Nike Case Analysis

Political Analysis

With the increased monitoring and enforcement of labour practices; Nike being in the public spotlight and subject to negative publicity on their subcontracted factories is forced to readjust the working conditions of their cross ocean factory workers to abide with proper regulations. This has caused Nike to modify their factory standards and employee working conditions by; limiting the maximum hours worked a week, implementing proper ventilation systems to filter out toxic fumes, increase worker access to protective equipment, and increase the capacity of medical facilities and medical staff for their workers.

Another area of concern is the discrepancy of differences in East Asian worker regulations and wages compared to the North American standards. Much speculation has gone toward attacking Nike for their blatant disregard of American labour ethics, but Nike is having difficulty explaining their justification of meeting offshore requirements. For example, the legal age in Indonesia was 14, an age at which compulsory Schooling has ended. Nike was criticized for apparently having girls at this age working in their factories (which wasn’t true), and was shunned for inhuman labour practices according to American standards.

Economical Analysis

Nike’s Asian operations had previously continued to soar generating US$300 million in 1994 in revenues to a whopping US$1.2 billion in 1997. However based on the Asian economic crisis, this had adversely affected revenues, while regional layoffs were inevitable. Nike also performed well in the European market generating about US$2 billion in sales and a good growth momentum was expected, however, some parts of Europe were only slowly recovering from an economic downturn. In the Americas (Canada and the U.S.A.), Nike experienced a growth rate for several quarters. The U.S. alone generated approximately US$5 billion in sales. The Latin American market at this point was exposed to economic volatility; however Nike still saw them as a market with “great potential for the future”.

Social Analysis

With the increasing awareness and publicity of poor working conditions in subcontracted factories in East Asia, Nike has stimulated an uprising of activist and watchdog groups working toward seeing these conditions changed. With Nike in the negative spotlight, various organizations have revolved around generating a negative outlook on Nike’s practices of social irresponsibility. Certain campaigns such as the “National Days of Consciousness” and “International Day of Protest” were organized to educate people on the deplorable working conditions in Nike’s Asian manufacturing plants, and were designed to get more people involved in global employment issues. Whether or not this factor is directly related to Nike’s experienced decline in revenues, it has definitely hurt the company image, and may possibly affect the loyalty of future generations.

Company Analysis

As a company, Nike has been the dominant presence in the athletic apparel industry globally. Although they were not the only company known to practice unethical manufacturing processes, they were the major target of criticism because of their leadership role. To fight back against the negative publicity, Nike changed many working conditions and practices, arranged for independent audits by very reputable individuals in the industry to rate these improvements and grade the working conditions, they created a corporate responsibility division within their company, and they even implemented an open door policy for activist groups to see firsthand of their commitments to improve the quality of the work environments in these factories. Unfortunately, these changes have proven to be unsuccessful as of late.

Strategic Options

Nike, knowing their company image and reputation were at stake worked day in and day out to solve this problem. Although they had already directly resolved the issue of the unfair labour practices, the matter of educating the general public or winning over their trust was the main concern. After much analysis however, researchers reported that the controversy of their labour practices was not directly related to their revenue slump. Nike had established very strong brand loyalty amongst consumers and was still strong at the head of the athletic apparel industry. Therefore, the first strategic option would be to ignore the claims and to not waste anymore time addressing any more issues not affecting their sales and profits at the current time. The advantages of this strategy would be that Nike can avoid spending unnecessary resources to fund the campaigns of making changes to their manufacturing process. This would save them much time and resources and allow them to keep their system the way it had always been, already proven efficient and cost effective. The disadvantages of this option however are the chances of it stunting brand loyalty of future generations. As the stigma of their company image continuously grew, if left unattended, Nike may have trouble establishing the same level of brand loyalty for future generations taught to turn against them.

The next option Nike has is to continue addressing the concerns of the public but improving their already existent campaign for change. Nike had already improved working conditions significantly within these factories but they had trouble gaining the public’s trust and favour for their actions. Nike needs to invest in a marketing scheme to educate the public in regards to their plan of action. Nike also has to change their approach by discontinuing their efforts of denying the public’s claims of unfair labour practices and accept the responsibility for change openly. This way they acknowledge the crowds concerns and their action towards change will serve a greater purpose. If they take responsibility rather than work around it, it will give an unselfish perspective toward Nike’s efforts if the public believe they are doing it for the greater good rather than to just avoid