Superbrands, Globalization, and Neoliberalism: Exploring Causes and Consequences of the Nike Superbrand
The rise of superbrands has many implications for the nature of work, workers, and organizations. This paper explores superbrands and their impact in three ways. First, the dynamics of the superbrand Nike, along with the implications of Nike as a superbrand, are explored. Second, globalization is discussed as a phenomenon affecting the global balance of power. Finally, the paper explores the effects of neoliberal policy on the growth and dominance of superbrands. In particular, the discussion on globalization and neoliberalism illuminate the various ways in which these phenomena facilitate and support the rise of superbrands and their multinational corporations (MNCs).
Nike: The Superbrand
Superbrands such as Nike have been described as one of the central mediums of globalization and as symbols of a global economy. These brands constantly appear in the top half of all studies of the most powerful brands, with Nike in 2009 ranking 26th at a brand value of $13.18 billion. Klein (2000) describes Nike as a transcendent superbrand that took branding to another level, beginning to focus principally on brands and brand management, believing that while products are made in factories, a brand is made in the mind and bought by the consumer. The result for Nike was innovative ad campaigns, superstars like Michael Jordan, superstores like Nike Town, and corporate campuses such as the Nike World campus. The Nike swoosh is meanwhile believed to be the most recognizable brand icon or corporate logo, conveying "Nike" without need of words. The swoosh was designed by a university student attending a class taught by Nike CEO Phil Knight. He asked her to create a logo that would fit on the side of a shoe. When she created the Swoosh, “Knight got the symbol that would revolutionize [Nike… She] got $35” (Feit & Surpuriya, 1997, p11).
The current Nike CEO, Phil Knight, started the company in 1964 with Bill Bowerman. Knight was instrumental in breaking Nike away from Adidas and Reebok when he realized that importing shoes from other countries using cheap labour would allow them to challenge the market leaders. A Nike manager describes how Nike and its executives symbolize the Nike climate: “Emotionally, Nike executives are like top sportsman – very focused, very determined, hardworking… They want to win” (Crainer & Dearlove, 2003, p162). Since Nike went public in 1980, its market capitalization increased from $386 million to $13 billion. Crainer & Dearlove (2003) state: “Nike’s ‘Just do it’ slogan seemed to sum up its whole approach to business” (p159). Between 1995 and 1997, the company’s sales increased from $4.8 billion to $9.2 billion. Nike’s success lies in the massive amounts of money spent on sponsorships and advertising, that is, on marketing its brand. Goldman and Papson (1998) state, Nike’s marketing, advertising, and sponsorships “constitute the epicentre of innovative strategies that allows enterprises to capture greater shares of wealth within a global commodity chain” (p6). In 1997, Nike spent $5.6 billion on marketing, including $4 billion dollar on individual athletes sponsorship. In 1998, Nike sponsored soccer superstars Ronaldo and Scholes, and signed a $400 million 10 year deal with the Brazilian soccer team.
Nike is a transnational or multinational corporation that “links national economies into a complex web of global production arrangements” (Goldman & Papson, 1998, p6). Nike’s products are made up of a complex arrangement of material and non-material components across national boundaries. The most complicated Nike shoe is made up of 200 components, but when looking at even a simple Nike shoe, then it is easily seen how Nike symbolizes globalized production. For example, the simplest of Nike’s shoes, the Air Max Penny basketball shoe is made up of 52 components from five different nations, meaning that a Nike shoe would have been touched by at least 120 pairs of hands during production. But Nike is not a manufacturing company or even a shoe company; it is a sports company. As Feit and Surpuriya (1997) state: “They were selling sports, an ideology based on the pursuit of excellence in which people's lives are improved through competition, fair play, fitness, and self-esteem. The new Nike wasn't simply about shoes and slam dunks, but about promoting a higher way of life.” (p4).
