyer is low
- Exit barriers are high
Power of Substitutes: Low- Medium
- usually hypermarkets offer different products in one location.
- Consumer switching costs are low.
Prices and quality of substitute products are very competitive
Buyers’ Bargaining Power
: Low
- A large number of
customers.
-Customers usually make
small purchases.
New Entrance : Medium pressure
-Economies of scale.
-Entry barriers are relatively high
-Wal-Mart has cost advantage over other competitors
- Existing industry members are looking to expand their market
Suppliers’ Bargaining
Suppliers : Low
-Wal-Mart purchases huge
quantities of products
-Low switching costs from
one supplier to another.
- Many suppliers
Porters 5 force Model: Walmart
8. Rivalry among
competing sellers:
Medium – High
-Competitors were also
engaged in aggressive
differentiation strategy
-Switching cost is low for buyers
Power of Substitutes: Low
- substitutes for athletic footwear products are low
Buyers’ Bargaining
Power : Low
- A large number of
customers.
-Customers usually make
small purchases.
-Sellers’ product are
differentiated
New Entrance : Low pressure
-Economies of scale.
-Entry barriers are relatively high
-access to athletic shoes distribution channels is a moderate to high
to
-many athletic shoes customers are brand loyal
Suppliers’ Bargaining
Suppliers : Low
-many suppliers in this
industry
- very little
differentiation among
the suppliers
- Low switching cost
Porters 5 force Model: Nike
9. Strength
Nature of the organization get introduced to
the public with their very own codes.
Ability of converting criticisms into
competitive advantage.
The forming way of code of conducts that
inspires their employees to act ethically.
Weakness
Emergence of pricing pressure for the
contract factories.
Compliance with the codes of conducts
are costly.
Use of multiple codes creates Audit
Fatigue.
Ineffective Codes.
Opportunities
Building a strong relationship with the
blend of trust, honesty, team work and
respect for each other.
Driving of CSR activities that will lead
to economic benefits.
Threats
Incur of high cost will make customers
to switch to the substitute products I
the market.
Reputation can be at risk for the
criticism by human rights activists.
Loss of good vendors.
SWOT Analysis
10. Unethical Practices at Supplier Factories
Forced &
Child labor
Inadequate
occupationa
l
safety
overtime
pay
violations
Unsafe &
unhealthy
working
condition
wage
discriminati
on
Underpayme
nt of
minimum
wages
11. Findings…
Foreign manufacturers are deliberately deceiving
inspection teams and concealing violations of supplier
codes of conduct through
- Maintaining two sets of books
- Hiding the use of underage workers and unsafe work practices
- Meeting requirements by secretly shifting production to
subcontractor
- Coaching managers and employees on answering questions
posed by audit team members
12. Findings…
Strapping pressures from importers to keep prices low give
suppliers a big incentive to cheat on their compliance with labor
standards.
Difficult for importers to maintain & monitor the foreign
manufacturer’s falsification records.
Downward pressure on prices made it financially difficult for
foreign manufacturers to improve working conditions and
workers compensation & benefits.
13. Recommendations
Audits need to conduct both by customer companies and industry
alliance groups and help suppliers comply with the expected standards
rather than to impose penalties for violations and permanently cutting
off purchases.
Increasing the number of audits and conducting unannounced audits of
factories across the world that supplied its members and affiliates had
also becoming more familiar with the factories and their workers & keep
suppliers alert to follow the code of conduct.
Companies need to be more conscious on raise the order price and
lengthen turn-over time so as to reflect reasonable labor costs.
14. Recommendations
Provide workers at its supplier factories with labor rights training
programs, and establish worker representation through democratic
elections to protect workers’ legal rights, health and safety, and
overall welfare.
Distributing the code to all of its contract factories in directed them
to post the code in a visible place and in the appropriate local
language so that suppliers would comply with companies’ expected
standard.
The code had been periodically evaluated and modified based on
experience and feedback from the ethical sourcing community over
the years.
