This study was conducted to analyze the strategies selected and employed by Nike Inc
during 1990 to 2000 to deal with the rising criticism Irom the media and public. This study
employed Porter`s strategic Iorces analysis to analyze the strategies deployed by Nike in between
1990-2000. The study also used Porter`s Iive Iorces analysis to understand the opportunities and
threats Iaced by Nike Company during that period oI time.
The study also explored which oI the Whittington`s systemic and Processual schools oI
thought was relevant to Nikes strategy during 1990 to 2000 with respect to its growing criticism.
Further, this study also identiIied which oI Mintzberg`s cultural and environmental schools oI
thoughts applied to Nike between the years 1996 and 2000 in terms oI its strategy development.
The Iindings revealed that Nike`s decision to move to Asia had strategic implications
involved in it. The company tried to position itselI as a manuIacturer oI diIIerentiated products
and to gain cost leadership Irom its competition. The Iive Iorces analysis suggested that the
company had an edge over its competition and the suppliers had very low bargain power due to
Nike`s vast number oI subcontractors. The global share oI the company was more than 45° and
it enjoyed a unique position with its innovative and careIully designed products.
The Iindings also suggested that the Nike Company employed Mintzberg`s
environmental strategies to Iind a way to deal with the criticism aimed at the company. The
Iindings also suggested that the Whittington`s Systematic school oI thought was applicable to the
strategic moves employed by Nike Inc.


Title Page#
Terms oI ReIerence ...............................5
Introduction: Nike Inc ..............................6
Porter`s Strategic Model: Nike in Asia ..................... 7
Porter`s Five Forces Framework ..........................9
Going Global BeneIits Nike ..........................11
Whittington`s Systematic and Processual schools oI thoughts ............13

Processual School oI Thought ..........................14

Systematic School oI Thought ..........................15

Nike`s Approach in 1990-2000 .........................16
Mintzberg`s cultural and environmental schools oI thought: a comparison ........18
Environmental School ..............................20
Nike`s strategy in 1996-2000 ..........................21
Findings ...................................23
ReIerences.................................. 25
Appendices .................................26



University oI Oregon in De Wit & Meyer
2004: 933-940 26




Figure 1 Business inIormation in Iocus in environmental school 20


Derek Hardwood, Module leader at Sunderland Business School, University oI Sunderland, has
requested this report on the Nike`s dispute with the University oI Oregon in De Wit & Meyer, to
analyze the strategic moves employed by Nike Inc to deal with the growing criticism and public
movements against the company. The report was to be submitted to him on Monday July 11,

I have employed various measures to understand and analyzed the strategic moves employed by
Nike Inc during the period oI 1990 to 2000. Porter`s generic strategies model was analyzed and
employed on Nike Inc to understand which strategy was adopted by Nike Inc when outsourcing
its work to Asian sub-contractors. Porter`s Five Forces model was also employed on Nike Inc Ior
the period oI 1990-2000 to Iind out the opportunities and threats Iaced by the company during
that period.
Likewise, Whittington and Mintzberg`s strategic schools oI thoughts were compared and studies
with reIerence to Nike Inc`s strategies during that particular period oI time.


Nike is the world leader in the manuIacturing oI sportswear and gear with more than 47°
market share across the globe. The company is among one oI those companies who are only
Fortune 500 Company located in Oregon. The company has more than 700 shops around the
world and has oIIices located in 45 countries outside the United States (NikeBiz). It has most oI
its Iactories in South East Asia including Indonesia, China, Taiwan, India, Thailand, Vietnam,
Pakistan, Philippines and Malaysia (NikeBiz).
In the year 2000, Nike had contracts in 46 countries with 565 subcontractors. The
company was enjoying 45° global market share. It had various outsourcing units in Taiwan,
Indonesia and South Korea.
The subcontractors were not oIIering their workers wage rates as per international
standards. The Iactories were divided into Iour main divisions; production, chemical, stitching
and Assembly section. The production goal was so extended that the workers had to work over
time, without incentives, to meet the goals. The workers were oIten abused physically and
verbally by their supervisors. Many people were likely to be the patients oI liver cancer, kidney
disease, heart attacks, inIertility and many skin related disease in Iuture due to poor working
environment. (Nike Case: Appendix A).
In early 1990`s, many campaigns started against the company and its Iactories across the
globe. In October 1996, a 48 hour report was aired about Nike`s sub contractors and their Iactory
operations in Asia revealing its business practices and downgrading behavior oI subcontractors
to their workers (Nike Case: Appendix A).

