Strategic Management

COMPANY NAME: NIKE

SUBMITTED BY: JOEL BABU (49031)

DATE OF SUBMISSION: 30-06-2023

WORD COUNT:2194

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Introduction

Nike previously known as Blue-Ribbon sports which was founded by Phil Knight and Bill
Bowerman on 1964 is now a market leader in Global athletic footwear, sports and apparels
industry. Nike took the jump of manufacturing its own shoes in 1972 along with the famous
‘Swoosh ‘brand mark embedded into the system (Mukesh Singh Almiya, 2020). (Goil,
2022)has investigated that out of 23 billion pairs of shoes that are manufactured worldwide,
majority of them are made of virgin plastic, rubber and petroleum products which results in
greater carbon dioxide emissions. The first step that took by Nike was on 1998, in which
they announced plans on phasing out the use of single use PVC plastics on Nikes products
and also to comply their contracted 600 factories with IS014000 environmental standards
(Landrum, 2001). Another innovation in the field of manufacturing was studied by (Hussain
A. Ali Mahdi, 2015) and found that Flyknit Racer, which is more like a sock on sole shoe was
made by knit threading rather than conventional stacking of fabrics. It resulted in more
environmentally friendly and economical production of Nike products.

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Critical analysis of Current sustainability efforts by Nike

Nike is the world’s largest manufacturer of apparel and footwears and in 2021 it holds 39%
of market share of the entire footwear industry (Salpini, 2021). Nike has even set some
optimistic, yet claim to be realistic goals for 2025 in terms of sustainability keeping it far
ahead of its competitors (Nike, 2023). It also worth to examine how far has Nike gone in
achieving its goals for 2025.

 Sustainable Materials

Sustainable materials are also one of the areas where Nike is trying to stretch its legs in
terms of sustainability. In 2018 company entered ‘The global agenda’s circular fashion
system commitment’ to push for use of sustainable materials in manufacturing and also to a
circular fashion system where the materials get sourced from post-consumer textiles (Nike,
2018). (Parisi, 2021)has studied into a new model ‘Space Hippie’ that was introduced in
2020 which is made up of 90% of recycled materials. They have also come up with another
material, alternative to leather called FlyLeather which is made up of 50% recycled plastic.
This proves that Nikes has firm commitments in terms of sustainable materials but they
have long way to go in achieving 100 recycled materials for manufacturing.

 Greenhouse Gas Emissions

Nike has made a firm commitment to the Paris climate agreement of 2015 in order to bring
down the Greenhouse gas emissions by 70% from its contracted factories in 2016. As part of
pushing its sustainable strategies further company had written an open letter to the UN
restating their commitment in the climate agreement in 2017 (Nike, 2021). One of the
sustainable studies done by a website “good on you” in august 2020 gave Nike a low score
for sustainability stating that even though company has set an initiative on reduction of

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greenhouse gases, lack of evidence was found in achieving its targets on time. Even though
they had some success in water reduction for manufacturing, they have completely failed in
the reduction of greenhouse gases (freixo, 2022).

 Waste reduction efforts

Nike has made one of its sustainable goals to achieve zero landfills by 2025 from its owned
and operated factories across the globe. ‘Nike Grind programme’ is biggest contributor in
achieving this which was launched in 1992, where the post-consumer athletic shoes are
collected at Nikes collection centres to use as raw materials for high quality sports surfaces
(e.g.: basketball courts, running tracks and gym floors) and clothing (UberArtisan, 2023).
(Hansson, 2019)had looked into ‘Nike grind programme’ and found that the programme was
able to direct the tons of millions of shoes to be a part of another supply chain, which
otherwise would have ended up in landfills. But on closer inspection it found that,
environmental impacts of the programme due to the greenhouse gas emission associated
with the transportation of materials to collection centres and to recycling facilities offsets its
desired goals.

Identification, Description and Critical discussion of new strategies

Every year Nike publishes an impact report stating that how much progress have they made
on their sustainable goals. The report contains priority issue’s part, where they have
analysed the priority issues for the company in terms of sustainability (figure 1). But the
graph looks obscure, as it does not show how much progress have been made in addressing
the problems.

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Figure 1: (Nike, 2021), Impact Report 2021, Priority Issues FY21

So, it’s worth looking into areas where Nike can become more sustainable.