In this way Nike was a brand, an idea and a lifestyle. To keep this image Nike focused entirely on advertising, marketing and promotion. As Phil Knight says: “There is no value in making things any more. The value is added by careful research, by innovation and by marketing” (Klein, 2000, p197). By focusing on this, what Nike is ensuring is one thing: profit. Put in other words, as Goldman & Papson (1998) state: “Why take on the headaches of building manufacturing sites and organizing and maintaining a labour force, when it makes greater fiscal sense to subcontract the manufacturing process?” (p7). In other words, priorities have changed; the logic of the new priority is not to spend money on machines that will rust, factories that need constant upkeep, and employees that will age and die; resources should be used on sponsorships, expansion, and advertising as it is this that will help to build superbrands. The increased resistance to investing in labor and factories has led to the inevitable devaluation of the production process, producers and employees. Nike products are manufactured in more than 700 factories, in 51 countries, employing over 500,000 workers. its direct employees are 22,658, most work in the United States in management, administration, laboratories and logistics, and none are involved in production. This is contracted to Korea, Taiwan, Thailand, Indonesia and China, who in turn subcontract different components and its materials to other local companies (Locke & Siteman, n.d., Went, 2000).
Goldman & Papson (1998) assert that Nike symbolizes the globalization of both sports and commodity culture. Nike executives frequently state their commitment to being a global company: “The aim is to sell a global brand through marketing that appeals to local tastes… The commitment is to be a global company – one management, one theme, one value, one ethic around the world” (p4). In this drive and commitment Nike have come to represent the hollowed corporation, the embodiment of a globalized world. Hollow corporations are mostly form, as the lack of a stable workforce gives it little tangible content. In such corporations, the central axis is no longer manufacturing, as production is broken up and dispersed, but is the marketing of the brand. In the global capitalist system of producing, distributing and selling goods, the Nike swoosh signifies the globalization picture of flexibility (Goldman & Papson, 1998). Flexibility is present in Nike’s production facilities, locations and jobs. This may be best explained using the Nike model, which Klein (2007) describes as: “Don’t own any factories, produce your products through an intricate web of contractors and subcontractors, and pour your resources into design and marketing” (p285).
Team Nike, as Klein (2000) states, initiated the no-limits brand spending, together with complete disinvestment in its workers. Nike is the personification of the product-free brand. Major companies have embraced the very successful Nike model, which is characterized by mass layoffs as necessary corporate strategy, and a prioritizing of the needs of the brand over the needs of workers. But, the factories disappearing from one country do not reappear in another. Along the way, they become something completely different: an ‘order’ placed with a subcontractor who in turn pushes it off to ten more subcontractors, who passes it on to workers working in basements and living rooms. So, once the sub/contractors take out their own profit, what is left is the worker – at the bottom of the chain – receiving a paltry paycheck: “When the multinationals squeeze the subcontractors, the subcontractors squeeze the workers” (Klein, 2000, p212). This change is so extreme that superbrands refuse to disclose locations of production sites, using competition as an excuse, and stating that they, like us, are “bargain hunters in search of the best deal in the global mall” (Klein, 2000, p202). But, their ‘bargain hunting’ has extreme negative consequences for human beings, for the workers, as all the MNCs like Nike are interested in are materials, low prices and delivery dates, paying no attention to how low the prices are, the workers, or working conditions.