Nike underwent various environmental and human right concerned activities to wash out
the aIIects oI negative publicity and was very successIul in its pursuance against the media and

Like many other organizations, Nike Inc moved its operations to South East Asia mainly
in Taiwan and South Korea. This move strategic move, as per Porter`s strategic models, was
based on the combination oI cost leadership and diIIerentiation strategy.
Porter (1980, 1985) suggests that a company can become the leader oI an organization
through managing its operational and other Iunctional costs. The companies that Iollow this
strategy are called lowest-cost producers in the industry. According to this strategic model, iI a
company adopts cost leadership strategy, it can maximize its proIits at a standard market price.
The companies master cost eIIectiveness in all the activities oI a value chain. The cost leadership
does not imply that the company will be selling its products at low price. Lynch (2003) reported
that there are many companies in the industry who are charging higher or equal to their
competitors while maintaining low cost eIIiciency and reinvesting the extra earning Iurther into
the business.
The diIIerentiation strategy reIers to the Iirm`s attempt to position itselI unique in its
relative industry with some value ad-ons to the buyers. This strategy involves the combination oI

one or more attributes oIIered in the products that are valued by the buyers in the industry and
uniquely positioning itselI to meet the needs and wants oI the customers.
Porter (1980) argued that the Iirms, who engage in diIIerentiation strategy may incur
additional costs like advertising cost, cost oI posititioning itselI as a diIIerentiated product or
service based company.

Nike careIully planned its strategies to position itselI in the industry. The Nike`s move to
hire Asian sub-contractor was oI high importance to the company to maintain cost eIIectiveness
in the operations and Iunctions. The company`s attempt to sub contract Asian contractors was
based on the strategy to master cost leadership. Nike had lot oI beneIits involved behind this
strategy among them the chieI ones were lowest possible labor cost, direct access to the raw
material suppliers and low tariII rates.

While Nike`s attempt to employ diIIerentiation strategy to outsource its most oI
manuIacturing in Asia and its aggressive marketing activities allowed it to topple its competitors
in the industry. The diIIerentiation strategy used by Nike had three Iold beneIits to the company.
The beneIits came Irom extensive research and development by the research labs in the company
to maintain innovation. The company became able to deliver high quality products at low cost.
Lastly, the eIIective marketing strategies and celebrity endorsements increased the awareness oI
its products.


In order to understand the threats and opportunities Nike had during the time period oI
1990 to 2000, we have used Porter`s Iive Iorces Iramework to analyze Nike`s position in the
O Distribution and sub-contractors mastery
O Access to cheap labor and raw materials
O TariII and duties oI a country
O Nike had 565 contract Iactories in 46 countries. The bargaining power oI suppliers was
relatively very low.
O The number oI employees Iluctuated in the Iactories due to their strict working hours and
Iailure to meet the production target.
O The rapid change in the production process in the Iactories was to cause serious issues to
the production oI products to the company.
O The increased allegations on the company may end up suppliers increasing the wage rates
oI their workers which can ultimately increase the cost oI production.

O The company was oIIering diIIerentiated products to its customers
O Products were careIully designed to meet the needs oI athletes and Iashion trends.
O Competitive products all compete on diIIerentiation
O The Nike`s image was badly aIIected by all the negative publicity

O Many customers sent their used Nike shoes to the CEO oI the company to show their
discontent towards Nike`s activities in Asia.
O The biggest threat company had been that its products were charged at very high price
which could have triggered the buyers` need to switch to the low price brands.
O The buyers stopped buying its products with the perception that these are not sweatshop
O Many current and potential buyers, students oI various institutions, started their
consortium called Workers Rights Consortium to support the workers rights in the Asian
Iactories, thus Iurther aIIecting Nike`s image.
O The company was engaged in eIIective marketing campaigns to diIIuse the negative
impact oI media exposure.
O But the hate among people may have triggered the sale oI substitutes in the market.
O The threat oI new entrants was practically non existent at that time. Nike was a market
leader with 45° global market share. The company had strong and well established brand
name thereIore it had no threat present at that time.
O Another reason Ior no new entrants was that the cost oI production was already very high
Ior the then present market players. So Ior successIul penetration in the industry high
capital was required. The new entrants don`t usually have high capital in the beginning
which results in their market Iailure.

