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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.
skate blades. It is the largest seller of such garments in the world. exceeded that of adidas (31%). in-line roller skates. Gseries by. Another wholly-owned subsidiary Hurley International offered a line of action sports apparel (for surfing. and then in approximately 140 countries around the world. 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. In Nike’s case. Bauer also offered various products for street and roller hockey. 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. 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. and snowboarding) and youth lifestyle apparel and footwear under the Hurley brand name. In the face of constant accusations. The company manufactures in China. protective gear. Nike's share of the soccer shoe market in Europe (35%).000 retail accounts in the US. and Bragano through its wholly-owned subsidiary. Nike's wholly-owned subsidiary. and 83% are women. It sells to approximately 19. The criticism continues. Taiwan... Nike's Soccer sales were nearly $1 billion. CH. and hockey jerseys. Mexico as well as in the US and in Italy. hockey sticks. Cole Haan Holdings.Nike sold a line of dress and casual footwear.. Nike paid the prestigious Manchester United club an unprecedented $450 million over 14 years to run its merchandising and uniform operations. apparel and accessories for men and women under the brand names Cole Haan®. Few have work-related skills when they arrive at the factory. Korea. Cole Haan. or 25% of the global market. By September 2004. the issues are those of human rights and conditions for workers in factories in developing countries. licensed apparel and accessories under the Bauer® and NIKE® brand names. offered ice skates. equipment and accessory products for the sports and athletic market. Nike has developed a considered response. aiming for carbon neutrality. Nike the company Nike Inc produces footwear. 95% of the workers in the nine participating factories have received pay or wage increases in the last year.. and making sports available to young people across the world. clothing. consistent with government minimum wage increases. . however. skateboarding. For the first time. Nike had achieved rapid growth in part by using the aggressive marketing tactics that made it big in the US. It now has a well developed focus for its corporate responsibility on improving conditions in contracted factories. Just about all of its products are manufactured by independent contractors with footwear products in particular being manufactured in developing countries. Nearly half of these workers have completed senior high school.. Bauer NIKE Hockey Inc. supported by corporate website reporting.
Nike has sought to respond to these allegations by putting into place a code of conduct for all of its suppliers. and allow independent inspection to verify conditions there. Far and away. which has experienced serious problems leading to labour disputes. Other critics have suggested that Nike should publicise all of its factories. within which around 20% of the workers are creating Nike products. with allegations made by campaigns of poor conditions. and 3. 73. when these are meaningless given the different cost of living in the countries concerned. 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. although a subsequent investigation was unable to confirm this. They now operate stitching centres where the non-use of child labour can be verified. By and large.4% of workers are satisfied with their relationship with direct line supervisors. As for wage rates. but critics contend that this does not actually constitute a fair living wage.8% of workers reported receiving unwelcome sexual comments. and working with the Global Alliance to review around 21 of these factories. verbal abuse. 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.8% are satisfied with management. Conditions for these workers has been a source of heated debate. A further report has been produced relating to a site in Mexico. Any auditing carried out by Nike should be made public.2% of the workers had personally experienced. the main concerns expressed by workers relate to their physical working environment. 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. Nike are also visibly dismayed at how they have attained the status of lead focus in this area. with commonplace harassment and abuse. In addition. 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.What are the issues? Nike has around 700 contract factories. plus details of audits of those factories. Nike believe that the sharing with factory locations with independent third parties on a confidential basis enables them to monitor their supply chain properly. sexual trade practices in recruitment and promotion were reported by at least two workers in each of two different factories. The Issue . A lot of focus is given to wage rates paid by the company’s suppliers. audits have found that wage rates are above the national legal minimum. She points to a photo published in 1996 showing children in Pakistan stitching Nike footballs as an example of the use of child labour. In both cases. 67.8% had observed. where these are less of a cost. in her widely read book "No Logo" deals quite extensively with Nike. Nike responded to the audit reports with a detailed remediation plan. accusing them of abandoning countries as they developed better pay and employment rights in favour of countries like China. 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. and remain in Taiwan and Korea despite the higher wages and labour rights. They state that disclosure of the factory names. An average of 7. the following was reported: 30.3% reported being physically abused. What do the critics say? Naomi Klein. In Indonesia. and to pick up and respond to issues. and 56.