Behind the shiny façade of innovate marketing and design, health and fitness, and athleticism, is a series of public relations nightmares: the reality behind Nike. Locke and Siteman (n.d.) state that Nike became a poster-child of “the potential risks and problems which globalization creates for all multinational corporations” (p9). Besides the Swoosh, the other ‘S’ word that became synonymous with Nike is sweatshops. Nike has come under increasing scrutiny for underpaid workers, low wages, child labour, mistreatment of workers, and poor working conditions. Phil Knight himself admits that Nike “has become synonymous with slave wages, forced overtime, and arbitrary abuse” (Klein, 2001, p375). Nike has been accused of not being able to set aside the bottom line – profit – for a moment, to consider the exploitation of mistreatment of the very workers that are getting them to the bottom line. A CLR report (1997) examined the working conditions in sports factories in China making shoes for Nike, and found that practices and conditions thoroughly violated Nike’s own code of conduct, the Apparel Industry Partnership code of conduct and Chinese labour law. There are no trade unions and any sign of organizing is seriously punished giving workers no outlet to express injustices. Even though the workday is supposed to be eight hours long, the normal workday is 11-12 hours, and 2-5 hours of compulsory overtime which, if refused, can result in a docking of a day’s pay or even dismissal. When a worker does not fulfill their unrealistic daily quota, they are forced into unpaid overtime. Yet, conditions seem only to be getting worse in these factories in these Export Processing Zones.
To make the products for Nike and superbrands to put their logo on, the free-trade or EPZs, such as that in China described above, emerged (Klein, 2000). Life stops inside these zones: it is a place of pure work and a tax-free economy zone. While China has 18 million workers in 124 zones, in the world, there are over 1000 EPZs in 70 countries with 27 million workers: $200-250 billion worth of trade flow within these zones. The similarity of the workers lives within the EPZs are striking: long workdays (12-16 hours); young women workers working for sub/contractors from Korea, Taiwan, or Hong Kong; contractors filling orders for companies in US, UK, Japan or Germany; harsh management; abusive supervisors, below-subsistence wage; unstable contracts; low-skill monotonous work; and migrant workers.
Furthermore, industries like Nike have led to and are typical examples of the deskilling of production: “the migration of shoe assembly jobs from one Asian nation to the next is only possible if the work of making shoes is deskilled” (Goldman & Papson, 1998, p12). Workers perform the same highly specialized gluing and stitching tasks over and over again. Workers are penniless and homeless, feeling ‘alien’ in the factories, and ‘alien’ in that they are migrant workers who have come for the promise of good jobs and wages, which they have not yet seen. Sleep deprivation, malnutrition and homesickness combine to result in deep disorientation and alienation. This is, as Rose (1990) states, the basic alienation that lies at the heart of work: “Workers work because they have to, they work at the behest of others in a process they do not control, to produce goods or services they do not enjoy… work is made up of the elements of obedience, self-denial and deferred gratification” (p56).
There is another way in which workers have become separate and alienated from the products they create. This is in the disparity of what they earn creating the shoe and how much they would have to earn, or rather how long they would have to work to buy that shoe. For example, the women who make Nike shoes earn $1.35 an hour. A Chinese worker working a fifty-hour week would have to spend half her monthly income to buy a pair of Air Jordan XVs (Collins, 2001). Another disparity lies in what workers earn creating the shoe and the celebrity’s endorsement deal for that same shoe. Michael Jordan earned $20 million in 1992 to put his name on a Nike shoe, more than the total wages of all the women in East Asia working to create that shoe (Collins, 2001), or of the entire workforce of Nike contractors in Vietnam (Clair, 2008). Thus, the Nike product, or as Marx describes it – commodity – is separate from the person who created it. Marx describes this mysterious relationship and commodity as follows: “In it the social character of men’s labor appears to them as an objective character stamped upon the product of that labor; because the relation of the producers to the sum total of their own labor is presented to them as a social relation, existing not between themselves but between the products of their labor” (Collins, 2001, p2). Goldman and Papson (1998) argue that while once the locus of value production used to be those who work with their hands on the products, now the locus of value production sits where the symbolic workers, the advertisers, marketers and designers are, as they are believed “to contribute the greater share of value to the product” (p11). Thus, the relationship between the worker and the actual value of their labour is obscured by a system of surplus capital and commodity exchange, specifically, profit. Or, as Marx would say, the operation of capital is built on the exploitation of labour (Goldman & Papson, 1998)
Three of the more publicized consequences of Nike’s superbrand outsourcing are: the exploitation in Indonesia, the child labour in Pakistan, and the health and safety conditions in Vietnam (Locke & Siteman, n.d.). In Indonesia, exploitation, poor working conditions and abuse of human rights are prevalent in Nike factories. The factories refused to pay workers the minimum wage, which only covers 70% of their living needs, clearly not enough to support a family. Supervisors and managers are abusive to the predominantly female workforces who are ‘terrified’ to speak back as their meager wages will be cut if they do. In the city of Sialkot in Pakistan, which specializes in export-oriented and labour-intensive goods, Nike was exposed for child labour in 1996, where an article was published that included a photo of a 12-year-old boy stitching a Nike soccer ball. Nike’s defense to such criticisms was that factories are owned and run by independent sub/contractors and not by Nike. Goldman and Papson (1998) assert that by saying they do not know anything about manufacturing, as they are marketers and designers, Nike was able to distance itself from its treatment of workers and its working conditions, using the defense that they really did not know, and adding – as one Nike executive states – “I don’t know that I need to know” (p7).
