Nike: Managing Ethical Missteps-Sweatshops to Leadership in Employment Practices - Essay Example

? Case Study Analysis: Nike: Managing Ethical Missteps-Sweatshops to Leadership in Employment Practices [N a m e] INTRODUCTION: The most important aspect for any organization is to follow a proper code of conduct based on ethical behavior. However, this ethical culture is not properly followed and many things are not done for the benefit of those working to give any business success, rather, it is always about profit. This case analysis is based upon the practices carried out by Nike that led to its bad reputation and cost it almost 50 % loss of shares in the stock market. It further talks about the challenges that Nike had to face and what it did to rescue its down going reputation. Apart from this certain recommendations have also been presented. ETHICAL ISSUES FACED BY NIKE IN 1990s: With its headquarters in Oregon, USA, Nike was originally founded in 1964 and was given the brand name in 1971. Now, Nike, which is named after the Greek goddess of victory, produces in 45 countries worldwide and is one of the best sellers of athletic footwear and apparel (Ferrell, Fraedrich, and Ferrell, 386-395). The celebrity endorsement by the famous athletes became the main reason of Nike’s popularity and fame. The increase in popularity resulted in the increased demand of the product and therefore a requirement for a high level of production arose to meet the customers’ demands. In the 1980’s after becoming a public limited company, the company had a spectacular rise in the market, but in the 1990s, the criticism on Nike’s practices in production such as child labor in third world countries, safety and health problems and physical harming of the employees started (Ferrell, Fraedrich, and Ferrell, 386-395). On violation of the human rights for manufacturing, Nike responded to the criticism, but the critics considered it as a damage control stunt rather than an attempt of setting things right. As Nike did not stepped in the market as a leader, but other companies like Puma and Adidas already existed and had a prominent market share. Therefore, to be competitive and produce on a low cost, Nike outsourced its manufacturing divisions to the parts of the world which had low labor costs. They first shifted to Japan, Korea and Taiwan in the early 1980s and by the mid 80s they started their manufacturing units in Southern China (Ferrell, Fraedrich, and Ferrell, 386-395). Within a few years, Nike had almost 700 independent factories, mostly located in the poor Asian nations (Ferrell, Fraedrich, and Ferrell, 386-395). The main reason of outsourcing the manufacturing factories to the third world Asian countries was cheap labor which led to low manufacturing and production costs. But this also led to a major criticism on the human rights that were violated. Extremely bad working condition at the factories, lower wages, harassment and abuse and lastly child labor became major issues to deal with for the company. Sweatshop labor aroused the consciousness of general public and the media, human and labor right activists and non-governmental organizations criticized over the policies that Nike was following most important of which were unhygienic and poor health and safety situation in the work place, low wages and discriminated hiring and firing of labor. The mass media highlighted these issues which grabbed the public attention implicating a bad reputation for the company lowering its image and profits. Another hit on the company’s reputation came in 1993 when a magazine published the real life pictures of children working in the factories of Nike and other companies stitching soccer balls instead of being in school. This led to protests and demonstrations against human rights violation all over the USA (Ferrell, Fraedrich, and Ferrell, 386-395). A discovery made by a firm auditing a factory of Nike in Vietnam was leaked to the media that added more a bad insight about Nike’s already building horrific reputation. The report indicated that the employees are exposed to a chemical which is a serious threat to the health concerns of the workers aside from breaching other clauses in the code of conduct. Time to time, Nike has been in the mainstream facing challenges. With the allegation imposed on Nike’s malpractices of production, it also had to face the natural and environmental problems such as water deficits, climatic change, pollution, raw material and energy consumption. These problems prevailed specially in the developing countries which lack in properly regulated workplaces and infrastructure. Now in order to save itself from the critics and the damaged reputation of the company, Nike had to do really well in responding to these challenges. The protests against Nike caused a severe damage to their revenue. Universities cancelled their contracts with Nike which resulted in almost the decline of Nike’s stock prices by 50 % (Ferrell, Fraedrich, and Ferrell, 386-395). SURVIVAL MEASURES TAKEN BY NIKE: Nike had to take drastic measure to convert the negative reputation into somewhat positive. They had to undo what had already been done to get back the lost image. Their first action was to control the damage. For this they launched public relations campaign involving individual representatives for Nike visiting campuses and talking to students activists etc, fighting the allegation put on them regarding their hostile working environment, conditions and practices. They focused on developing better working conditions for workers and claimed that they do not take advantage of the workers, instead ensure that all the employees have safe and hygienic working environment and well paid wages. Also to repair its tarnished image, Nike used celebrities as their spokesperson and endorsers for uplifting the brand image. FUTURE PROSPECTS AND RECOMMENDATIONS: Regardless of the challenges and criticism that Nike had to face in the past few years, it has proved itself to be a competitive and successful business in recent times making good profit. The corporate social responsibility practices of Nike have evolved since its doom days and now customers and corporate clients seem to have their faith restored. Nike’s main focus now to maintain the developed code of conduct based on the ability of employees to perform the job perfectly and not on the basis of biasness or discrimination of any sort. Nike also disclosed its supply chain and the factory locations where the production is carried out. This way they can monitor their own standards and performance. Adopting the strategic management strategies such as balanced score card etc, Nike has developed a standard of measuring its own growth and performance. Now in order to stay competitive with the prospects of new market entrants in the future, Nike has to maintain its standards and be sure to strictly adhere to the CSR so that they do not have to face the allegations that cost them their reputation a decade ago. Work Cited Ferrell, O.C., John Fraedrich, and Linda Ferrell. Business Ethics: Ethical Decision Making and Cases. 8th ed. Mason, OH: South Western Cengage Learning, 2011. Read More