A Comprehensive Analysis Of Nike Company - Case Study Example

A Comprehensive Analysis Of Nike Company INTRODUCTION Nike Inc. is the leading supplier of athletic shoes and equipment, as well as a key producer of sports equipment in the world. Its major products include Nike Football, Nike Sportswear, and Nike Volleyball among others. As of 2008, the company’s revenue was over $ 18.6 billion. Nike’s sales technique relies on its retail accounts or stores, through other combination of independent distributors and internet website nikestore.com. Nike’s vision is to be the leading sports and Fitness Company in the world. Although this vision statement is hailed as broad, it does not provide the specific product statements as or portray the specific products the company sells. Nike’s innovation is considered top class, as it is known to produce top quality footwear products and apparel. The company has invested a lot of resources in research and development, making the largest company in the category of sportswear. With the innovations, the company wants to be identified as the most recognized company in terms of differentiation. Nike has been faced with a series of problems, which has negatively affected the company’s business image, and consequently, its performance. Some claims include the violation of child labour laws and poor working conditions, such as low wages, long overtime hours without guaranteed payment, forced overtime work, no consultation with workers on matters that concern them, poor medical services and others. Nike Vietnam can take some steps to improve its working conditions in order to redeem its tainted image. The dynamism of strategic management is a continuous management. According to David (2011), a change in any of the management component of a company can necessitate a complete change of the company progress. Nike can also find strategies to hold onto Emerging Markets such as China and India. Considering that its competitors such Adidas, whose market share surges everyday. The company can partner with the existing market leaders in these countries to gain entry into the new markets. The youths in the emerging markets should be targeted as they comprise the majority population. In order to redeem its image, the company needs to rebrand a section of its apparel to go in line with the modern management strategy where the ethics/ social responsibility form part of their themes. Corporate social responsibility forms part of long term strategic management for any large company like Nike. Working Conditions at Nike Vietnam Company- Weakness Nike Inc. is the leading supplier of athletic shoes and equipment, as well as a key producer of sports equipment in the world (Marina 2008). The company is based in the United States, and its head office is in Beaverton, Oregon. Most people are familiar with various products offered at Nike stores, such as Nike Football, Nike Sportswear, and Nike Volleyball etc. It was from the sale of these products coupled with the company’s slogan “Just Do It” that Nike could get a profit of $15 billion in 2006 (Marina 2008). As of 2008, the company’s revenue was over $18.6 billion, an indication of its business success. It also has an excess of 30,000 workers globally. However, over the past few years, Nike has been faced with a series of problems, which have negatively affected the company’s business image, and consequently, its performance. Some issues of concern include paying low wages to its workers, and using child labour among others. As expected, such grave claims are bound to affect the successful establishment of any business both locally and internationally, and Nike is not an exception. For instance, Nike’s sweatshop labour case resulted in numerous controversial debates concerning its ethical business practices. That painted a bad image of the company in the public eye. It is what Nike has been still struggling to overcome among American and other customers worldwide, even if it has tried to recover from bad press coverage. Literature Analysis Over the past few years, Nike has been faced with a series of problems, which have negatively affected the company’s business image, and consequently, its performance. The following is an in-depth analysis of various challenges that Nike Inc. has faced in the recent past. Nike’s problems started when the company decided to outsource its manufacturing plants from numerous countries with an intention of lessening costs and improving its productive efficiency. It resulted in widespread protests and outrage far beyond the expectations of the company. The protesters stereotyped the company as “forcing children to slave away in hazardous conditions for below-subsistence wages” (Hill 2009, p. 57). Workers at the factories were forced to work extremely long hours to fill quotas. In addition, they had to follow stringent rules throughout working hours, while being paid minimal wages, despite the fact that 77% of employees of Nike Vietnam had respiratory problems (Hill 2009). Consequently, human rights and globalization activists criticized the company for exploiting workers abroad and placing them under very poor working conditions. What angered them most was the fact that Nike was cashing in billions of dollars, but still failed to provide a safe environment for its workers. There were complaints against globalization and numerous protests against poor working conditions, which made the company, realize the importance of providing a safe working environment to its employees, as well as adhering to specific standards for everyone at its factories abroad. The key challenges that Nike had to confront were ethical, cultural and legal. It is a good thing that the company has provided numerous jobs to people across the world. However, that does not justify its maltreatment of workers. For instance, while the average daily wage in Vietnam was about $3, Nike Vietnam paid only $ 1.60 daily to its workers (Hill 2009). This problem could have been avoided through paying each of company’s employees a wage that corresponded to the payment in their home country, in order to be able to afford basic items. Besides, a decent living wage is a cultural expectation. Since the company failed to meet it, people protested. Another challenge that the company had to face was the issue of unsafe working conditions. Nike hired an accounting firm Ernst & Young to carry out an audit of its business practices. The audit report discovered that employees with breathing and skin problems had been left to continue working in departments with chemicals despite harmful conditions (Fass 2010). This was in addition to the claim that more than a half of those workers, who worked at departments dealing with chemicals were not provided with protective clothing, such as masks and gloves. The findings of the report were meant to be confidential, but somehow they reached the public. That triggered a lot of rage and anger from all corners of the world. While it continued to make even higher profits, it exploited its own workers that enabled them to succeed. Nike’s problems were not far from over. It was again accused of failing to adhere to child labour laws. The company hired children, and forced them to work long hours, while paying them wages below