Should Nike Continue Sourcing from Asia or Go with Caribbean and Central America?

Memo to Nike
Dear Amanda Tucker,
The current situation at Nike necessitates the company to make sensible compromises in its sourcing strategies. It can be argued that the success of the company is based majorly on the sourcing strategy, especially by using low-cost manufacturing destinations to lower labor costs. Indeed, the company has historically faced multiple issues and criticism, especially in the 1990s, due to the working conditions at the suppliers' factories (Hsieh et al., 2019). However, Nike has learned how to address these problems by monitoring compliance among the suppliers and helping the Asian countries reduce the human rights challenges tarnishing Nike’s image both in the United States and globally. This has been a positive step and a statement of Nike's commitment to corporate social responsibility (CSR). However, success in Asia should not be the end of the road, especially when there are potential alternatives closer to home where similar terms and conditions as Asia can be exploited.
The current situation facing Nike’s sourcing strategy is also characterized by a dilemma regarding the feasibility of the Caribbean and Central America as potential alternatives to Asia. As illustrated in the case, shifting to these countries has the possibility of helping Nike improve lead time. However, these countries also present several challenges for Nike due to the country risks associated with them. Being among the least developed countries in the Americas, the Caribbean and Central America can be described as largely unstable countries, both economically and politically. The risks in the Caribbean include corruption, environmental and security concerns, and issues with the labor unions. In Central America, the risks include corruption, political instability, labor problems, environmental issues, and natural disasters (Hsieh et al., 2019). Therefore, it can be argued that the Caribbean and Central America present Nike with major problems requiring the company to make careful risk calculations before making the sourcing decisions.
As of 201, Nike was supplied by over 500 suppliers across 41 countries staffed with over a million workers. In Nike apparel, 328 factories supplied the company with half the volume coming from China, Vietnam, and Thailand, while the remainder was served by 34 other countries. In Nike footwear, 94% of the volume was supplied by Vietnam, China, and Indonesia, while the rest was sourced in 10 other countries (Hsieh et al., 2019). A sourcing strategy works best when it offers the company economic competitiveness, especially regarding production costs. However, competitive advantage and CSR are interlinked, something that Nike has experienced. According to Porter and Kramer (2006), CSR has become inescapable for companies, which means that the CSR concerns that Nike faces in Asia could also be faced elsewhere. However, considering the volumes produced in Asia, it can be argued that there are potential benefits of establishing factories closer to home. In this case, Nike already has suppliers from Central America, where it already has five factories. Since labor is only a small part of the production costs, such aspects as lead time and free trade agreements can give Nike a means of furthe...