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Published by: Shivain Rooprai on Nov 29, 2011
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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 the company Nike Inc produces footwear. licensed apparel and accessories under the Bauer® and NIKE® brand names. Bauer NIKE Hockey Inc. Another wholly-owned subsidiary Hurley International offered a line of action sports apparel (for surfing. Nearly half of these workers have completed senior high school... skateboarding. Few have work-related skills when they arrive at the factory.. protective gear. Nike paid the prestigious Manchester United club an unprecedented $450 million over 14 years to run its merchandising and uniform operations. Mexico as well as in the US and in Italy. Nike had achieved rapid growth in part by using the aggressive marketing tactics that made it big in the US. Bauer also offered various products for street and roller hockey. equipment and accessory products for the sports and athletic market. Nike's Soccer sales were nearly $1 billion. and then in approximately 140 countries around the world. Nike's wholly-owned subsidiary. Taiwan. and snowboarding) and youth lifestyle apparel and footwear under the Hurley brand name. 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. . In Nike’s case. It sells to approximately 19. supported by corporate website reporting. 95% of the workers in the nine participating factories have received pay or wage increases in the last year. hockey sticks. By September 2004. clothing. in-line roller skates. It now has a well developed focus for its corporate responsibility on improving conditions in contracted factories. skate blades. offered ice skates. Cole Haan Holdings. however. aiming for carbon neutrality. and making sports available to young people across the world. The criticism continues.. Nike's share of the soccer shoe market in Europe (35%). Just about all of its products are manufactured by independent contractors with footwear products in particular being manufactured in developing countries..000 retail accounts in the US. and 83% are women. and with small exceptions the bases wages in these factories are above the regions minimum wage – although critics would observe that doesn’t add up to a great deal.Nike sold a line of dress and casual footwear. and hockey jerseys. Cole Haan. Korea. exceeded that of adidas (31%). In the face of constant accusations. 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. the issues are those of human rights and conditions for workers in factories in developing countries. Nike has developed a considered response. and Bragano through its wholly-owned subsidiary. It is the largest seller of such garments in the world. The company manufactures in China. For the first time. Gseries by. consistent with government minimum wage increases. CH. or 25% of the global market. apparel and accessories for men and women under the brand names Cole Haan®.

A lot of focus is given to wage rates paid by the company’s suppliers. Far and away. 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.8% are satisfied with management. and to pick up and respond to issues. and 56. and working with the Global Alliance to review around 21 of these factories.8% of workers reported receiving unwelcome sexual comments. verbal abuse. 67.What are the issues? Nike has around 700 contract factories. In both cases. although a subsequent investigation was unable to confirm this. Nike responded to the audit reports with a detailed remediation plan. What do the critics say? Naomi Klein. The Issue . What does Nike say? Nike accuses Naomi Klein of peddling inaccurate and old information. with allegations made by campaigns of poor conditions. They now operate stitching centres where the non-use of child labour can be verified. plus details of audits of those factories. Nike has sought to respond to these allegations by putting into place a code of conduct for all of its suppliers. She points to a photo published in 1996 showing children in Pakistan stitching Nike footballs as an example of the use of child labour. but critics contend that this does not actually constitute a fair living wage. Conditions for these workers has been a source of heated debate. within which around 20% of the workers are creating Nike products. where these are less of a cost. They point out that they have not abandoned countries as she claims. By and large. with commonplace harassment and abuse. They state that disclosure of the factory names. Any auditing carried out by Nike should be made public. when these are meaningless given the different cost of living in the countries concerned.3% reported being physically abused. accusing them of abandoning countries as they developed better pay and employment rights in favour of countries like China. Other critics have suggested that Nike should publicise all of its factories. and allow independent inspection to verify conditions there. 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 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. and 3. In addition. and remain in Taiwan and Korea despite the higher wages and labour rights. the main concerns expressed by workers relate to their physical working environment. A further report has been produced relating to a site in Mexico. 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. the following was reported: 30. which has experienced serious problems leading to labour disputes. audits have found that wage rates are above the national legal minimum. sexual trade practices in recruitment and promotion were reported by at least two workers in each of two different factories. Nike are also visibly dismayed at how they have attained the status of lead focus in this area. 73. In Indonesia.4% of workers are satisfied with their relationship with direct line supervisors. 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. in her widely read book "No Logo" deals quite extensively with Nike.2% of the workers had personally experienced.8% had observed. An average of 7. As for wage rates.

