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Nike Sweatshops Case Study

In countries such as Vietnam, China, Indonesia and Mexico, Nike has been
criticized for making contract with factories(known as nike sweatshops).
Vietnam Labor Watch, is a union which picturised the factories having contracts
by Nike in which overtime and minimum wage laws were violated. In Vietnam
during 1996, the company claims, “those practices have been stopped”.the
company has also been sued for exploiting oversees cheap labour and providing
them poor working conditions with high risk in the free trade zone where most
of the manufacturing units are settled.
In Pakistan and Combodia also, criticism has been faced by nike for the use of
child labour in the factories contracted by nike for the production of soccer
balls. Thenafter Nike took certain actions to stop or atleast minimise the running
practices Although Nike took action to curb or at least reduce the practiceand
changed their stratergies to gain consumers interest back (Mintzberg, H,1994) .
However still continued giving contacts for production to the companies
situated in those areas where there are least laws and regulations which makes it
hard to check whether the child labout is still used or not.


External Environment

EXTERNAL MICRO ENVIRONMENT

CUSTOMERS – Worldwide
SHARE HOLDERS – People buying Nike shares.
MARKET INTERMEDIARIES – Dealers and Nike outlets are the only source.
COMPETITORS – Puma, Adidas, Reebok.




EXTERNAL MACRO ENVIRONMENT
(PESTLE)
There are many challenges and complexities which an organization has to deal
when it interacts with the external environment (Mason, R. and Mitroff,
I.,(1981 )
POLITICAL
Nike is on of the biggest company running business in the society attacked by
several protests. the company has also been sued for exploiting oversees cheap
labour and providing them poor working conditions with high risk in the free
trade zone (Daily Mail,2011). In regards to wages, company argues that they
have fair wages, which are according to the countries, they working in, instead
of paying the equivalent of $US.
ECONOMICAL
Customer spending pattern and purchasing power are the factors included in
economical environment. These factors consists inflation, business cycles,
unemployment, income and interest rate.
SOCIO-CULTURAL
For Nike it is important to understand the sociocultural environment, which
includes such forces that affect perception, society‟s basic values, behaviors and
preferences. When these factors changes, the customer behavior also changes
which affect the sale of product. Nike always targets the social values of self-
actualization, achievement, conformity and individualism with the slogan
“JUST DO IT”, which is the heart of Nike advertisement.
TECHNOLOGICAL
Nike‟s R&D team has spent more than a decade researching, dreaming, testing
and developing the desire of putting springs in the athlete‟s foot. Nike dream
changed into the reality by creating Nike Shox. Therefore, through the
technological advancement, Nike holds the competition in the market.

INTERNATIONAL
Nike with its assets and products hold the major area in the world in terms of
market share. The popularity of the brand is increased with the high pace in the
whole.
ENVIRONMENTAL
In the United States, Japan and Western Europe, there is a strong presence of
Environmental consciousness. Nike is working on environmental friendly
working cycles since decade, which make the Nike safe from environmental
issues.
NIKE‟S SUCCESS FACTOR
Unlike most of the companies in the world, Nike invests a large share of its
revenues on advertising and promotion of its products - $1.13 billion in 1998.
Many celebrities, such as Michael Jordan, Tiger Woods, John McEnroe, Andre
Agassi, Carl Lewis and Monica Seles are paid huge amount for their attachment
with the Nike‟s products. For example, in 1988, $45 million was paid to
Michael Jordan and $28million to Tiger Woods by Nike.

SWOT Analysis Nike, Inc.

SWOT analysis basically gives an overview of an organization as it reflects
organization strength, weaknesses, opportunities and threats. It helps the
organization in making proper planning and strategies, which will help them in
the long run (Mintzberg, H. and Lampel, J., (1999)

Strengths.

 Nike is one of the most competitive industries in its product segments.
Nike has a strong competing feeling towards its successors and
competitors. At the Atlanta Olympics, instead of Nike, Reebok sponsored
the games., against to which Nike sponsored the top athletes and
therefore gained more valuable coverage.
 Nike itself has no factories or building for manufacturing. This company
gives contract to other factories to work for them. A lot of money is saved
through this process. Nike is using Outside-In vs. Inside-Out In this
context.
Weaknesses.
 Even after having a diversified range of products, Footwear market still
plays a dominant share in Nike‟s income. If in case its market share
crashes, the company may suffer a lot.
 Bad publicity, labor violation, factory issues and unethical business
practices lead Nike to face high reputational loss. It tarnished the
company‟s image in this competitive market badly.

Opportunities.
 Nike product development itself offers many opportunities. The owners
of the company believe that the products are not for the fashion purpose,
however, customers purchasing Nike products, not always buy them for
the sports purpose, but also for its brand image and stylish range,
especially the youths. This provides Nike with great opportunities, as
customers are interested in both sports as well as fashionable products.
 China and India are the new emerging markets in the world having the
new richer generation of consumers, where the demand for these products
will increase. So linking up with these countries Nike gets a chance to
develop its reputation in the world as, these new markets will be ready to
spend on a high reputed sport goods items.
Threats.

 Companies in the same sport sector are the major threat to Nike‟s
business. Adidas, Reebok, Puma are its competitors. So if Nike fails in
gaining consumer trust these companies can easily take over Nike share
in this highly competitive market.

Strategic Recommendation

In my point of view, I will recommend Nike should use profitability vs.
responsibility strategy, as being more responsible towards workers will
build up more trust and brand loyalty, towards stakeholders, ultimately
which will result in higher profits.






REFERENCES






Daily Mail Reporter,2011 “Nike workers 'kicked, slapped and verbally
abused' at factories making Converse” Daily Mail Australia
http://www.dailymail.co.uk/news/article-2014325/Nike-workers-kicked-
slapped-verbally-abused-factories-making-Converse-line-Indonesia.html


De Wit, B. and Meyer, R. (2010) „Strategy Process, Content, Context
,An International Perspective‟ Fourth edition ,ch.1

Mintzberg, H. and Lampel, J., (1999), Reflecting on the strategy process,
Sloan Management Review, 20 (3) pp. 21-30
<http://findit.lib.rmit.edu.au:9003/sfx_local?sid=&volume=40&date=199
9&aulast=Mintzberg&atitle=Reflecting%20on%20the%20strategy%20pr
ocess&issn=0019%2D848X&issue=3&genre=article&title=Sloan%20ma
nagement%20review&>

Mason, R. and Mitroff, I. (1981) „Complexity: the nature of real world
problems‟, in B DeWit and R Meyer (eds.), Strategy Process, Content,
Context, Cengage Learning, Andover, UK


Mintzberg, H. (1994), The fall and rise of strategic planning, Harvard
Business Review, 72 (1), pp. 107-114
http://findit.lib.rmit.edu.au:9003/sfx_local?genre=article&atitle=The%20
fall%20and%20rise%20of%20strategic%20planning&title=Harvard%20
Business%20Review&date=1994&volume=72&issue=1&spage=107&au
last=Mintzberg&__char_set=utf8