INTRODUCTION

Nike, the largest seller of athletic footwear and athletic apparel in the world with subsidiaries in over 200 countries across the world, has attempted to keep itself on the cutting edge of technology. Nike has been launching new technically advanced shoe models from time to time, backed by innovative advertisements, celebrity endorsements, successful associations (college teams) and event sponsorships When it faced a crisis in the late 1990s, Nike decided to strengthen its management, overhaul its information systems, and streamline supply chain management. Since then, Nike has been achieving rapid growth by using aggressive marketing tactics. However, the company still faces many challenges in the wake of changing fashion trends, the falling sale of its higher- priced shoes, and increasing competition. The case discusses the evolution of Nike's marketing strategy and the company's various initiatives to strengthen its competitive position in a changing environment. For the year ended 31st May 2004, Nike, a leader in the global sports shoes industry announced a vastly improved performance, earning almost $1 billion on sales of $12.3 billion. Earnings had increased by 27% while orders worldwide went up by 10.7%. Nike's return on invested capital was 22%, up from 14% four years ago. Having completed a $1 billion share repurchase, Nike had plans to buy back shares worth $1.5 billion over the next four years. Nike had faced a crisis in the late 1990s. Many analysts felt this was because its creativity had not been backed by operational discipline. Nike had operated on instinct, often guessing how many pairs of shoes to produce and hoping it could offload them in the market. In the past few years, Nike had tried to balance creativity with a strong business focus. Nike had overhauled its information systems to get the right number of shoes to the market more quickly. The company had also streamlined logistics and strengthened its management team. It focused on more efficient management of its portfolio of brands -- Cole Haan dress shoes, Converse retro-style sneakers, Hurley International skateboard gear, and Bauer in-line and hockey skates. As 2004 drew to a close, Nike realized it could not underestimate powerful competitors such as adidas. When founder Phil Knight resigned on 18th November 2004, it marked the beginning of a new era at Nike under the leadership of William D. Perez. Perez had earlier been president and chief executive of S.C. Johnson & Son. NIKE BUSINESS Nike's athletic footwear products were worn for both casual or leisure purposes. Running, basketball, children's, cross-training and women's shoes were Nike's top-selling product categories. Nike also offered shoes designed for outdoor activities like tennis, golf, soccer, baseball, football, bicycling, volleyball, wrestling, aquatic activities, hiking, and other athletic and recreational uses. Nike sold sports apparel, athletically inspired lifestyle apparel, as well as athletic bags and accessory items. Nike often marketed footwear, apparel and accessories in "collections" of similar design or for specific purposes. Nike also marketed apparel with licensed college and professional team and league logos. Nike sold sports balls, timepieces, eyewear, skates, bats, gloves, and other equipment designed for sports activities, swimwear, cycling apparel, maternity exercise wear, children's clothing, school supplies, timepieces, and electronic media devices. Nike also sold various plastic products to other manufacturers through its wholly owned subsidiary, NIKE IHM, Inc. and plastic injected and metal products to other manufacturers through its wholly-owned subsidiary, BAUER Italia S p A.

