In the case study Nike: Managing Ethical Missteps and Seizing Opportunity, we explore the story of Nike: the world’s leading seller of athletic wear.
As some may know and others may not, Nike was actually started (similar to FedEx by Fred Smith) from a college paper by Phil Knight which conceptualized importing athletic shoes from Japan into the United States. In 1964, Knight teamed up with a colleague and launched Blue Ribbon Sports, a distributor of Japanese athletic shoes which also marketed its own brand for sale in the U.S. After about seven years in business, Blue Ribbon Sports broke camp with its Japanese supplier and the company we know today as Nike came into existence. The rest of the story is now one for the history books. Nike’s rise to fame and prominence was not without challenges, however.
As the company grew and expanded into regions all over the world, concerns developed in regard to labor and human rights infringements, in addition to allegations of ethical misbehavior.In essence, Nike subcontracted the manufacturing of its shoes in many countries where workers did not enjoy the same rights and working conditions as their counter-parts in the United States; hence, reports of meager working conditions and even child labor began to surface. Even with viable company regulations, the sheer locations of many of these manufacturing plants (in third-world countries) created quite the enforcement issue. To make matters worse, in the 1990s labor rights activists and the media began acts of protest against Nike’s violations, damaging the company’s reputation. Then, in 1996, the ‘big one” hit.Life magazine published an article with photographs of Pakistani children stitching tennis balls for Nike and a few other companies. Needless to say, the stark images dealt a severe blow to Nike’s corporate reputation and sales began to plummet. Customers who had held the Nike banner high began to withdraw their support of the company.
Critics led anti-Nike demonstrations all across the United States. In its haste to address the issues and save the company, Nike put together a plan to protect its image, but fell short of dealing with the source of the problem: labor and human rights violations.Of course, most critics saw right through that sad attempt at recovery and now Nike’s business ethics and social responsibility came into question. In the process of trying to defend itself, Nike faced a lawsuit alleging that it made deceptive claims to the public which “violated California’s unfair competition and advertising laws” (Ferrell, Gatewood, Ferrell, Taylor, 2010).
This litigation resulted in Nike paying out around two million dollars in a court settlement. Since then, Nike has make adequate strides in improving labor conditions in its factories.The company has taken steps to ensure that its subcontractors do not engage in illegal and unethical labor practices. For example “in August 1996, Nike joined the Apparel Industry Partnership, a coalition of companies and labor and human rights groups [….
] to draft an industry-wide code of conduct” (Ferrell, Gatewood, Ferrell, Taylor, 2010). In the area of social responsibility, Nike developed the Reuse-A-Shoe program to recycle worn out shoes (the recycled material was called “Nike Grind”) and later partnered with the National Recycling Corporation to accumulate more than 1. million pairs of shoes for recycling every year since 1995. Additionally, Nike began to repair its reputation through the development of auditing tools to measure improvement, publicly disclosing the names and locations of all its factories to create a level of transparency, and advancing its participation in philanthropy by developing and funding social networks that work with under privileged youth, minorities, young women and youth living in conflict circumstances around the globe, for example (Ferrell, Gatewood, Ferrell, Taylor, 2010).As proof of it ethical turnaround, Nike was ranked number one in the environmental category in Business Ethics magazine (2005-2007), due to it work to eliminate waste and toxic substances from production processes and it 2009, Nike topped Fortune’s list of “The World’s Most Admired Companies” (Ferrell, Gatewood, Ferrell, Taylor, 2010). Initially, Nike experienced the results of a few ethical missteps.
Most would have to concede, however, that the company was more than able to manage those missteps and seize the opportunities created all the way to the bank. In 2009, the company reported sales of more that 19 billion dollars (Lynch, 2009). .
Name and evaluate the strengths, weakness, opportunities, and threats Nike faces. In naming and evaluating Nike’s strengths, weaknesses, opportunities and threats, there are many points to discuss. According to our text, “a strength is an ability or attribute internal to the organization that has the potential of giving it a distinctive competence” (Ferrell, Gatewood, Ferrell, Taylor, 2010). One major strength of the Nike Corporation is that it has literally become a household name. No one can speak about sports apparel and not mention the Nike brand. The company’s marketing campaigns have taken care of that.As additional strengths, Nike has contributed to society in the form of the Reuse-A-Shoe recycling program, which has recycled more than 21 million pairs of used athletic shoes since 1995 (a huge step toward social responsibility); it successfully developed its own code of conduct and audit tools to help advance the working environment in its factories (a plus for business ethics); it was receptive to the requests from colleges to disclose the names and locations of all it factories (to develop a relationship of trust and rapport); and it participates in the advancement of philanthropy (a show of corporate responsibility).On the other hand, “a weakness is a skill or attribute that the firm lacks or one that it has not developed and at which it performs poorly” (Ferrell, Gatewood, Ferrell, Taylor, 2010).
