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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.
and then in approximately 140 countries around the world. and hockey jerseys. apparel and accessories for men and women under the brand names Cole Haan®. 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. Gseries by. It sells to approximately 19. offered ice skates. The criticism continues.. skateboarding. Few have work-related skills when they arrive at the factory. and Bragano through its wholly-owned subsidiary. For the first time. equipment and accessory products for the sports and athletic market. Taiwan. Nike's wholly-owned subsidiary. and making sports available to young people across the world. aiming for carbon neutrality. Cole Haan. in-line roller skates. Nike has developed a considered response. Mexico as well as in the US and in Italy. The company manufactures in China..000 retail accounts in the US.. It is the largest seller of such garments in the world. 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.Nike sold a line of dress and casual footwear. the issues are those of human rights and conditions for workers in factories in developing countries. Bauer also offered various products for street and roller hockey. hockey sticks. protective gear. Another wholly-owned subsidiary Hurley International offered a line of action sports apparel (for surfing. supported by corporate website reporting. Nike had achieved rapid growth in part by using the aggressive marketing tactics that made it big in the US. Bauer NIKE Hockey Inc. licensed apparel and accessories under the Bauer® and NIKE® brand names. exceeded that of adidas (31%). By September 2004. Korea.. or 25% of the global market. 95% of the workers in the nine participating factories have received pay or wage increases in the last year. . Cole Haan Holdings. however. consistent with government minimum wage increases. Nearly half of these workers have completed senior high school. CH. Just about all of its products are manufactured by independent contractors with footwear products in particular being manufactured in developing countries.. In the face of constant accusations. Nike the company Nike Inc produces footwear. Nike's share of the soccer shoe market in Europe (35%). Nike paid the prestigious Manchester United club an unprecedented $450 million over 14 years to run its merchandising and uniform operations. Nike's Soccer sales were nearly $1 billion. clothing. and snowboarding) and youth lifestyle apparel and footwear under the Hurley brand name. 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. skate blades. It now has a well developed focus for its corporate responsibility on improving conditions in contracted factories. In Nike’s case.
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 state that disclosure of the factory names. 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. She points to a photo published in 1996 showing children in Pakistan stitching Nike footballs as an example of the use of child labour. where these are less of a cost. As for wage rates. although a subsequent investigation was unable to confirm this. and working with the Global Alliance to review around 21 of these factories. What does Nike say? Nike accuses Naomi Klein of peddling inaccurate and old information. with commonplace harassment and abuse. Other critics have suggested that Nike should publicise all of its factories. when these are meaningless given the different cost of living in the countries concerned. and allow independent inspection to verify conditions there. Far and away. Nike responded to the audit reports with a detailed remediation plan.4% of workers are satisfied with their relationship with direct line supervisors. the main concerns expressed by workers relate to their physical working environment. Nike are also visibly dismayed at how they have attained the status of lead focus in this area. By and large. Conditions for these workers has been a source of heated debate. An average of 7. and to pick up and respond to issues. accusing them of abandoning countries as they developed better pay and employment rights in favour of countries like China. within which around 20% of the workers are creating Nike products. and 3. sexual trade practices in recruitment and promotion were reported by at least two workers in each of two different factories.What are the issues? Nike has around 700 contract factories. In Indonesia. 67. Any auditing carried out by Nike should be made public. audits have found that wage rates are above the national legal minimum. Nike believe that the sharing with factory locations with independent third parties on a confidential basis enables them to monitor their supply chain properly.8% had observed. A further report has been produced relating to a site in Mexico.2% of the workers had personally experienced. A lot of focus is given to wage rates paid by the company’s suppliers.8% are satisfied with management. the following was reported: 30.3% reported being physically abused. What do the critics say? Naomi Klein. plus details of audits of those factories.8% of workers reported receiving unwelcome sexual comments. The Issue . with allegations made by campaigns of poor conditions. but critics contend that this does not actually constitute a fair living wage. In addition. verbal abuse. They now operate stitching centres where the non-use of child labour can be verified. 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. and 56. In both cases. which has experienced serious problems leading to labour disputes. Nike has sought to respond to these allegations by putting into place a code of conduct for all of its suppliers. in her widely read book "No Logo" deals quite extensively with Nike. 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. 73. 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.