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  Better policies for their contracted workers (Operational level)

In 1991, an American labour activist Jeffrey Ballinger first exposed Nike of its labour
practices in six Indonesian factories exposing it off conditions like below-minimum wages,
unfavourable working conditions and child labour. The world stood still when a Life
magazine published a report of 12-year-old Pakistani boy was found sewing Nikes football in
1996 (Newidea, 2019). Nike has been trying to win back its long-lost reputation and has
made first corporate social responsibility policy in 1991 and published a list of its contracted
factories as a move to show transparency in 2001 (Frits, 2018). All of this effort was slowly
making a difference and Nike was slowly winning back its customers until in 2017, the
Guardian report revealed that more than 500 workers working in four factories for Nike and
other brands were hospitalised and 350 of the workers collapsed in a span of 3 days (Mckay,
2019).

There are more pragmatic ways in which Nike can overcome these problems and become
more sustainable. But sustainable change as always come with a hefty price tag. Nike can
set Guidelines for the proper working conditions of the workers in contracted factories (e.g.:
Proper toilet conditions, proper working temperatures) and ensure that they are being
followed by frequent auditing to these factories. They can also engage in talks with
governments in east Asian countries (where their manufacturing units are located) for strict
enforcement of labour rules and on banning policies that prohibit the formation of labour
unions. Raising the wages of its contracted workers to above minimum wages is also
another solution and all of this can be monitored by a formulating a team under their
corporate social responsibility wing. But then it comes to a question on how are they going
to afford it? With a company of such scale contributing to the economies of east Asian
countries and global presence, they will be able to bring the governments around the table
for negotiations. As (Newidea, 2019) says with an annual revenue of over $US30 billion they
should be able to afford it.

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  Sustainable sourcing of cotton (Operatinal level)

In order to push Nike in terms of environmentally and socially sustainable, Nike planned to
source 100% of its cotton from sustainable methods by 2020. Later on, 2017, Nike entered
into sustainable cotton challenge where the company aims to source all cotton from
sustainable source by 2025 (Nike, n.d.). The company sources some organic cotton through
Better Cotton Initiative (BCI), but not all of it. Nike even received a worst rating due to less
clarity in the use of herbicides and pesticides for cotton production (Consumer, n.d.). Also,
when it comes to a social aspects of sourcing cotton, almost half of the entire cotton in the
world comes from Xinjiang region, which has a long history of forced labour of Uyghur
people in China. As (Peter S. Goodman, 2021)says “even if a brand has no direct relationship
with Chinese factories, they can’t rule out any links to Xinjiang cotton”.

There are alternative strategies Nike could adopt if they want to become environmentally
Sustainable. If a company has sustainability in mind, it should have plans on sourcing 100%
cotton. Growing cotton is a water intensive process and can consume large amount of
water. What Nike can do is invest into research and development of new cotton breeds to
develop cottons that consume less amount of water. (Shaw, 2017)has also proposed the use
of alternative material such as SeaCell, a fibre that requires less water than cotton but feels
like cotton. Improving the wages of cotton farmers is also a pragmatic approach, as it would
make them less reliant on chemicals to grow cotton. Another alternative strategy would be
to invest in cotton programmes that are recognised by the Textile exchange (e.g., BCI) and
also to educate farmers of practises that minimises the use of herbicides and pesticides.

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  Sustainability through Imitation (Top management level)

“Imitation occurs when firms copy efficient solutions from other leading firms” (Steven
Cavaleri, 2018). Nike can become more sustainable in adopting successful sustainable
strategies from other successful firms in the market. For example, Patagonia has made its
products like jackets from 100% recycled plastics and Nike adopted to do the same, but they
haven’t quite reached the 100% threshold in their products yet (Harley, 2022). Patagonia
aims to produce products that have very long-life cycle, something that last for a long time
and they even send out instructions to customers on how increase products longevity,
which Nike can imitate. They also keep a strict monitoring over their supply chain which
shows customer more transparency. They allow used Patagonia products to be sold on their
site, further extending the life cycle of the product (Eddy, 2022).

