According to Nike's annual reports, they sold $3 498 700 000 worth of shoes to the United States
in 1999. Nike was a running shoe manufacturer for a number of years until in the 80's when Phil Knight with his Stanford MBA, decided to change strategies. Instead of actually producing shoes, Nike’s new image was a "sports and fitness company". They decide
d that their core competency
was not the manufacture of shoe
s but the design and marketing: Some dedicated fans decided to “Just Do It” and chose to tatoo themselves with the swoosh
producing a true living billboard. Nike was one of the first firms to use a radical outsourcing techniques, divesting their ownership of factories entirely except one small R&D site.
The contractors are what got Nike into some very hot water in the last couple of years. Any buyer will seek the lowest price, and in Nike's case, they found it in countries such as Korea and later, China. Nike moved to China to flee the unionizing workers in South Korea. The South Korean workers were asking for $2.40, so they decided to move to China so they could pay 1/10 of the cost. The average Chinese worker makes 25c an hour.
The public reacted in horror as they saw images of young Chinese women who were considered 'worn out' by the time they were 25, sewing in poor conditions, living 10 people to a small dorm room with wages which did not support their basic needs. Nike claimed that they were not responsible for the conditions that their contractors were providing. It was not Nike's job to ask how the supplier ran their business. Many of Nike's customers did not see it the same way. They started to question how Nike did their business. When they found out, they stopped buying their shoes.
Universities refused funding from Nike, Niketowns were picketed, factories were visited by countless investigative reporters. Nike was in the middle of a public relations disaster. Inner city kids, who are largely responsible for popularizing Nike for the suburban shopping mall crowd trying to emulate street style, felt ripped off and angry when they learned it only took $5 to make a running shoe for which they had paid $100+.
Finally, Nike gave in. They have started a program called 'Project Transparency'. Right now they have the addresses of 42 of their 521 factories published on the web with PriceWaterhouseCoopers' monitoring processes described and corrective measures taken.
Many people think that when they buy clothing, equipment etc they are paying a premium for higher quality. Yes, Nike does often present a high tech shoe, but so much of what we pay for is simply marketing.