O Nike had intense competition with then market players like Adidas, Puma, Fila etc.
O The competitors were also engaged in aggressive diIIerentiation strategies.
O Nike, with respect to its competitors, had strong market position and brand identity
O Nike was engaged in celebrity endorsements and it oIIered cutting edge products to its
O The negative publicity in 1990-2000 severely injured the company`s image and gave
edge to the competitors to rise and take part in the negative publicity.

Nike, with 41° market shares (Reuters, 2010), dominates the global market Ior the
athletic Iootwear and apparel earned the revenue oI $ 19014 million in year 2010 (Iinancial
report, 2010). The company is outsourcing all oI its work without hurting the quality oI its
products; Nike still is a market leader. The international sales oI the company are more than 60°
oI its total revenue enabling the company to receive 51° gain in the proIit (business week,
Going global has beneIited Nike through various aspects the chieI ones among them are
increased market share and customer base. Going global oIIers the advantage oI targeting new
group oI customers whose preIerences meets Nike`s products and reduced labor costs.
The company Iorecasts rise in its revenue up to 40° by the year 2015 by opening new
stores and penetrating new markets where the Chinese markets are oI great importance (Reuters,
2011). The Nike`s Chinese business units are currently earning more than $ 2.4 billion Ior its

products and the company executives expects that this rate will double within next Iive years
(Reuters, 2011). This athletic shoe and cloth manuIacturing giant has gained substantial growth
in emerging markets by oIIering and marketing its non Nike brands in markets like Turkey,
Russia and Brazil (wikinvest, 2011).
The company has adopted the strategy to open small number oI outlets in United States
and sell through national retail outlets. The Chinese markets have Iew malls available currently,
thereIore, the company has Iormulated diIIerent strategy Ior Chinese markets. The Chinese
markets have more than 5000 shops that Iocus single sport item. The completion is very less in
china resulting in less discount rate to the consumers and higher proIit margins. This strategy has
lead to more than 37° proIit margin to the company in Chinese markets as compared to 23° in
Northern America (CNN money, 2011). The diverse product oIIerings are one oI the biggest
advantages to Nike Ior its global expansion (business week, 2007).
The global revenue oI the company has increased a lot but the business practices in U.S
markets are not very Iavorable as they were beIore the recession hit the country. The company
has to Iace challenges like increasing costs, Ireight charges and Iluctuating currency rates (Nike
Inc, 2011).
The company`s success in the international markets is the collective eIIort to connect its
brands to the emotions, culture, and endorsement with the local celebrities. Nike joined United
Nations project to promote human rights in the year 2000 since then the global image oI the
company have improved enormously and earned it more than 1.1 billion dollars revenue Irom its
business in Asia (Czinkota, 2008).



In 1977, Whittington proposed Iour diIIerent approaches that were targeted to measure a
speciIic period oI time. He provided Iour indicators to measure those approaches. The indicators
are: deterministic or emergent nature oI people, single goal or pluralistic towards the
achievements oI goals, the style oI their strategies, and the inIluence oI those approaches on the
people respectively.

Indicators Processual Systemic

Deterministic Deterministic Emergent

$ingle goal or Pluralistic Plural Plural

$trategy style CraIted Embedded

Influences Psychology Sociology

Period (decade of influence) 1970s 1990s

Processual school oI thoughts involves deterministic nature oI people with pluralistic
approach towards their goals and strategies. The strategies are craIted Ior the organization and
this school oI thought has direct inIluence on the psychology oI people and the Iactors associated
to them. This approach took Iame in the late 70`s.
Systematic school oI thoughts involves the emergent nature oI people with the pluralistic
thoughts towards the goals and strategies. They Iollow embedded style oI strategy Iormulation
and this school oI thought has impact on the sociology and social lives oI people and the
interlinked Iactors. This approach inIluenced late 90`s era.