Nike sold a line of dress and casual footwear, apparel and accessories for men and women under the brand names Cole Haan, CH, Gseries by, Cole Haan, and Bragano through its wholly-owned subsidiary, Cole Haan Holdings. Nike's wholly-owned subsidiary, Bauer NIKE Hockey Inc., offered ice skates, skate blades, in-line roller skates, protective gear, hockey sticks, and hockey jerseys, licensed apparel and accessories under the Bauer and NIKE brand names. Bauer also offered various products for street and roller hockey. Another wholly-owned subsidiary Hurley International offered a line of action sports apparel (for surfing, skateboarding, and snowboarding) and youth lifestyle apparel and footwear under the Hurley brand name... By September 2004, Nike's Soccer sales were nearly $1 billion, or 25% of the global market. For the first time, Nike's share of the soccer shoe market in Europe (35%), exceeded that of adidas (31%). Nike had achieved rapid growth in part by using the aggressive marketing tactics that made it big in the US. Nike paid the prestigious Manchester United club an unprecedented $450 million over 14 years to run its merchandising and uniform operations... Exhibits Exhibit I: Revenue Performance Exhibit II: Revenue Distribution Exhibit III: EPS Performance Exhibit IV: Return on Invested Capital Exhibit V: Stock Chart (5 Years) Exhibit VI: Income Statement Summary Nike has become one of those global companies targeted by a broad range of campaigning NGOs and journalists as a symbolic representation of the business in society. In Nikes case, the issues are those of human rights and conditions for workers in factories in developing countries. In the face of constant accusations, Nike has developed a considered response, supported by corporate website reporting. It now has a well developed focus for its corporate responsibility on improving conditions in contracted factories, aiming for carbon neutrality, and making sports available to young people across the world. The criticism continues, however. Nike the company Nike Inc produces footwear, clothing, equipment and accessory products for the sports and athletic market. It is the largest seller of such garments in the world. It sells to approximately 19,000 retail accounts in the US, and then in approximately 140 countries around the world. Just about all of its products are manufactured by independent contractors with footwear products in particular being manufactured in developing countries. The company manufactures in China, Taiwan, Korea, Mexico as well as in the US and in Italy. Who works in these factories? The Global Alliance report on the factories in Indonesia gave the following workforce profile: 58% of them are young adults between 20 and 24 years old, and 83% are women. Nearly half of these workers have completed senior high school. Few have work-related skills when they arrive at the factory. 95% of the workers in the nine participating factories have received pay or wage increases in the last year, consistent with government minimum wage increases, and with small exceptions the bases wages in these factories are above the regions minimum wage although critics would observe that doesnt add up to a great deal.

What are the issues? Nike has around 700 contract factories, within which around 20% of the workers are creating Nike products. Conditions for these workers has been a source of heated debate, with allegations made by campaigns of poor conditions, with commonplace harassment and abuse. Nike has sought to respond to these allegations by putting into place a code of conduct for all of its suppliers, and working with the Global Alliance to review around 21 of these factories, and to pick up and respond to issues. In Indonesia, the following was reported: 30.2% of the workers had personally experienced, and 56.8% had observed, verbal abuse. An average of 7.8% of workers reported receiving unwelcome sexual comments, and 3.3% reported being physically abused. In addition, sexual trade practices in recruitment and promotion were reported by at least two workers in each of two different factories, although a subsequent investigation was unable to confirm this. 73.4% of workers are satisfied with their relationship with direct line supervisors, 67.8% are satisfied with management. Far and away, the main concerns expressed by workers relate to their physical working environment. A further report has been produced relating to a site in Mexico, which has experienced serious problems leading to labour disputes. In both cases, Nike responded to the audit reports with a detailed remediation plan. What do the critics say? Naomi Klein, in her widely read book "No Logo" deals quite extensively with Nike, accusing them of abandoning countries as they developed better pay and employment rights in favour of countries like China, where these are less of a cost. She points to a photo published in 1996 showing children in Pakistan stitching Nike footballs as an example of the use of child labour. Other critics have suggested that Nike should publicise all of its factories, and allow independent inspection to verify conditions there. Any auditing carried out by Nike should be made public. A lot of focus is given to wage rates paid by the companys suppliers. By and large, audits have found that wage rates are above the national legal minimum, but critics contend that this does not actually constitute a fair living wage. What does Nike say? Nike accuses Naomi Klein of peddling inaccurate and old information. They point out that they have not abandoned countries as she claims, and remain in Taiwan and Korea despite the higher wages and labour rights. They admit that the 1996 photo documented what they describe as a "large mistake" when they began to order soccer balls for the first time from a supplier in Pakistan. They now operate stitching centres where the non-use of child labour can be verified. Nike believe that the sharing with factory locations with independent third parties on a confidential basis enables them to monitor their supply chain properly. They state that disclosure of the factory names, plus details of audits of those factories, would be used by the NGOs simply to make further attacks rather than as part of a dialogue to help the company to address and resolve those problems which exist. As for wage rates, Nike feels that establishing what constitutes a "fair" wage is by no means as easy as its critics would have the public believe and disparages the constant quoting of wage rates in US dollar equivalents, when these are meaningless given the different cost of living in the countries concerned. Nike are also visibly dismayed at how they have attained the status of lead focus in this area. They request that people look towards their competitors and see how many of them have taken the kind of measures the company has over the last few years. The Issue