And yet.900 per year -meaning that a typical person survives barely on $5 per day. nearly all the soccer balls made in Pakistan have been revealed to be made by young children getting paid just cents a day. exports from Sialkot brought income of almost US$ 385 million into the Pakistan economy.S constitution states that child labor is an illegal and inhumane practice and any U. Nike knew that it was in trouble. it's important to recognize that . Gender and other forms of discrmination plus adding to the lack of political will. Pakistan has a population of approximately 1 million and is an important centre for the production of goods for export to international markets. And. This case study will examine the claims and describe the industry and its impact on laborers and their working conditions.Nike has been accused of using child labor in the production of its soccer balls in Pakistan." Although 1996 was the first year in which real public attention was focused on Nike's labor practices abroad. This fact has been well documented and reported by the international media for several years but nothing has been done about it. most troubling.Consumer awareness 1996 When the June. In Pakistan it is clearly documented that child labor is against the law. Education receives around 3% of the total gross domestic product when compared to over ten times of this amount spent on military. but the government carries lack of willingness to do anything about it. 2. 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. Only a boycott by the United States and other nations will have any impact on slavery and child-based industries. particularly sporting goods. In a matter of weeks. that is Sialkot. like the United States. the government has taken very little action to combat it. Are dolphins becoming more important than children? A question making WTO to reconsider the children's appeal of the third world. from discriminating against the importation of goods made by children. 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. company found guilty practicing and encouraging it will be prosecuted.S. Cameramen have been pushed out of factory floors. How it all started . and with the high rate of inflation it becomes difficult for a low income population to survive.GATT and WTO prohibits member nations. gives the clear picture of the existence of 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. Child labor exists in Sialkot both in the export sector and the domestic sector. Futhermore the U. Nike has not done an especially good job of scrutinizing the subcontractors with which it's working. Indonesian labor organizers has been put behind bars. While Pakistan has laws against child labor and slavery. Provision for education is very limited. due to the fact that very low priority is given to education in the national budgets. In 1994. Child labor is spread all over Pakistan but has the greatest impact in the northwest of punjab province. Nor has it been open about its labor practices in the way public companies should be expected to be. Sialkot is thus one of the world’s most important centres for production of sporting goods. Pakistan has a traditional culture where earning of one person goes on feeding 10 mouths. 1996 issue of Life magazine carried an article about child labor in Pakistan. Description Brief about the tradition of child labor in Pakistan Pakistan has a per-capita income of $1. holding up Tariq's photo. And that's nonot all. activists all across Canada and the United States were standing in front of Nike outlets.