In Processual school oI thought, Managers assume that they can intervene in the process
and improve their chances oI success in the markets in the Iuture. This approach is based on the
situations and scenarios and the planning is done according to these scenarios.
The scenario based planning may involve the Iollowing:
O Solving a current problem or giving solutions to the questions
O Implement the permanent solutions
O Mind opening oI people
O The strategy to be strengthened
O To Iind a way out oI a puzzled situation
O To communicate solutions to the problems
O To develop necessary skills to cope with the problem
O To teach the participants about the strategic dealing oI situation
Van der Heijen (2005) explains that Iuture cannot be predicted and thus it is uncertain to
us. He Iurther states that we can interpret the events and develop a process theory to Iind out the
reasons oI its occurrence. According to him, we can learn Irom these situations and these
situations guide our strategies. He considers these events and scenarios very powerIul Ior the
Iollowing reasons:
O ReIlects the uncertain situations
O Allows coherence Irom diIIerent disciplines oI the world
O Findings are based on real liIe context

O Provides the reasons oI the occurrence

Granovetter (1985) argued that the business is an economic activity which cannot be
carried out separately Irom our social liIe. The economic activates we adopt are the
amalgamation oI our societal relations, Iamily, country and proIession. These societal relations
have great impact on our decisions and actions pertaining to them and these Iactors guide our
behavior. ThereIore the personal and social Iactors shape our economic activities and decisions.

HuII (1990) Iurther emphasized that these Iactors that guide our strategies are not related
to cognition but to the culture. Culture is a social system which eIIects and get aIIected by our
liIe, economic activities etc. (Gergen 1994). Whittington (1993) explained that the culture,
history and societal norms have signiIicant impact on our growth and investment in the business.
From this it can be derived that the strategies are dependent on the culture.

Rouleau & Seguin (1995) provided Iour diIIerent Iorms oI approaches based on the
organizational theories. They believed that these strategies and theories have close connection
with each other. According to them, this connection Iollows the same pattern to the studies
proposed by Whittington (1993).
This school oI thought emphasizes on the organizations as a open system which
transIorms input into outputs. This system took Iame in 1960s and had a strong impact on the
managerial thinking about diIIerent techniques to relate company with external and internal

environmental Iactors. This school oI thought Iocuses on the whole organization, its involvement
in the environment and its requirements to achieve the balance.
Nike had to Iace lot oI external criticism around the globe during 1990 and 2000. There
were lots oI activities in action against the companies, particularly Nike, to educate the people
about the bad practices oI the company, their working conditions and low wage rates etc. The
negative publicity had proIound impact on the brand image oI the company and company
management took reasonable steps to stop the impact to Iurther destroy the brand image.
Nike considered the external and internal Iactors, according to systematic school oI
thought, in its consideration to cope with those activities against the company and its global
image. The company took part in the Fair Labor Association (FLA) to ensure that the labor will
be given their rights, and assured the health and saIety measures at work place.
The low wage rates, poor working conditions were the external Iactors that had
inIluenced the company as a whole. Nike announced the code oI conduct to be Iollowed and
made it mandatory Ior it and its sub contractors. The company announced that it will hire people
to monitor the activities oI its sub contract Iactories to Iurther ensure the code oI conducts are
Iollowed and respect is given to the workers. The company Iurther implemented changes to
assure that the ventilation system, surgical masks, gloves, shoes, proper medication etc. to be
given to the workers working Ior the company.
This strategy oI taking things seriously and devising a corporate social responsibility Ior
the company had good impact on the over all image oI the company and saved a great Iortune
Irom being ruined in terms oI negative image. The company`s eIIorts to take action against its

sub contractors and employing reasonable measures to create check and balance saved the
company Irom lot oI implications imposed on the company and its operations, thus, saving the
Iace oI the company and its revenue.







The cultural school oI thought involves the
collective approach to the Iormation oI

The environmental school oI thought involves
the reactive approach towards the Iormation
oI strategy.


The cultural school oI thought involves
various groups and departments oI an
organization. The strategy is Iormulated by
the collective and cooperative process oI
understanding among the various
executives at an organization. The
strategies Iormulated under this school oI
thoughts represent the views, ideas, culture
oI the organization.

The environmental school oI thought involves
the reaction and response oI external
environment towards the operations and
strategies adopted by the company. This
school oI thought is helpIul to devise
strategies in accordance oI those responses.
This school oI thought considers the
environment as a prime actor towards the
strategy Iormulation and implementation.


This school oI thought is based on

This school oI thought is based on the
external Iactors, primarily on biology.



This school oI thought Iocuses on the roles
oI society, the belieI system, values, norm
and their relative importance in the process
oI decision making and their impact on the
strategies oI an organization. This school
oI thought presents the Iactors that are
resistant to bring the change within an
organization and plays important role when
it comes to mergers and acquisitions.

The main Iocus is given to the Iactors that can
aIIect the strategy Iormulation. Those Iactors
come Irom the external environment.