This case study will examine the claims and describe the industry and its impact on laborers and their working conditions. Nike has not done an especially good job of scrutinizing the subcontractors with which it's working. gives the clear picture of the existence of child labor in Pakistan. nearly all the soccer balls made in Pakistan have been revealed to be made by young children getting paid just cents a day.S constitution states that child labor is an illegal and inhumane practice and any U. Are dolphins becoming more important than children? A question making WTO to reconsider the children's appeal of the third world. Nike knew that it was in trouble. Sialkot is thus one of the world’s most important centres for production of sporting goods. 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. company found guilty practicing and encouraging it will be prosecuted. it's important to recognize that ." Although 1996 was the first year in which real public attention was focused on Nike's labor practices abroad.Nike has been accused of using child labor in the production of its soccer balls in Pakistan. 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. While Pakistan has laws against child labor and slavery. And. exports from Sialkot brought income of almost US$ 385 million into the Pakistan economy. Education receives around 3% of the total gross domestic product when compared to over ten times of this amount spent on military. 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. Provision for education is very limited. Child labor is spread all over Pakistan but has the greatest impact in the northwest of punjab province. In Pakistan it is clearly documented that child labor is against the law. the government has taken very little action to combat it.S. like the United States.Consumer awareness 1996 When the June. due to the fact that very low priority is given to education in the national budgets. And yet.900 per year -meaning that a typical person survives barely on $5 per day. Cameramen have been pushed out of factory floors. 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. How it all started . but the government carries lack of willingness to do anything about it. that is Sialkot. 1996 issue of Life magazine carried an article about child labor in Pakistan. 2. Description Brief about the tradition of child labor in Pakistan Pakistan has a per-capita income of $1. holding up Tariq's photo.GATT and WTO prohibits member nations. Futhermore the U. and with the high rate of inflation it becomes difficult for a low income population to survive. In a matter of weeks. Pakistan has a population of approximately 1 million and is an important centre for the production of goods for export to international markets. most troubling. from discriminating against the importation of goods made by children. Gender and other forms of discrmination plus adding to the lack of political will. This fact has been well documented and reported by the international media for several years but nothing has been done about it. particularly sporting goods. activists all across Canada and the United States were standing in front of Nike outlets. And that's nonot all. Only a boycott by the United States and other nations will have any impact on slavery and child-based industries. In 1994. Pakistan has a traditional culture where earning of one person goes on feeding 10 mouths. Child labor exists in Sialkot both in the export sector and the domestic sector.