Nike has been accused of using child labor in the production of its soccer balls in Pakistan. This case study will examine the claims and describe the industry and its impact on laborers and their working conditions. While Pakistan has laws against child labor and slavery, the government has taken very little action to combat it. Only a boycott by the United States and other nations will have any impact on slavery and child-based industries. Futhermore the U.S constitution states that child labor is an illegal and inhumane practice and any U.S. company found guilty practicing and encouraging it will be prosecuted.GATT and WTO prohibits member nations, like the United States, from discriminating against the importation of goods made by children. Are dolphins becoming more important than children? A question making WTO to reconsider the children's appeal of the third world. 2. Description Brief about the tradition of child labor in Pakistan Pakistan has a per-capita income of $1,900 per year -meaning that a typical person survives barely on $5 per day. And that's nonot all, Pakistan has a traditional culture where earning of one person goes on feeding 10 mouths; and with the high rate of inflation it becomes difficult for a low income population to survive. Child labor is spread all over Pakistan but has the greatest impact in the northwest of punjab province, that is Sialkot. Pakistan has a population of approximately 1 million and is an important centre for the production of goods for export to international markets, particularly sporting goods. In 1994, exports from Sialkot brought income of almost US$ 385 million into the Pakistan economy. Sialkot is thus one of the worlds most important centres for production of sporting goods. Child labor exists in Sialkot both in the export sector and the domestic sector. This fact has been well documented and reported by the international media for several years but nothing has been done about it. In Pakistan it is clearly documented that child labor is against the law, but the government carries lack of willingness to do anything about it. Provision for education is very limited, due to the fact that very low priority is given to education in the national budgets. Education receives around 3% of the total gross domestic product when compared to over ten times of this amount spent on military. Gender and other forms of discrmination plus adding to the lack of political will, gives the clear picture of the existence of child labor in Pakistan.

How it all started - Consumer awareness 1996 When the June, 1996 issue of Life magazine carried an article about child labor in Pakistan, Nike knew that it was in trouble. The article's lead photograph showed 12-year-old Tariq surrounded by the pieces of a Nike soccer ball which he would spend most of a day stitching together for the grand sum of 60 cents. In a matter of weeks, activists all across Canada and the United States were standing in front of Nike outlets, holding up Tariq's photo. And yet, Nike has not done an especially good job of scrutinizing the subcontractors with which it's working. Nor has it been open about its labor practices in the way public companies should be expected to be. Cameramen have been pushed out of factory floors. Supervisors at a plant in Vietnam apparently beat workers being paid 20 cents an hour and refused to allow them to leave their work posts. Indonesian labor organizers has been put behind bars. And, most troubling, nearly all the soccer balls made in Pakistan have been revealed to be made by young children getting paid just cents a day. Nike chairman Phil Knight also acknowledged that a shipment of soccer balls Nike purchased in Pakistan in the year 1996 was made by a subcontractor using child labor in "horrible conditions." Although 1996 was the first year in which real public attention was focused on Nike's labor practices abroad, it's important to recognize that

manufacturing shoes in low-wage countries was, from the start, a crucial part of Phil Knight's plan for his company. In other words, American jobs have not been shipped abroad. On the contrary, Nike has never made shoes in the United States. Its first factories, built in the 1960s, were in Japan, when that country was still a part of the Third World. And since thirty years Nike have migrating from nation to nation, arriving as countries install the necessary mechanisms for orderly business operations and leaving as living standards become too high to make manufacturing profitable. Nike "not Just do it but Do it right." This is the first time that Nike has had to face real questions about its labor practices abroad, the first time that it has felt a public-relations impact. At this point, that impact does not seem at all devastating. While in the short run Americans are generally horrified by the issue of child labor and has expressed concern over the working conditions in foreign factories, Nike should take immediate actions in order to provide remedy to all the activism it faces, otherwise it can prove devastating for the company's image in the long run. The basic truth about Nike is that its only real strength is its good name. Nike rules because of all the good things people associate with the company: sharp ads, Michael Jordan, Tiger Woods, little Penny, and Michael Jordan again. If "beaten workers" and "child labor" get added to that list, then Nike's greatest asset will be lost. Now the burden is on the company both to do a better job of implementing company-wide global standards of conduct and also to improve its openness to the media. The more you hide, after all, the more people think you have something to hide. Every hand that goes up, hurts Nike in the public eye. And when you're a consumer company, that's the only eye that matters. Consumers -- "Just don't do it."