But it is probably in Vietnam that the most shocking worker conditions could be found. In Vietnam, Nike employs around 25,000 workers who produce over a million shoes each year. Nike workers, largely female, are exposed to severe physical, verbal and sexual abuse. Clair (2008) cites cases where 60 female workers were forced to run laps around the factory as punishment for not wearing the right shoes and many women fainted due to the heat and had to be hospitalized, while in another case dozen women were violently beaten on the head by a shoe, and in another case workers mouths were sealed with tape as penalty for talking while working. Critics say that Nike is aware of these conditions for a long time and are clearly not controlling its contractors, turning a blind eye to these abuses for one simple reason: profit. In Vietnam, it costs Nike $1.50 dollars to produce a shoe that will be sold for $150 dollars in the US. This is because the average worker earns around $42 a month, or $500 a year. Compared to the paycheck of the Nike CEO, the inequality is shocking grotesque. As Clair (2008) states: “Knight, who owns 100 million shares of Nike stock, pulls in roughly $80 million in dividend payments each fiscal quarter. At that pace, a Vietnamese worker would need to toil for nearly 4,000 years to equal Knight’s annual income” (counterpunch.org).
Globalization is not positive for everyone. According to Went (2000), it is “being used as an excuse to give unaccountable, bureaucratic international organizations more and more authority to decide and punish and increasingly to limit the scope for economic or social choices at the national and regional levels, by means of international treaties, rules and structures” (p4). Globalization has led to a persistent dictatorship of the market, greater social inequality within and among countries, and a flattening of wages, working conditions and social security. National states or trade unions are increasingly powerless in the face of globalization. The process is perhaps best described by Brecher and Costello (1998): “As almost every factor of production moves effortlessly across borders, the very idea of an American economy is becoming meaningless, as are the notions of an American corporation, American capital, American products, and American technology. A similar transformation is affecting every other nation” (p18).
According to Went (2000), there are four aspects of globalization that changed the functioning and organization of the world. First, the world economy is one as global markets are replacing national markets. MNCs use these global markets as a natural strategy. Second, the influence of MNCs keep growing and global companies are organizing production and distribution globally, with major consequences for the structure of organizations and for employees. Third, power has shifted away from governments to supranational organizations like the World Bank, IMF, G7, WTO and OECD. Fourth, macroeconomic policies are being globalized, with the neoliberal paradigm becoming unchallenged and being applied globally. Full employment are no longer a goal, instead emphasis is on export-oriented growth, free trade, labour market flexibility, more market and less state social policy, and privatization.
