Saeki Natsuko – Nike is one of the biggest sports goods manufactures in the world. Ohmae Kenichi, a well-known Japanese commentator who is an advisor to the company, described the secret of its success in production and sales activities as a marvelous combination between "core skill" and "out-sourcing".

In Nike's case, the "core skill" means marketing strength and the know-how to go out and acquire world-famous athletes to promote their products. It also means crating catchy slogans like "Just Do It!" and "There is no finish line!"

The "out-sourcing" that Ohmae has praised so much means contracting out all works except for the "core skills." In concrete terms, Nike owns no factories, so it commissions its production work to factories which are mostly located in Asian countries, including China, Indonesia and Taiwan. People at the headquaters in Oregon, the United States, send blueprints through computer networks, and some 300 engineers visit contract factories to perform qualityn control. Ohmae has claimed that Japanese companies who are burdened by high labor costs might look toward Nike as a good management model.

The harsh reality

The reality of the workers in the Nike factories, however, is seldom the focus of debates on the company's "success." Up until about 1988, many of the company's shoes were manufactured by companies based in Korea and Taiwan, but they then began to move to Indonesia in search of lower wages and a "stable political situation" (or in other words, the lack of recognition of worker's rights). Most of sports shoes producted by companies like Nike are now manufactured at the Indonesian subcontractor factories of Korean and Taiwaniese companies. The majority are located in West-Java Province, and 50% are in Tanggerang. By 1988, there were 78% export-oriented sports shoes manufacturing factories in the Botabek area (Bogor, Tanggerang, Bekasi), and by 1992 this number had climbed to 256. Some 80% of the shoes are exported.

I had a chance to interview Nike workers in Indonesia last year, and found that roughly 85% of the workers are young single women from rural areas, which is apparently because these women are said to be principled, obedient and industious compared to males. They are recruited through classified ads in newspapers and local radio stations, or through direct recruiting. As Nike is a world-renowned brand, getting a job at one of its affiliated factories is likely a status symbol for local people, and it may be that some offer bribes to local officials or factory security officers.

The average daily wage is US$2.10. To put this figure into perspective, it is said that in 1993 Nike signed promotional contracts for US$20 million with basketball superstar Michael Jordan. In the same year, the total salaries paid to 12,000 Indonesian workers came to just US$5 million.

Workers engage in ten hours a day of repetitive work, and some injure their fingers in press machines. These kinds of job-related accidents are a daily affair, and the manager pays only for tratment, not for compensation. Though the factories have first aid room, there is not sufficient medicine or other equipment to cope with major injuries.

Aside from these poor working conditions, the managers of the factories have caused other serious problems for the workers. When the Korean companies first came into Indonesia, most managers were former military officers, and they seemed to believe that the "lazy Indonesians" needed to receive a military training. The workers were forced to stay at company dormitories, and needed permission before going out. They were also searched before using the praying room or toilet to "prevent sabotage." Some were dismissed simply for being late for work because they could not use the toilet, and others for temporarily losing track of papers with internal information.

It is difficult in Indonesia for workers to speak out in order to improve the poor working conditions they face. They are not allowed to organize unions outside of the one recognized by the government. On September 28, 1992, 6,000 workers of the Sung Hwa Dunia company went on strike, demanding a raise in their wages from Rp.2,000 a day to the minimum wage of Rp.2,600, the recognition of menstruation leave, and improvements in accident compensation. These were quite resonable and limited demands. The management, however, asked the police to investigate and find out who lead the strike. As a result, 21 workers who were suspeced of being leaders were temporarily laid off for questioning. The workers brought the issue to court, and it is still unresolved.

A recent Nike financial report (the third quaters of 1996) shows that their net profits are $23.7 billion, up 77% from the previous year. Nike's Japan sales also doubled. If we remember that when Nike was in management crisis, Japan's Nissho Iwai supported it financially, we find that Japan's "contribution" to Nike's "success" has been considerable.