In the modern era of globalization, the incentive to locate parts of a growing business into countries or zones, which offer radical cost advantages can be tempting. Traditional strategy tools such as the SWOT analysis, Porter’s Value Chain and Five Forces will readily point a globally expanding firm towards many sources of competitive advantage, including moving their manufacturing to far less expensive and far less regulated markets for labor. Alas, commonly used strategy tools do not contain an ethical imperative. Ethical contingencies must always to be incorporated into these models.
In the extreme, where economic logic overrides ethical considerations, the resultant corporate social misbehavior will eventually become known and this invariably has a damaging impact on the brand.
Some of us can still recall the many ethical violations of labor conditions by Nike, in various parts of the world for over two decades. Eventually, Life Magazine published a photo of a 12-year boy from Pakistan hand stitching a soccer ball – a task that took the boy eight hours and for which he received $0.60. This story and others like it have followed Nike ever since and Nike’s subsequent losses of market share in the sporting goods marketplace has been the price they paid.
Even today, Nike is still shared as a textbook example of corporate social irresponsibility.