Globalization can be considered in terms of trade, international mergers and takeovers, technology, the global assembly line, and multinationals (Went, 2000). World trade has reached an unparalleled level: “Since the late 1980s international trade has been growing twice as fast as the world’s combined gross national products” (p10). There is also a rapid increase in mergers and takeovers and foreign direct investment (FDI). FDI especially has prompted globalization faster than international trade. By 1997, 143 countries had adopted special laws to encourage FDI and most countries have adapted their economy in some way to attract foreign investor. Technology, of course, plays a major role in all of this. MNCs take advantage of new technologies and considerably reduced transport and telecommunication costs to produce goods and services through processes spread all over the world. Products are being assembled with parts brought from all parts of the world. This is the global assembly line; a process of outsourcing, contracting and subcontracting that has major implications for the organization of work and the employees’ position within the MNCs. To increase profit, MNCs can close or move its operations to a cheaper location, or threaten to gain concessions. Globalization has given the MNCs power to put pressure on workers and producers by weakening their bargaining power as a result of increased global competition (Carr & Chen, 2001). Finally, the number of corporations operating transnationally amounted to 53,000 in 1997 with 448,000 foreign affiliates. The MNCs share of world economy keeps growing and this gives them considerable power over weaker countries and economies.
The results of this rapid globalization are diverse. Of particular relevance in the rise of the superbrand, dictatorship of the financial markets, a race to the bottom, privatization, increasing migration, growing social inequality, and commodification appear to be particularly important factors (Went, 2000). First, due to internationalization of capital markets and liberalization of capital flows, the suppliers of capital are the ones dictating financial markets, ‘making and breaking’ many governments and their countries. Countries who want to draw this capital or FDI must adapt to the wishes of those who have the capital, and in this way they are pressurized to adapt their policies to the demands of the market, that is, those who hold the capital. Developing countries are pressurized to prioritize export and payment of foreign debt. The result is that these countries citizens “interests and needs remain neglected as long as their governments do no see or do not opt for a way out of the IMF’s straightjacket” (p27). So, even though factories in the EPZs do not pay taxes or create infrastructure, they are there because of the trickle-down theory: the belief that EPZs create jobs and workers income from these jobs will boost the local economy. Governments of developing countries fear the loss of foreign factories and investment and offer 5-10 year tax breaks, lax regulations, their own workers with the lowest wage, and dirt-cheap rent: “a fantasyland for foreign investors” (Klein, 2000, p207). In addition, labor laws are not being enforced within zones because governments regard EPZs as foreign trade policy, not a labor rights issue, and because they promised a cheap and compliant workforce to foreign investors, EPZ factories are run according to rules that break the labor laws.
Second, concerning the race to the bottom, as the markets become more integrated and global, and restrictions on transnational flow of goods and services are quickly being eliminated, the result on wages, working conditions, employment and social security are devastating. According to Brecher and Costello (1998), the most direct result of globalization is “the ‘race to the bottom’ itself – the reduction in labor, social, and environmental conditions that results directly from global competition for jobs and investment” (p22). This race to the bottom is predominantly a vehicle for the MNCs, is sometimes promoted by governments, or is imposed by the World Bank or IMF. By moving production sites to countries with cheaper labour or by importing goods from these countries or by even threatening to do this, working conditions are under constant pressure from MNCs whose profits increase by billions while workforces diminish more every year. Went (2000) states: “The continuing shift of industrial production to low-cost sites in developing countries where worker protection is lower is likely to increase the global incidence of occupational disease and injury” (p17). Development is established on lower wages as trade in good, services and capital becomes freer as a result of international norms and policies. MNCs have become obsessed with continual cost-cutting through the shrinking of their workforces and the consequent saving on wage and social security. Eden & Lenway (2001) state that the MNC is one of the very few benefiting from globalization, being that it is an embodiment of globalization, “the prime movers behind globalization, taking advantage of the increased openness of domestic economies to integrate their activities across national markets and societies” (p383). The side effects of this are manifold. As countries aim to become more competitive in the global company by reducing wages and job and social security, incomes and infrastructure worsens. Low wages and less public spending result in less buying power or stagnation, recession and unemployment.Continued on Next Page »