Every hand that goes up. Tiger Woods. At this point." This is the first time that Nike has had to face real questions about its labor practices abroad.R.S. 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. Nike should take immediate actions in order to provide remedy to all the activism it faces. 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. And since thirty years Nike have migrating from nation to nation. or export of sweatshop goods in the U. little Penny. The legislation . The basic truth about Nike is that its only real strength is its good name. And when you're a consumer company. that's the only eye that matters.NIKE DISCLOSES FACTORY LOCATIONS! On April 13th. Consumers -. then Nike's greatest asset will be lost. that impact does not seem at all devastating. On the same day Nike launched the report. when that country was still a part of the Third World. built in the 1960s. Specifically. the more people think you have something to hide. A companion bill (H.3485) by Senator Byron Dorgan (ND) on June 8. Nike issued its "2004 Corporate Responsibility Report" admitting to countless abuses that labor advocates have struggled to bring to light for years. On the contrary. otherwise it can prove devastating for the company's image in the long run.manufacturing shoes in low-wage countries was." Anti-Sweatshop Legislation The National Labor Committee has been working on anti-sweatshop legislation. The more you hide. 2006. no forced labor. Its first factories.will for the first time hold corporations legally accountable to respect human and worker rights by prohibiting the import. American jobs have not been shipped abroad. right to organize and bargain collectively and the right to decent working conditions. from the start.5635) was introduced in the House by Representative Sherrod Brown (OH-13) on June 16.The Decent Working Conditions and Fair Competition Act . VICTORY . Click here for the list of sponsors. the first time that it has felt a public-relations impact. these core standards include no child labor. were in Japan. Nike rules because of all the good things people associate with the company: sharp ads. 2005. after all. Nike "not Just do it but Do it right. and Michael Jordan again. In other words. Michael Jordan. Nike has never made shoes in the United States. . 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. freedom of association. sale. The anti-sweatshop legislation was introduced in the Senate (S. Call your representatives today and ask them to vote Yes on the Decent Working Conditions and Fair Competition Act."Just don't do it. a crucial part of Phil Knight's plan for his company. Goods made under conditions which violate the core ILO standards will be banned. hurts Nike in the public eye. 2006. If "beaten workers" and "child labor" get added to that list. arriving as countries install the necessary mechanisms for orderly business operations and leaving as living standards become too high to make manufacturing profitable.
e. the wage calculation rate is inaccurate (i. freedom of association is not allowed or provided although it is legal. freedom of association is prohibited due to an exclusive union agreement. Here are some of the facts from the report that the newspapers did not include in their stories: Freedom of Association . Harassment Issues . . (NOTE: EFJ believes this number to be significantly lower than the actual number of factories that do not allow independent union organizing).e.In 50% to 100% of Nike’s partner factories. Wages .In 25% to 50% of Nike’s partner factories.In 25% to 50% of Nike’s partner factories.In up to 10% 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.g. . . Working Hours . worker age verification is inconsistent or not well-documented. 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. a confidential grievance system is not provided. wages paid to workers are below the legal minimum wage. physical. Gains were made several years ago when students pressured Nike to disclose the factories that produced the Nike apparel in their bookstores. work hours exceed Nike’s Code of Conduct. China. . employees are working 7 days a week).In 10% to 25% of Nike’s partner factories. . sexual and /or psychological abuse.Nonprofit groups. At that point Nike had only disclosed roughly a dozen factory locations. work hours exceed legal limit. . one day off in seven is not provided (i. . when workers refuse to work overtime they are penalized. the amount that workers are paid is wrong. . the overtime pay rate is less than the law demands or the calculation for overtime pay is inaccurate.In 25% to 50% of Nike’s partner factories.In 10% to 25% of Nike’s partner factories. and most likely below what they should get).In 25% to 50% of Nike’s partner factories.In up to 25% of Nike’s partner factories. workers report verbal.In 10% to 25% of Nike’s partner factories.) Child Labor . including Educating for Justice.In 10% to 25% of Nike’s partner factories. workers do not trust the grievance process.In up to 10% of Nike’s partner factories. . . Vietnam). freedom of association is prohibited by law (e.In 25% to 50% of Nike’s partner factories.
2 billion (FY 2009) . Founder(s) William J.87 billion (FY 2009) Net income US$1. Founded January 1964 as Blue Ribbon Sports 1978 as Nike. Inc.49 billion (FY 2009) Total assets US$13. Oregon) Area served Worldwide Key people Philip H. Oregon.In up to 10% of Nike’s partner factories.2 billion (FY 2009) Operating income US$1. there are workers younger than Nike’s "Child Labor" standard. Knight (Chairman) Mark Parker (CEO & President) Products Athletic shoes Apparel Sports equipment Accessories Revenue US$19.. Knight Headquarters Washington County.United States (Near Beaverton. "Bill" Bowerman Philip H.
nike.69 billion (FY 2009) Employees 30.com .200 (2008) Website www.Total equity US$8.
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