Anti-Sweatshop Legislation The National Labor Committee has been working on anti-sweatshop legislation. The legislation - The Decent Working Conditions and Fair Competition Act - will for the first time hold corporations legally accountable to respect human and worker rights by prohibiting the import, sale, or export of sweatshop goods in the U.S. Goods made under conditions which violate the core ILO standards will be banned. Specifically, these core standards include no child labor, no forced labor, freedom of association, right to organize and bargain collectively and the right to decent working conditions. The anti-sweatshop legislation was introduced in the Senate (S.3485) by Senator Byron Dorgan (ND) on June 8, 2006. A companion bill (H.R.5635) was introduced in the House by Representative Sherrod Brown (OH-13) on June 16, 2006. Click here for the list of sponsors. Call your representatives today and ask them to vote Yes on the Decent Working Conditions and Fair Competition Act.

VICTORY - NIKE DISCLOSES FACTORY LOCATIONS! On April 13th, 2005, Nike issued its "2004 Corporate Responsibility Report" admitting to countless abuses that labor advocates have struggled to bring to light for years. On the same day Nike launched the report, they took a concrete step that activists had been asking for 10 years: they disclosed the names and addresses of each one of their 700+ factories around the world.

Nonprofit groups, including Educating for Justice, have long asked Nike to disclose their factory locations so that independent groups could monitor the working and living conditions of Nike's subcontracted factory workers. Gains were made several years ago when students pressured Nike to disclose the factories that produced the Nike apparel in their bookstores. At that point Nike had only disclosed roughly a dozen factory locations.

Here are some of the facts from the report that the newspapers did not include in their stories: Freedom of Association - In 10% to 25% of Nikes partner factories, freedom of association is prohibited by law (e.g. China, Vietnam). - In up to 10% of Nikes partner factories, freedom of association is prohibited due to an exclusive union agreement. - In up to 10% of Nikes partner factories, freedom of association is not allowed or provided although it is legal. (NOTE: EFJ believes this number to be significantly lower than the actual number of factories that do not allow independent union organizing). Harassment Issues - In 25% to 50% of Nikes partner factories, workers report verbal, physical, sexual and /or psychological abuse. - In 25% to 50% of Nikes partner factories, workers do not trust the grievance process. - In 25% to 50% of Nikes partner factories, a confidential grievance system is not provided. Working Hours - In 50% to 100% of Nikes partner factories, work hours exceed Nikes Code of Conduct. - In 25% to 50% of Nikes partner factories, one day off in seven is not provided (i.e. employees are working 7 days a week). - In 25% to 50% of Nikes partner factories, work hours exceed legal limit. - In up to 25% of Nikes partner factories, when workers refuse to work overtime they are penalized. Wages - In 10% to 25% of Nikes partner factories, the overtime pay rate is less than the law demands or the calculation for overtime pay is inaccurate. - In 10% to 25% of Nikes partner factories, the wage calculation rate is inaccurate (i.e. the amount that workers are paid is wrong, and most likely below what they should get). - In 25% to 50% of Nikes partner factories, wages paid to workers are below the legal minimum wage. (Note: Nike has not published any research on living wages for their partner factories.) Child Labor - In 10% to 25% of Nikes partner factories, worker age verification is inconsistent or not well-documented.

- In up to 10% of Nikes partner factories, there are workers younger than Nikes "Child Labor" standard.

Founded

January 1964 as Blue Ribbon Sports 1978 as Nike, Inc.[1]

Founder(s)

William J. "Bill" Bowerman Philip H. Knight

Headquarters

Washington County, Oregon,United States (Near Beaverton, Oregon)

Area served

Worldwide

Key people

Philip H. Knight

(Chairman)
Mark Parker

(CEO & President)

Products

Athletic shoes Apparel Sports equipment Accessories

Revenue

US$19.2 billion (FY 2009)[2]

Operating income

US$1.87 billion (FY 2009)[2]

Net income

US$1.49 billion (FY 2009)[2]

Total assets

US$13.2 billion (FY 2009)[3]

Total equity

US$8.69 billion (FY 2009)[3]

Employees

30,200 (2008)

Website

www.nike.com