Cultural school oI thoughts is based on the
cultural norms and values oI people,
thereIore, it can be vague to sometimes.
The unclear views and understanding about
the Iactors oI society can Iurther lead to the
resistance towards the change. All the
inIormation collected via this school oI
thought can be used against the
organization, its strategies and goals.

Environmental school oI thoughts is based on
the external Iactors aIIecting the business oI
the organization; this may lead to vague and
un-clear issues that can hinder the implication
oI strategies within the organization. The
strategies Iormed on the basis oI
environmental dimensions are less useIul to
the company and are mostly unrealistic to the
company and its requirements.

This school oI thought oIten measures and

6. This school oI thought measures the
cultural dimensions oI people, their cultural
perspectives, appreciates inquiry and
Ashridge mission model.

compares the contingency theory Irom the
organizational perspective as well as the
situation based leadership within the

ENVIRONMENTAL SCHOOL- strategy Iormation as a reactive process

The Proponents oI this school oI thought takes the strategy Iormulation process within an
organization as a reactive process initiated due to the external Iactors (Mintzberg, 1998). The
organizational strategists try to understand the external pressures imposed on the organization
and considers environment as a primary actor.

Figure 1- Business inIormation in Iocus in environmental school

This school oI thought sees environment as a main component oI strategy development
process. The organizations and their leaders consider the environmental Iorces beIore devising
their plans. This school oI thought was emerged Irom contingency theory. The organizational
theorists suggested that the organizations are aIIected by these Iactors at large. While the
academic theorists suggested that the strategies are aIIected by the political powers and the
environmental Iactors.
This school oI thought states that the environment is has the central importance in the
strategy Iormulation process and the organizations must respond to these Iactors and adapt
themselves to the environment.
According to environmental school oI thought, Nike`s strategies were greatly inIluenced
by the external environmental Iactors. The rising criticism by the media in country had led Nike
to re-Iormulate its strategies to meet the requirements oI the people and the company. The
criticism around the country, low wage rates, activists that Ioster the negative publicity oI the
company and various others had inIluenced the company`s ability to devise its strategies to
accord with these external Iactors and save its public image.
The company underwent various strategic changes like its participation in President
Clinton`s Apparel Industry Partnership (AIP) to develop certain measures to ensure that the
apparel and Iootwear are not manuIactured under sweatshop conditions. The AIP aimed to
strengthen decent and humane working conditions at workplace.

The company Iurther launched its Corporate Social Relationship (CSR) strategy in the
public to Iurther strengthen itselI as a responsible citizen and a company. The Nike`s
management promised its commitments to environment and labor Iorce with the public through
its CSR strategy.
Nike participated in Fair Labor Association (FLA) as a next step oI its positive publicity
in the country and across the globe. FLA aimed to monitor the working conditions oI the
diIIerent manuIacturing companies including Nike to Iigure out what is happening there and
initiate reasonable measures to seize any wrong doing in the Iactories.
These and other environmental measures attempted by Nike were part oI its
environmental strategy to strengthen its public image against all the harm done by the criticism
oI the media and newspapers in 1990`s. These strategies were designed to cope with the
environmental Iactors that aIIected the organizations capabilities.


This study was conducted to study the market leader oI sport gear and apparel
manuIacturer in USA; Nike Inc, to understand the strategies adopted by the company to tackle
the worsening conditions it Iaced back in 1990 to 2000.
The Iindings oI the study revealed that the company had Iaced lot oI criticism during late
nineties. In order to save the Iace oI the company the company management devised measures
and strategies to sustain the company in the market.
The company had an edge over its competitors through aggressive marketing strategies
and it was continuously trying to Iace its brand image Irom getting hurt Irom the campaigns
against the company. The company`s suppliers had very low bargaining power this helped the
company to Iormulate the business plans oI its own choice. The negative perceptions were
developing in the minds oI buyers and this had seriously aIIected the buyers` decision to
purchase company`s products.
The Iindings revealed that company engaged in various environmental causes and human
rights concerns to Iight against the labor right issues and environmental pollution cases. The
company`s eIIorts saved it a lot oI Iortune.
The comparison between the Mintzberg`s cultural and environmental school oI thoughts
revealed that Environmental school oI thought was more closely related to the Nike`s eIIorts to
save its Iace and build a positive rapport across the globe.

Lastly, the analysis oI Whittington`s systemic and Processual schools oI thoughts
suggested that the Nike Inc was deploying systemic approach Ior the Iormulation oI its strategies
and their implementation across its Iactories.


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Appendix A








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