the required minimum wage rate. For instance, according to Global Exchange, one factory, owned by a Korean subcontractor working for Nike, was hiring children approximately thirteen years old forcing them to work for up to seventeen hours daily under enforced silence, while being paid only 10 cents per hour (Sage 2008). The exposure of workers to harsh and toxic chemicals, such as carcinogens, also placed the company at odds with human rights activists. In an attempt to redeem its badly tainted image, the company stated that it had formulated an action plan for dealing with various problems indicated in the report, and that it had improved safety and ventilation, reduced overtime hours and lessened the use of toxic chemicals. SWOT MATRIX Strength Nike is the market leader in the manufacturer of sportswear apparels, with over 30 percent market share, followed closely by Adidas at 22%. The company has benefited in the market for its light weight products with goes in line with its market athletic theme; “just do it!” with this position, the company is in pole position to dominate the market if they strive to improve their image in emerging markets. Weakness The company accused his report of having discrepancies, in addition to a questionable method, by means of which the investigation had been conducted (Hill 2009). The idea of audits done on oversees factories by independent auditors came from the organization “United Students against Sweatshops” in an attempt to obtain an accurate independent audit. However, it seemed that even independent auditors did not deliver accurate results. Opportunities The bad image of the company resulted in Nike hiring Andrew Young, a one-time U.S. Ambassador to the UN, the former mayor of Atlanta and congressional representative. His responsibility was to evaluate working conditions at various Nike’s subcontractor plants around the world. Nike has the opportunities to improve its image as a company that embraces unsafe working conditions and the violation of child labour laws. In addition, the widely recognized brand name of Nike can help them form partnerships with governmental and non-governmental organizations to ensure it provides safe and ethical business practices, as well as to monitor its sweatshops established in foreign countries (Rutenberg, 2002). Several challenges facing the brand show how important it is for companies to follow the rules and regulations established in a particular country in order to successfully operate its business there. Threats The company faces strong competition from Nike, which purchased Reebok in 2005 to enlarge its market share and strategically position itself into the sportswear market. Based on the above challenges it is imperative assess working conditions at Nike Vietnam to confirm numerous complaints against the company, as well as what the company can do to improve the situation. Despite the fact that the company’s brand is well-known in the whole world, it is true that if it does not react fast to deal with the above problems, the business might eventually go down due to numerous people distancing themselves from the company (Rutenberg 2002). As of 2007, retailers of Nike products, both small and large, reported that a significant number of their customers did not want anything to do with the brand because of the allegations raised against the company over worker exploitation overseas (Rutenberg 2002). As a result, their sales dropped considerably, affecting the overall performance of the company. The company need to assess company’s working conditions, and what measures the company can take to improve the situation for its workers in order to redeem its tainted image and reclaim the success it has had in the recent past. Grand Strategy Matrix The purpose of the strategy For Nike to maintain their growth and strong market position, they need to adopt a grand strategy in line with the modern business model. Nike’s proposal for new positioning strategy is based on the fact that it is one of the companies with overseas factories, where poor working conditions have been reported. The company need to build its competitive image in terms of its corporate social responsibility. Strategy suggestion The second strategy is to rapidly grow its market. The first strategy is to ensure the company expands its product to emerging markets in Asia such as India and China. To continue building a strong competitive position the company will need these markets. The company also need to embrace partnership or acquisition of other similar businesses overseas to increase its rapid growth. The company needs to use acquisition strategies to make their presence felt in the emerging markets. For example, Adidas acquisition of Reebok put them in a pole position to strengthen their market segmentation. The company can develop strategies to ensure that they establish their market position in the American market. At the moment, the company is facing slow market growth in the American market. This is prompted by strong competition from other companies such as Puma, Reebok, and Adidas among others. A small opportunity for growth of market share in America may be a major limitation to Nike. The other challenge is poor working condition claims at Nike Inc., which do not only affect its factory in Vietnam, but also its other oversees companies. The main problem associated with the expansion strategy is that the company may find it difficult to control a big market share with different market share. The famous brand name of Nike is at risk from diminishing working resources in the coming years, if the company continues with its current poor working practices of paying low wages to its workers, long working hours and the failure to provide protective clothing to its employees. The company should realize the value of its workers and start treating them with respect as human beings, and not as working tools. It is also important for the management of Nike Vietnam to realize that the public image is very important and the way the public views the company greatly determines whether it will succeed or fail. The implementation of these strategies will be very instrumental in helping Nike redeem its bad public image. References David, F. R. (2011). BUS 490: strategic management concepts and cases, 13th edition , upper saddle river , NJ. Fass, A. (2010). "The Media Business - Advertising - Addenda - The Media Business – Advertising- Addenda - Nike Spot Wins An Emmy Award", The New York Times. Retrieved from www.transclusion.dog.jaworzno.pl/p-Nike,_Inc. Hill, C. (2009). “International business: competing in the global marketplace”, New York, McGraw-Hill/Irwin. Marina, H. (2008). "Olympics: How does Nike feel about conspiracy theories? No comment, Sport, The Guardian", London, Blogs.guardian.co.uk, Retrieved from http://www.answers.com/topic/nike-inc Rutenberg, J. (2002). "The Media Business - Advertising - Addenda - The Media Business – Advertising - Addenda - Nike Spot Wins An Emmy Award", The New York Times, Retrieved from http://www.transclusion.dog.jaworzno.pl/p-Nike,_Inc. Sage, A. (2008). "Nike profit up but shares tumble on U.S. concerns", Reuters, Retrieved from http://uk.reuters.com/article/2008/06/26/business-nike-results-dc-idUKWNAS924120080626 Read More