Nike should take immediate actions in order to provide remedy to all the activism it faces. sale. built in the 1960s. right to organize and bargain collectively and the right to decent working conditions. Nike rules because of all the good things people associate with the company: sharp ads.5635) was introduced in the House by Representative Sherrod Brown (OH-13) on June 16. In other words.S. 2005. At this point. that's the only eye that matters. On the same day Nike launched the report. 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. VICTORY . If "beaten workers" and "child labor" get added to that list. The legislation . 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. Nike "not Just do it but Do it right. the more people think you have something to hide. little Penny. or export of sweatshop goods in the U. . 2006."Just don't do it. and Michael Jordan again. that impact does not seem at all devastating.will for the first time hold corporations legally accountable to respect human and worker rights by prohibiting the import. Its first factories. hurts Nike in the public eye.NIKE DISCLOSES FACTORY LOCATIONS! On April 13th. a crucial part of Phil Knight's plan for his company. Consumers -." This is the first time that Nike has had to face real questions about its labor practices abroad. when that country was still a part of the Third World. from the start. 2006. And since thirty years Nike have migrating from nation to nation.manufacturing shoes in low-wage countries was. freedom of association." Anti-Sweatshop Legislation The National Labor Committee has been working on anti-sweatshop legislation. Tiger Woods. The basic truth about Nike is that its only real strength is its good name. 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. American jobs have not been shipped abroad. And when you're a consumer company.3485) by Senator Byron Dorgan (ND) on June 8. The anti-sweatshop legislation was introduced in the Senate (S.R. Nike has never made shoes in the United States.The Decent Working Conditions and Fair Competition Act . 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. Nike issued its "2004 Corporate Responsibility Report" admitting to countless abuses that labor advocates have struggled to bring to light for years. A companion bill (H. after all. The more you hide. On the contrary. otherwise it can prove devastating for the company's image in the long run. Specifically. were in Japan. these core standards include no child labor. Michael Jordan. no forced labor. the first time that it has felt a public-relations impact. arriving as countries install the necessary mechanisms for orderly business operations and leaving as living standards become too high to make manufacturing profitable. then Nike's greatest asset will be lost. Every hand that goes up. Goods made under conditions which violate the core ILO standards will be banned.
worker age verification is inconsistent or not well-documented.e. wages paid to workers are below the legal minimum wage. workers report verbal. 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. employees are working 7 days a week).In 25% to 50% of Nike’s partner factories. . a confidential grievance system is not provided.In 10% to 25% of Nike’s partner factories.In 25% to 50% of Nike’s partner factories.e.In up to 10% of Nike’s partner factories. workers do not trust the grievance process. freedom of association is prohibited due to an exclusive union agreement.) Child Labor .In 10% to 25% of Nike’s partner factories. 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. the amount that workers are paid is wrong.In 10% to 25% of Nike’s partner factories. including Educating for Justice. work hours exceed legal limit. the overtime pay rate is less than the law demands or the calculation for overtime pay is inaccurate. freedom of association is not allowed or provided although it is legal. the wage calculation rate is inaccurate (i. . . physical. At that point Nike had only disclosed roughly a dozen factory locations. . .g. . and most likely below what they should get). work hours exceed Nike’s Code of Conduct. Harassment Issues . Wages . Vietnam). .In 25% to 50% of Nike’s partner factories. China.In up to 25% of Nike’s partner factories. (NOTE: EFJ believes this number to be significantly lower than the actual number of factories that do not allow independent union organizing).In up to 10% of Nike’s partner factories. . sexual and /or psychological abuse. Working Hours . freedom of association is prohibited by law (e.In 10% to 25% of Nike’s partner factories.In 25% to 50% of Nike’s partner factories.Nonprofit groups. .In 50% to 100% of Nike’s partner factories. (Note: Nike has not published any research on living wages for their partner factories.In 25% to 50% of Nike’s partner factories. when workers refuse to work overtime they are penalized. . one day off in seven is not provided (i. Here are some of the facts from the report that the newspapers did not include in their stories: Freedom of Association .
Knight Headquarters Washington County.2 billion (FY 2009) . Oregon) Area served Worldwide Key people Philip H.49 billion (FY 2009) Total assets US$13..United States (Near Beaverton. Founded January 1964 as Blue Ribbon Sports 1978 as Nike. Oregon.87 billion (FY 2009) Net income US$1. Knight (Chairman) Mark Parker (CEO & President) Products Athletic shoes Apparel Sports equipment Accessories Revenue US$19. Founder(s) William J.2 billion (FY 2009) Operating income US$1. there are workers younger than Nike’s "Child Labor" standard.In up to 10% of Nike’s partner factories. "Bill" Bowerman Philip H. Inc.
Total equity US$8.com .nike.69 billion (FY 2009) Employees 30.200 (2008) Website www.
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