How Vietnam Became Nike's Top Footwear Supplier

Summary

Nike’s presence in Vietnam has shaped both the local economy and its global supply chain, with over 51% of its footwear produced in Southeast Asia, primarily in Vietnam. The company’s impact is immense, providing hundreds of thousands of jobs and contributing significantly to the nation's exports. However, Nike has faced numerous labor scandals over the years, from poor working conditions to wage theft. Despite these challenges, Nike continues to invest in Vietnam, emphasizing its strategic importance amid the competitive landscape, with rivals like Adidas following suit.

Takeaways

• 😀 Nike is the world’s leading footwear brand with over $51 billion in sales and a market cap of $144 billion.
• 😀 Over 51% of Nike’s footwear is produced in Southeast Asia, with Vietnam being the dominant manufacturing country.
• 😀 In 2022, Vietnam produced 44% of Nike’s footwear and 26% of its apparel, surpassing China and Indonesia in production share.
• 😀 Nike’s manufacturing presence in Vietnam began in 1995, and by 1999, it accounted for 5% of Vietnam's GDP.
• 😀 The company has created over 476,000 jobs across 123 factories in Vietnam, significantly contributing to the country’s economy.
• 😀 Despite Nike’s economic impact, labor conditions in its factories faced scandals, particularly in the late 1990s, leading to protests and global campaigns.
• 😀 Nike responded to labor issues by introducing a 'Code of Conduct' in 1999 and committing to improve conditions through audits and education programs.
• 😀 By 2005, Nike employed over 130,000 workers in Vietnam, and by 2012, Vietnam produced over 41% of Nike’s footwear.
• 😀 Strikes and protests over low wages and poor working conditions persisted into the 2010s, highlighting ongoing labor disputes.
• 😀 Despite challenges, Vietnam’s low labor costs and strategic position made it an essential manufacturing hub for Nike and competitors like Adidas.
• 😀 In 2021, Vietnam became Nike’s main source of shoe production, surpassing China and demonstrating the country’s critical role in Nike’s supply chain.

Q & A

What percentage of Nike’s footwear was produced in Southeast Asia in 2021?

In 2021, over 51 percent of Nike's footwear was produced in Southeast Asia, with Vietnam playing a significant role.

What is Vietnam's contribution to Nike's footwear production?

In 2022, Vietnam manufactured over 44 percent of Nike’s footwear, making it the leading producer of Nike shoes, ahead of both China and Indonesia.

What was the economic impact of Nike in Vietnam?

Nike’s operations in Vietnam have created over 476,437 jobs across 123 factories, making a significant contribution to the country's economy and the livelihoods of many workers.

When did Nike establish its operations in Vietnam?

Nike established its operations in Vietnam in 1995.

What labor issues did Nike face in Vietnam in the late 1990s?

Nike faced a major labor scandal in the late 1990s, with reports of worker abuse, underage labor, and poor working conditions, particularly at the Tae Kwang Vina Factory.

How did Nike address the labor issues in Vietnam in the late 1990s?

Nike implemented a 'Code of Conduct' based on ILO conventions in 1999, aimed to protect workers' rights. They also introduced education programs, health improvements, and a microenterprise loan program.

What were some of the recurring labor problems in Nike’s factories in Vietnam?

Despite improvements, labor problems persisted, including wage theft, forced overtime, physical and verbal abuse, and unsafe working conditions, even in the mid-2010s.

What impact did the US-Vietnam trade talks have on Nike's operations in Vietnam?

The trade talks created uncertainty for Nike's operations in Vietnam, as the potential trade agreement could reduce import duties and increase production, adding thousands of jobs in the country.

How did the Covid-19 pandemic affect Nike’s operations in Vietnam?

The Covid-19 pandemic caused significant disruptions, with factory shutdowns and delays. However, Nike remained committed to investing in Vietnam despite the challenges.

What is the significance of Nike’s investment in Vietnam compared to its competitors like Adidas?

Nike's investment in Vietnam is significant not only because it is the largest producer of Nike shoes in the country but also because its competitors, like Adidas, are following a similar strategy, producing over 40 percent of their footwear in Vietnam.