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.

the issues are those of human rights and conditions for workers in factories in developing countries. By September 2004. For the first time. 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. consistent with government minimum wage increases. skate blades. Nike paid the prestigious Manchester United club an unprecedented $450 million over 14 years to run its merchandising and uniform operations. offered ice skates. and hockey jerseys. . Just about all of its products are manufactured by independent contractors with footwear products in particular being manufactured in developing countries. apparel and accessories for men and women under the brand names Cole Haan®. in-line roller skates.. 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 making sports available to young people across the world. and Bragano through its wholly-owned subsidiary. Mexico as well as in the US and in Italy. 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. licensed apparel and accessories under the Bauer® and NIKE® brand names. Another wholly-owned subsidiary Hurley International offered a line of action sports apparel (for surfing. supported by corporate website reporting. Gseries by..000 retail accounts in the US. Bauer also offered various products for street and roller hockey. CH.. 95% of the workers in the nine participating factories have received pay or wage increases in the last year. and snowboarding) and youth lifestyle apparel and footwear under the Hurley brand name. Bauer NIKE Hockey Inc. Nike had achieved rapid growth in part by using the aggressive marketing tactics that made it big in the US.. The company manufactures in China. Korea. Nike's share of the soccer shoe market in Europe (35%). In the face of constant accusations. protective gear. Nike's Soccer sales were nearly $1 billion. The criticism continues. however. Nearly half of these workers have completed senior high school. Cole Haan Holdings. Few have work-related skills when they arrive at the factory. exceeded that of adidas (31%). It is the largest seller of such garments in the world. clothing. hockey sticks. It sells to approximately 19. Nike has developed a considered response. It now has a well developed focus for its corporate responsibility on improving conditions in contracted factories. In Nike’s case.Nike sold a line of dress and casual footwear. equipment and accessory products for the sports and athletic market.. Taiwan. and then in approximately 140 countries around the world. aiming for carbon neutrality. Nike the company Nike Inc produces footwear. skateboarding. Nike's wholly-owned subsidiary. or 25% of the global market. Cole Haan.

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

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

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. And when you're a consumer company. Nike rules because of all the good things people associate with the company: sharp ads. Every hand that goes up. If "beaten workers" and "child labor" get added to that list. Michael Jordan. At this point. 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. 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. The anti-sweatshop legislation was introduced in the Senate (S. and Michael Jordan again.S. built in the 1960s. the first time that it has felt a public-relations impact. 2006. VICTORY . Nike "not Just do it but Do it right. a crucial part of Phil Knight's plan for his company. after all. Call your representatives today and ask them to vote Yes on the Decent Working Conditions and Fair Competition Act. 2006.5635) was introduced in the House by Representative Sherrod Brown (OH-13) on June 16. . hurts Nike in the public eye. Tiger Woods."Just don't do it. The more you hide. On the same day Nike launched the report. American jobs have not been shipped abroad. freedom of association. Goods made under conditions which violate the core ILO standards will be banned. Nike should take immediate actions in order to provide remedy to all the activism it faces.manufacturing shoes in low-wage countries was. Specifically. Its first factories." Anti-Sweatshop Legislation The National Labor Committee has been working on anti-sweatshop legislation. sale.NIKE DISCLOSES FACTORY LOCATIONS! On April 13th. from the start. were in Japan.will for the first time hold corporations legally accountable to respect human and worker rights by prohibiting the import. that impact does not seem at all devastating. no forced labor. that's the only eye that matters. Consumers -. little Penny. Nike has never made shoes in the United States. A companion bill (H. Click here for the list of sponsors. 2005. In other words. otherwise it can prove devastating for the company's image in the long run.The Decent Working Conditions and Fair Competition Act ." This is the first time that Nike has had to face real questions about its labor practices abroad. these core standards include no child labor. or export of sweatshop goods in the U. The basic truth about Nike is that its only real strength is its good name. And since thirty years Nike have migrating from nation to nation. then Nike's greatest asset will be lost. The legislation . arriving as countries install the necessary mechanisms for orderly business operations and leaving as living standards become too high to make manufacturing profitable. when that country was still a part of the Third World. Nike issued its "2004 Corporate Responsibility Report" admitting to countless abuses that labor advocates have struggled to bring to light for years.3485) by Senator Byron Dorgan (ND) on June 8.R. right to organize and bargain collectively and the right to decent working conditions. On the contrary. the more people think you have something to hide.

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

Oregon.87 billion (FY 2009)[2] Net income US$1. Knight Headquarters Washington County.2 billion (FY 2009)[3] .In up to 10% of Nike’s partner factories. Inc.2 billion (FY 2009)[2] Operating income US$1.. Knight (Chairman) Mark Parker (CEO & President) Products Athletic shoes Apparel Sports equipment Accessories Revenue US$19. "Bill" Bowerman Philip H. Oregon) Area served Worldwide Key people Philip H. there are workers younger than Nike’s "Child Labor" standard.49 billion (FY 2009)[2] Total assets US$13. Founded January 1964 as Blue Ribbon Sports 1978 as Nike.[1] Founder(s) William J.United States (Near Beaverton.

com .69 billion (FY 2009)[3] Employees 30.200 (2008) Website www.nike.Total equity US$8.

Sign up to vote on this title
UsefulNot useful