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. due to the fact that very low priority is given to education in the national budgets. Description Brief about the tradition of child labor in Pakistan Pakistan has a per-capita income of $1. And yet. In Pakistan it is clearly documented that child labor is against the law. Nike chairman Phil Knight also acknowledged that a shipment of soccer balls Nike purchased in Pakistan in the year 1996 was made by a subcontractor using child labor in "horrible conditions. Pakistan has a population of approximately 1 million and is an important centre for the production of goods for export to international markets. but the government carries lack of willingness to do anything about it. gives the clear picture of the existence of child labor in Pakistan." Although 1996 was the first year in which real public attention was focused on Nike's labor practices abroad. This case study will examine the claims and describe the industry and its impact on laborers and their working conditions. 1996 issue of Life magazine carried an article about child labor in Pakistan. Supervisors at a plant in Vietnam apparently beat workers being paid 20 cents an hour and refused to allow them to leave their work posts.S. activists all across Canada and the United States were standing in front of Nike outlets. that is Sialkot.S constitution states that child labor is an illegal and inhumane practice and any U. nearly all the soccer balls made in Pakistan have been revealed to be made by young children getting paid just cents a day. company found guilty practicing and encouraging it will be prosecuted. from discriminating against the importation of goods made by children. Futhermore the U. most troubling. Nike knew that it was in trouble. exports from Sialkot brought income of almost US$ 385 million into the Pakistan economy. Nor has it been open about its labor practices in the way public companies should be expected to be. Indonesian labor organizers has been put behind bars. In 1994. And. Provision for education is very limited. like the United States. particularly sporting goods. And that's nonot all. In a matter of weeks.Consumer awareness 1996 When the June. Sialkot is thus one of the world’s most important centres for production of sporting goods. Child labor is spread all over Pakistan but has the greatest impact in the northwest of punjab province. Pakistan has a traditional culture where earning of one person goes on feeding 10 mouths. the government has taken very little action to combat it.900 per year -meaning that a typical person survives barely on $5 per day. and with the high rate of inflation it becomes difficult for a low income population to survive. This fact has been well documented and reported by the international media for several years but nothing has been done about it.GATT and WTO prohibits member nations. How it all started . Child labor exists in Sialkot both in the export sector and the domestic sector.Nike has been accused of using child labor in the production of its soccer balls in Pakistan. Only a boycott by the United States and other nations will have any impact on slavery and child-based industries. Cameramen have been pushed out of factory floors. Are dolphins becoming more important than children? A question making WTO to reconsider the children's appeal of the third world. Gender and other forms of discrmination plus adding to the lack of political will. 2. Nike has not done an especially good job of scrutinizing the subcontractors with which it's working. it's important to recognize that . Education receives around 3% of the total gross domestic product when compared to over ten times of this amount spent on military. holding up Tariq's photo. While Pakistan has laws against child labor and slavery.

the first time that it has felt a public-relations impact. Its first factories. Click here for the list of sponsors. Nike has never made shoes in the United States.will for the first time hold corporations legally accountable to respect human and worker rights by prohibiting the import. the more people think you have something to hide.NIKE DISCLOSES FACTORY LOCATIONS! On April 13th. And when you're a consumer company.5635) was introduced in the House by Representative Sherrod Brown (OH-13) on June 16. 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." Anti-Sweatshop Legislation The National Labor Committee has been working on anti-sweatshop legislation.manufacturing shoes in low-wage countries was. In other words.3485) by Senator Byron Dorgan (ND) on June 8. that impact does not seem at all devastating. Nike rules because of all the good things people associate with the company: sharp ads. a crucial part of Phil Knight's plan for his company. built in the 1960s. little Penny. And since thirty years Nike have migrating from nation to nation. Every hand that goes up."Just don't do it. The legislation . American jobs have not been shipped abroad. The more you hide. Goods made under conditions which violate the core ILO standards will be banned. right to organize and bargain collectively and the right to decent working conditions. Nike issued its "2004 Corporate Responsibility Report" admitting to countless abuses that labor advocates have struggled to bring to light for years. or export of sweatshop goods in the U. 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. Tiger Woods. arriving as countries install the necessary mechanisms for orderly business operations and leaving as living standards become too high to make manufacturing profitable. Michael Jordan. hurts Nike in the public eye. If "beaten workers" and "child labor" get added to that list. when that country was still a part of the Third World. otherwise it can prove devastating for the company's image in the long run. At this point. after all. that's the only eye that matters.The Decent Working Conditions and Fair Competition Act . VICTORY . Call your representatives today and ask them to vote Yes on the Decent Working Conditions and Fair Competition Act. Nike should take immediate actions in order to provide remedy to all the activism it faces.R. 2006. A companion bill (H. these core standards include no child labor. On the same day Nike launched the report. sale. Nike "not Just do it but Do it right. freedom of association. On the contrary. no forced labor. Specifically. 2005. 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. were in Japan. then Nike's greatest asset will be lost." This is the first time that Nike has had to face real questions about its labor practices abroad.S. Consumers -. and Michael Jordan again. . The basic truth about Nike is that its only real strength is its good name. 2006. from the start. The anti-sweatshop legislation was introduced in the Senate (S.

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

2 billion (FY 2009)[2] Operating income US$1.2 billion (FY 2009)[3] . Oregon. there are workers younger than Nike’s "Child Labor" standard. "Bill" Bowerman Philip H.In up to 10% of Nike’s partner factories.United States (Near Beaverton. Founded January 1964 as Blue Ribbon Sports 1978 as Nike. Oregon) Area served Worldwide Key people Philip H. Knight (Chairman) Mark Parker (CEO & President) Products Athletic shoes Apparel Sports equipment Accessories Revenue US$19. Inc. Knight Headquarters Washington County..87 billion (FY 2009)[2] Net income US$1.49 billion (FY 2009)[2] Total assets US$13.[1] Founder(s) William J.

Total equity US$8.69 billion (FY 2009)[3] Employees 30.nike.200 (2008) Website www.com .

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