Without question, Nike’s primary weakness has been its abuse of human labor in third-world countries and unfortunately, the fact that it is one of the first companies to be linked to the problem. This showcases Nike’s inability to manage its foreign subcontractors and brings to light the phrase that “a contractor is only as good as his subcontractors. In addition, a clear weakness appears to be Nike’s inability to make the proper decision under adverse conditions. This was seen in the company’s quick decision to try to repair its reputation, instead of dealing with the source of the problem. “An opportunity is an environmental circumstance that is potentially beneficial for the firm” (Ferrell, Gatewood, Ferrell, Taylor, 2010).In this aspect, Nike is taking advantage of the opportunity to showcase its renewed environmentally responsible status as it was recently ranked number one in the environmental category of Business Ethics magazine as well as its number one most-admired apparel company ranking in Fortune’s 2009 list of the “World’s Most Admired Companies. ” Additionally, Nike has an opportunity to improve in the area of social responsibility by initiating more advanced techniques in the detection of employee abuse in its factories abroad.
Nike also plans to capitalize on innovation as a distinct opportunity. A new tank-top for runners, made of seventy-five percent recycled soda bottles and uses forty-three percent less energy to make than standard fabrics, offers Nike the opportunity to make a significant impact in the reduction of its carbon footprint. Finally, “a threat is an environmental factor that could be potentially harmful to the organization” (Ferrell, Gatewood, Ferrell, Taylor, 2010).Two major threats to Nike are the various labor rights activists and the main stream media.
The fact is when either of these two groups speaks, people tend to listen. In the 1990s, Nike’s reputation took a serious hit when these critics took to the streets and the airways to inform the public of the working conditions found at the company’s overseas factories. These reports threatened to attack the very heart of Nike’s business operations: its product supply.Nike was forced to deal with the problem or suffer the serious consequences of having its reputation continually slammed. In addition, being a part of the textile industry was also identified as a threat to the company.
Due to the way Nike’s products were manufactured, environmental concerns in regard to pollution and massive amounts of raw materials and energy consumption were brought to light. This presented yet another significant challenge the company needed to overcome. 2.What strategic controls did Nike implement to better monitor the working conditions in its subcontractors’ factories? To better monitor the working conditions in its subcontractors’ factories, Nike implemented three primary strategic controls.
In August of 1996, Nike joined forces with an alliance of companies and labor and human rights groups called the Apparel Industry Partnership. Together they drafted an industry-wide code of conduct that Nike used to help keep its subcontractors in compliance with labor laws.In order to evaluate the effectiveness of its code of conduct, the company developed and implemented three auditing tools: Management Audit Verification, which helps to identify issues such as work hours, wages and benefits as well as to formulate an action plan to address any related grievances; the Safety, Health, Attitude of Management, People and Environment, which is to be used every quarter by subcontractors to monitor their compliance with Nike’s Code Leadership Standards; and the Environment, Safety and Health audit, used by Nike’s compliance teams to verify factory compliance with Nike’s Code Leadership Standards.Additionally, Nike’s Balance Scorecard system was put into action as a means to improve factory working condition.
With this system, factories could earn scores based on labor, health, and environmental standards. In this way, high-scoring factories could be recognized and rewarded. Assume that you are the president of one of Nike’s competitors when the Life story was published in 1996. What steps would you take to protect your organization’s reputation and position it better strategically to compete against Nike?In all honesty, to be able to compete with Nike, a company president would have to pursue the same cheap labor that Nike is taking advantage of.
Without adopting that strategy, Nike would inevitably win all the pricing wars. The challenge then would be (similar to the ones Nike has already conquered) to assure the public that my company is in compliance with the same world-wide labors laws and to offer, through superior marketing, a better product.Of course, Nike has created a successful marketing strategy; but does it offer a superior product? After human and labor rights concerns are put to rest, the winning strategy would have to come in marketing. To help realize the effectiveness of marketing, one only needs to consider McDonalds versus Burger King as an example. Does McDonalds have a better hamburger or a better marketing campaign? The point is a company can have an outstanding product, but if nobody knows about it, it simply does not exist.My strategy, therefore, would be to hire a labor rights compliance inspector for every factory, create a superior product (at a better price) through the use of consumer surveys, and to make the commitment to “out-market” Nike to become the new leader in sports apparel. Another potential strategy would be to acquire smaller competitors in order to grab a greater share of the market: something that rival Adidas is already pursuing “to give it a leg up in tackling global market leader Nike” (Turner, 2005).References Ferrell, O.
, Gatewood, R. , Ferrell, L. , & Taylor, R. (2010). Principles of Management.
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