Essay on Tutorial 7 Ethics Case Study Nike An

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Tutorial 7 Case Study - Pakistan Sporting Goods – Saga Sports and Nike

This case outlines the relationship between a Pakistan sporting goods manufacturer, Saga Sports and Nike. The case will illustrate how doing business with international brands requires an integration of processes and full adoption of international standards. Specifically, the case will explore the importance of institutionalized processes within the supplier and the need for the supplier to internalize the brand equity of its buyer and uphold end-market standards. The case will explore the difficulties of monitoring and enforcing production standards in cottage industries. Origins and Nature of the Buyer-Supplier Relationship

Sialkot is the soccer ball capital of the world. At its height in the mid-1990s, nearly 80% of the world's soccer balls were stamped with “made in Pakistan” and were, in fact, made in Sialkot. All of the major brands had operations in Sialkot including Nike, Adidas and Puma. Up until that time, the industry functioned as a cottage industry. The production was managed in the city of Sialkot where the main factories would print and cut the material. The material was then given to subcontractors who would serve as an intermediary to villages and homes, delivering the materials and paying the homes on a per piece basis. The subcontractors would then return the balls to the Pakistani contractor to be packed and shipped. The industry structure took advantage of the widely available cheap labour – representing an estimated 40,000 workers, but also was vulnerable to child labour practices. Source: US Department of Labour, 2007.
In the mid-1990s, child labour in the soccer ball industry in Sialkot was brought to the world's attention through pictures published in Life Magazine and subsequent demonstrations at the 1996 European Championship. While the allegations extended across all the brands, the Nike brand was pictured in the Life expose. This occurred at the same time as other allegations of labour violations in other countries for Nike.

In response to the violations, Nike, and the other brands, worked with the international community and the local suppliers to set in place an institutional structure and manufacturing process to prevent any further violations in international labour standards. From these efforts, an international agreement, known as the Atlanta Agreement was signed and a revised structure and management system for the production of soccer balls in Sialkot was adopted. The Atlanta Agreement established a voluntary prevention and monitoring program with four key elements:

1. Registration of contractors, stitchers and stitching facilities
2. Establishment of internal monitoring systems
3. Agreement to independent monitoring
4. Coordination with a social protection program for children

The founder of Saga Sports, Mr. Khurshid A. Soofi, served as the Chairman on the standing committee for child labour and led the development of the Atlanta Agreement. Both Nike and Saga were signatures on the agreement and adopted the conditions of the agreement in the production process. In 2001, Mr. Soofi died and there was a shift in the direct management of Saga. In parallel, the structure of the soccer ball industry has been shifting. For the first time, in 2006, the official ball of the World Cup was not hand-stitched. The balls, made in Thailand, were instead melded together using a new thermal technology. Introduction of stitching technology to the production system coupled with an increased competition from outside Pakistan has led to cost pressures on the traditional Sialkot producers. The expectation is that in near future only the very premium soccer balls will be hand-stitched. Competition is increasing across Asia in soccer ball manufacturing. The Pakistan producers have yet to make the required investments to keep up with the shift in the market. Earlier this year, Nike received indications that