Nike’s Commodity Chain

The increases in obesity cases and obesity-related complications that have precipitated many deaths have made people question the source of many foods especially the fast foods. This has led many other people to question how most of the products and commodities they use in their everyday life are produced. Fred Pierce, in the confessions of an Eco-sinner is one individual who evaluates the hidden world that sustains the basic American lifestyle. He goes on a global tour to see how products are produced, the producers and their employees.

This highlights the various interactions and interconnections that link people in the commodity chain, unknown to each other, from workers to consumers (Pierce 1-10). These inter-connections occur in various other ways such as when we take time to trace the origins of our meals or phone calls between us and individuals in other continents. Purchasing particular products in a country such as China is based on various processes from production to consumption that links the consumers to producers. These links that define the consumption and production relationships where raw materials or ideas are transformed into finished products or services and then sold is said to be a commodity chain.

Commodity Chains

Generally, commodity chains involve how various commodities undergo the processes of production, distribution and consumption. Commodity chains traces how organizations gather and utilize necessary resources in the production, distribution and consumption of a commodity. This has adopted a global platform especially with so many advances in technology such as the internet and other high-tech communication devices such as the iPhone. They have been said to link traditional markets and individual societies into a global economy and society respectively. Consequently, this has led to establishment and successful growth of many transnational corporations such as Intel Corporation.

Consequently, it has led to establishment of a global commodity chain approach. The approach highlights connections between products, households and enterprises in different countries and how they are linked by inter-organizational networks into a world economy (Plahe 2). Global commodity chains consist of an input-output structure, a governance structure in addition to a territorial structure. The governance structure establishes how an organization’s resources such as production facilities and human capital are distributed and allocated in the commodity chain. Territorial structure highlights the dispersal of a commodity’s production and distribution centers.  

Geography and Commodity Chains

We can deduce that a scrutiny of the commodity chain either globally or locally can enable one to come up with a territorial map or geographical distribution of a particular commodity. Although the world is heavily influenced and shaped by prevailing economic forces based on abstract economic factors and theories, the world economy is grounded on various geographical factors. The link between commodity chains and geography involves the diverse business locations utilized by multinational companies which influence and affect people in different locations differently. This can be highlighted by cases of uneven development, exploitative labor relations, environmental pollution by transnational firms and underdeveloped local economies despite massive revenues by the multinationals (Neil, Kelly & Yeung 3-4). Therefore, commodity chains enable us to map out and visualize production and consumption processes of day to day commodities and hence more knowledge on what we consume.

Nike Production - Consumption - Distribution Network

With the rise of many health complications, people have turned to exercise in averting many of the diseases and illnesses that doctors maintain are preventable especially through running exercises. As such, running shoes have dominated the market where brands such as Nike, Reebok and Adidas have dominated the running shoes market. By 2009, manufacture of the Nike running shoes was carried out around the world in Africa, Middle East, Africa, Australia, both North and South Asia and America (Nike, Inc 2009). The major production facilities for the Nike running shoe are located in specific countries including China, Honduras, Brazil, Thailand, India, Turkey, Morocco, Vietnam and Mexico (Youssefi, 9). Consumption and distribution is also more in those countries; however, more of the commodity is sold to foreign markets. 

Commodity Chain: Key Factors and Processes

The main reason manufacture of the Nike shoe is carried in those countries is because of the low production costs involved in the manufacture of the commodity. Nike has also forced its numerous suppliers in these countries to lower their costs as it outsources much of its production. It has even been forced to re-locate from Japan to South Korea and then to Indonesia, Thailand, Vietnam and China. These countries are also chosen because they provide cheap labor, most of them women between the ages of 18-24 years (Youssefi, 1-2).

These countries also have big populations making it favorable for selling the product. However, most of the products are sold to foreign markets where more people have more disposable income. In a way, these countries also do not have strict measures in terms of environmental pollution as the companies have been condemned by environmentalists for polluting the environment. The geographical pattern that emerges seems currently to pinpoint most production processes of the running shoe to South East Asia countries especially China and Indonesia. The distribution and consumption pinpoint a divergence from this manufacturing areas to the rest of the world especially North America (A.M. R.C. &H.C.I.C par.2).

Typical Working Conditions: Nike Commodity Chain

As expected, the decision to choose these countries has primarily been informed by the lack of tough labor restrictions in these locations. Basically, the working conditions are substandard where wages are low and repression of labor laws ensure a compliant workforce (A.M. R.C. &H.C.I.C par.1-4). Many workers in these countries live in squalor due to low wages and research has shown that sometimes passports of foreign workers are withheld to ensure they work in those same factories that are exploitative (Read par.7).

Restructuring commodity chains

As the above information suggests, commodity chains can undergo restructuring to ensure all the stakeholders are treated fairly in the commodity chain. Restructuring will involve a major strategy that will primarily be based on outsourcing of production facilities (Van Dusen par.4). However, the manufacturers will be bound by set ethical and legal considerations geared towards improving the working conditions of the employees. Additionally, set incomes will be subject to renewal through raises after six months. Therefore, agreements will be drawn between the potential suppliers and the main companies (Nike) indicating the terms that should be adhered to. This will be enforced by the government which will act as the guardian of the people. This way, it will be a win-win situation for the suppliers, the workers and the company.

Nike: Politics of consumption

Nike commodity chain reveals some issues involving consumption politics. Politics of consumption with regards to labor involve mobilization by consumers through unified consumer interest in advocacy of comprehensive labor laws in enhancing labor relations (Daunton & Hilton 1-3). Protests from human rights groups and factory workers working for Nike in various South East Asia countries led to better working conditions for Nike’s factory workers. Wages were increased and dangerous chemicals were replaced in addition to acceptance of random factory inspections by labor associations in ensuring employees were not exploited. The company was forced to formulate and implement a code of conduct that set out regulations to be adhered to. These included issues on safety, health and labor standards to be followed as well as monitoring plans to ensure the plan was carried out (Demand Media, Inc. par.2-4).

Despite these measures, many multinationals wield a lot of power in many developing countries such as those in South East Asia where Nike’s subsidiaries are located. This coupled with massive corruption in those areas enable multinationals to contravene any laws set to aid exploited workers. Lack of strong activist campaigns in the countries will also derail the process of labor reform in those areas. All this is laid out easily by evaluating commodity chains of a particular product such as Nike’s running shoes.

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Conclusions

Commodity chains, especially those involving commodities sold by multinational companies can be assessed in a geographical perspective. This is because processes in a commodity chain traverse many geographical areas where it affects people in those areas differently. Therefore, commodity chains can enable one to easily assimilate a commodity’s production and consumption processes in a geographical way. This enhances understanding of the commodity in terms of its use, how the production is carried out and its effects on producers and employees as well as inherent ethical issues. This has led many activists to condemn multinational companies on their operations that encourage human exploitation and environmental pollution.