Another but more prominent strategy Nike can adopt from a highly sustainable companies
such as Patagonia is donation to environmental organisations. They are the one who also
came up with idea of donating 1% of entire revenue for environmentally sustainable
operations. Nike can easily adopt this method that will help Nike to win over its customers
or to attract new customers. Customers will get a feeling that they are part of a corporation
that really puts sustainability at front and it can result in increased sales as it did for
Patagonia. (Smith, 2021)put forward the idea that “Patagonia has the most successful
sustainable marketing, which is related to their higher sales volume”. Then Nike can
advertise their sustainability accomplishments resulting in higher sales which further assist
in meeting targets on time.

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Potential challenges related to the implementation of strategies

 Better policies for their contracted workers

Nike has always struggled with the better treatment of its contracted workers. The problem
with bringing better policies for workers like increasing their salary to above minimum and
bringing in good work conditions and cutting down on over time works is that it results in
increased production costs which will be reflected on the prices directly. Since the
customers in footwear industry (major industry for Nike) are price sensitive it can lead to
drop in customers and company may fail to attract new customers. Otherwise, the company
has to take up the losses themselves which will decrease their profits. Along with this it will
be expensive for Nike to formulate a team under its CSR wing for each region or countries
that consists of lawyers and international experts on labour rights and politics to advise and
formulate policies for Nike.

 Sustainable sourcing of cotton

Investing in sustainable cotton will be a tedious process for Nike. In order to become fully
sustainable, they want to cut their reliance on Xinjiang cotton. Then Nike has to source more
from other sustainable methods like better cotton initiative (BCI) and wouldn’t be sufficient
for the demand of the company. Then Nike has to invest in developing new varieties of
cotton which consumes less water or even to develop alternate materials that functions like
cotton. It results in the formulation of R&D team to work only on these, at the same time
keeping the current supply chain intact to meet the current demands. Nike has to spend
some money on its contracted farmers to practise them on agricultural practises that does
not rely up on chemicals to get a successful outcome.

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  Sustainability through Imitation

When it comes to imitation there is a lot of study that has to be done before adopting the
strategy blindly (e.g.: green marketing by Patagonia) The company has to analyse weather it
will cancel out any of its current sustainable programme or it will become a boost to the
current efforts. It also requires the adopting company (in this case Nike) to engage in talks
with company that they are adopting the strategy from. Sometimes company has to engage
in collaboration or talks with its direct competitors or similar player in industry and share
details, which may find hard from a business perspective.

Conclusion

The only thing that’s stopping Nike from being fully sustainable is their unwillingness to
adopt other proven sustainable strategies. But recently, Nike seems to have a foot on the
gas for sustainability. It can be also observed that they sometimes set optimistic goals for
them, but fails to achieve them on time. It can be observed that they are doing more in
some areas and too little in other areas of sustainability. Even though there are successful
strategies and improvements they could adopt, they really want to come up with something
that’s for future also. If Nike can accelerate faster to 100% sustainability, then they can
accelerate the sustainability of the entire industry.

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References
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Available at: How ethical is Nike? | Ethical Consumer

Eddy, E., 2022. Fast fashion: Adujusting Nike's future in the apparel industry. p. 9.

freixo, M. c., 2022. 2022. Valuation of nike. Inc, p. 15.

Frits, R., 2018. From sweatshops to sustainability: the case study of Nike.Inc. p. 4.

Goil, D. D., 2022. Ecowiser. [Online]

Available at: Nike’s Recycled Shoes: Lasting Impressions and Lesser Footprints. - Ecowiser

Hansson, A., 2019. Examining the Viability of Corporate Recycling Initiatives and Their Overall
Environmental Impact: The Case of Nike Grind and the Reuse-A-Shoe Program, p. 3.

Harley, Q., 2022. Supply chain Sustainability in fashion industry. p. 12.

Hussain A. Ali Mahdi, M. A. T. I. M., 2015. A Comparative Analysis of Strategies and Business Models
of Nike, Inc. and Adidas Group with special reference to Competitive Advantage in the context of a
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Landrum, N., 2001. Environmental and social rhetoric of Nike and Reebok.

Mckay, R., 2019. The truth behind the alleged Nike sweatshops. s.l.:WHO magazine.

Mukesh Singh Almiya, D. M. H. K. M. Z. B. H. M. I. B. N. M. M. B. M. N. M. E. W. B. M. J., 2020.

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Available at: Nike Sweatshops: The Truth About the Nike Factory Scandal | New Idea Magazine

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Available at: Nike - Sustainability Commitments — NIKE, Inc.

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