Nike Case Study (How Nike Solved Its Sweatshop Problem)
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NIKE CASE STUDY
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Nike Sweatshops Case Study
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Nike Sweatshops Case Study In countries such as Vietnam, China, Indonesia and Mexico, Nike has been criticized for makin
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Nike Sweatshops Case Study In countries such as Vietnam, China, Indonesia and Mexico, Nike has been criticized for making contract with factories(known as nike sweatshops). Vietnam Labor Watch, is a union which picturised the factories having contracts by Nike in which overtime and minimum wage laws were violated. In Vietnam during 1996, the company claims, “those practices have been stopped”.the company has also been sued for exploiting oversees cheap labour and providing them poor working conditions with high risk in the free trade zone where most of the manufacturing units are settled. In Pakistan and Combodia also, criticism has been faced by nike for the use of child labour in the factories contracted by nike for the production of soccer balls. Thenafter Nike took certain actions to stop or atleast minimise the running practices Although Nike took action to curb or at least reduce the practiceand changed their stratergies to gain consumers interest back (Mintzberg, H,1994) . However still continued giving contacts for production to the companies situated in those areas where there are least laws and regulations which makes it hard to check whether the child labout is still used or not. External Environment EXTERNAL MICRO ENVIRONMENT CUSTOMERS – Worldwide SHARE HOLDERS – People buying Nike shares. MARKET INTERMEDIARIES – Dealers and Nike outlets are the only source. COMPETITORS – Puma, Adidas, Reebok. EXTERNAL MACRO ENVIRONMENT (PESTLE) There are many challenges and complexities which an organization has to deal when it interacts with the external environment (Mason, R. and Mitroff, I.,(1981 ) POLITICAL Nike is on of the biggest company running business in the society attacked by several protests. the company has also been sued for exploiting oversees cheap labour and providing them poor working conditions with high risk in the free trade zone (Daily Mail,2011). In regards to wages, company argues that they have fair wages, which are according to the countries, they working in, instead of paying the equivalent of $US. ECONOMICAL Customer spending pattern and purchasing power are the factors included in economical environment. These factors consists inflation, business cycles, unemployment, income and interest rate. SOCIO-CULTURAL For Nike it is important to understand the sociocultural environment, which includes such forces that affect perception, society‟s basic values, behaviors and preferences. When these factors changes, the customer behavior also changes which affect the sale of product. Nike always targets the social values of selfactualization, achievement, conformity and individualism with the slogan “JUST DO IT”, which is the heart of Nike advertisement. TECHNOLOGICAL Nike‟s R&D team has spent more than a decade researching, dreaming, testing and developing the desire of putting springs in the athlete‟s foot. Nike dream changed into the reality by creating Nike Shox. Therefore, through the technological advancement, Nike holds the competition in the market. INTERNATIONAL Nike with its assets and products hold the major area in the world in terms of market share. The popularity of the brand is increased with the high pace in the whole. ENVIRONMENTAL In the United States, Japan and Western Europe, there is a strong presence of Environmental consciousness. Nike is working on environmental friendly working cycles since decade, which make the Nike safe from environmental issues. NIKE‟S SUCCESS FACTOR Unlike most of the companies in the world, Nike invests a large share of its revenues on advertising and promotion of its products - $1.13 billion in 1998. Many celebrities, such as Michael Jordan, Tiger Woods, John McEnroe, Andre Agassi, Carl Lewis and Monica Seles are paid huge amount for their attachment with the Nike‟s products. For example, in 1988, $45 million was paid to Michael Jordan and $28million to Tiger Woods by Nike. SWOT Analysis Nike, Inc. SWOT analysis basically gives an overview of an organization as it reflects organization strength, weaknesses, opportunities and threats. It helps the organization in making proper planning and strategies, which will help them in the long run (Mintzberg, H. and Lampel, J., (1999) Strengths. Nike is one of the most competitive industries in its product segments. Nike has a strong competing feeling towards its successors and competitors. At the Atlanta Olympics, instead of Nike, Reebok sponsored the games., against to which Nike sponsored the top athletes and therefore gained more valuable coverage. Nike itself has no factories or building for manufacturing. This company gives contract to other factories to work for them. A lot of money is saved through this process. Nike is using Outside-In vs. Inside-Out In this context. Weaknesses. Even after having a diversified range of products, Footwear market still plays a dominant share in Nike‟s income. If in case its market share crashes, the company may suffer a lot. Bad publicity, labor violation, factory issues and unethical business practices lead Nike to face high reputational loss. It tarnished the company‟s image in this competitive market badly. Opportunities. Nike product development itself offers many opportunities. The owners of the company believe that the products are not for the fashion purpose, however, customers purchasing Nike products, not always buy them for the sports purpose, but also for its brand image and stylish range, especially the youths. This provides Nike with great opportunities, as customers are interested in both sports as well as fashionable products. China and India are the new emerging markets in the world having the new richer generation of consumers, where the demand for these products will increase. So linking up with these countries Nike gets a chance to develop its reputation in the world as, these new markets will be ready to spend on a high reputed sport goods items. Threats. Companies in the same sport sector are the major threat to Nike‟s business. Adidas, Reebok, Puma are its competitors. So if Nike fails in gaining consumer trust these companies can easily take over Nike share in this highly competitive market. Strategic Recommendation In my point of view, I will recommend Nike should use profitability vs. responsibility strategy, as being more responsible towards workers will build up more trust and brand loyalty, towards stakeholders, ultimately which will result in higher profits. REFERENCES Daily Mail Reporter,2011 “Nike workers 'kicked, slapped and verbally abused' at factories making Converse” Daily Mail Australia http://www.dailymail.co.uk/news/article-2014325/Nike-workers-kickedslapped-verbally-abused-factories-making-Converse-line-Indonesia.html De Wit, B. and Meyer, R. (2010) „Strategy Process, Content, Context ,An International Perspective‟ Fourth edition ,ch.1 Mintzberg, H. and Lampel, J., (1999), Reflecting on the strategy process, Sloan Management Review, 20 (3) pp. 21-30 Mason, R. and Mitroff, I. (1981) „Complexity: the nature of real world problems‟, in B DeWit and R Meyer (eds.), Strategy Process, Content, Context, Cengage Learning, Andover, UK Mintzberg, H. (1994), The fall and rise of strategic planning, Harvard Business Review, 72 (1), pp. 107-114 http://findit.lib.rmit.edu.au:9003/sfx_local?genre=article&atitle=The%20 fall%20and%20rise%20of%20strategic%20planning&title=Harvard%20 Business%20Review&date=1994&volume=72&issue=1&spage=107&au last=Mintzberg&__char_set=utf8
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