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Running head: M6A3: COMPETITIVE IMPACT SUMMARY MILESTONE 21M6A3: Competitive Impact Summary Milestone 2 – Production and Industry AnalysisTommy BrooksExcelsior CollegeManagerial EconomicsECO508Dr. Srinidhi Anantharamiah
2TOPICCompetitive Impact Summary Milestone 2 – Production and Industry AnalysisDISCUSSIONSFactors influencing input and production costsFactors that influence input costs for the Adidas, Inc. are the overhead and other costssuch as labor and material used in the production of their sports apparel. In regards to Adidas,Inc., there are a lot of factors that influence their input costs. Examples include outsourcing,labor wages, and social responsibility. In regards to outsourcing, Adidas, Inc. is taking advantage of outsourcing to produce at lower costs. The Adidas group works with more than 1,000 independent factories from around the world to manufacture their products in more than 60 countries (Adidas, 2017). Even though they are bringing jobs to all corners of the world, they have been slammed for sourcing the production of its products to factories in countries where low wages, poor working conditions, and human rights problems are rampant. Additionally, a series of public relations nightmares; involving underpaid workers and child labor in Indonesia, and a poor working environment in most of their global factories. All of this combined to tarnish Adidas’s image. (Burke, 2000) Instantly, Adidas Inc. responded to allegations regarding subpar “poverty wages” and poor treatment of foreign workers. They responded by researching the cost of living in each of the factory locations starting back as early as 2001 (Anderson, 2012). In some of their factories, Adidas raised the minimum allowed working age. However, Adidas was slow to
3continue the pay increase and improve work conditions which continued to ensure their reputation and brand would be in jeopardy by failing to adopt two key matters. (Chatterjee, 2012) The first matter was to pay workers a living wage based on the cost of living in Indonesia and purchasing power (Chatterjee, 2012). Although Adidas ensured workers were paid the minimum wage established by each country, the established wage was not enough for workers to make a decent living. The wage also discouraged the interest of foreign investors. Second, Nike also failed to support fair treatment of employees in the Indonesia