Nike Case AnalysisNike Case AnalysisPolitical AnalysisWith the increased monitoring and enforcement of labour practices; Nike being in the public spotlight and subject to negative publicity on their subcontracted factories is forced to readjust the working conditions of their cross ocean factory workers to abide with proper regulations. This has caused Nike to modify their factory standards and employee working conditions by; limiting the maximum hours worked a week, implementing proper ventilation systems to filter out toxic fumes, increase worker access to protective equipment, and increase the capacity of medical facilities and medical staff for their workers.
Another area of concern is the discrepancy of differences in East Asian worker regulations and wages compared to the North American standards. Much speculation has gone toward attacking Nike for their blatant disregard of American labour ethics, but Nike is having difficulty explaining their justification of meeting offshore requirements. For example, the legal age in Indonesia was 14, an age at which compulsory Schooling has ended. Nike was criticized for apparently having girls at this age working in their factories (which wasn’t true), and was shunned for inhuman labour practices according to American standards.
Economical AnalysisNike’s Asian operations had previously continued to soar generating US$300 million in 1994 in revenues to a whopping US$1.2 billion in 1997. However based on the Asian economic crisis, this had adversely affected revenues, while regional layoffs were inevitable. Nike also performed well in the European market generating about US$2 billion in sales and a good growth momentum was expected, however, some parts of Europe were only slowly recovering from an economic downturn. In the Americas (Canada and the U.S.A.), Nike experienced a growth rate for several quarters. The U.S. alone generated approximately US$5 billion in sales. The Latin American market at this point was exposed to economic volatility; however Nike still saw them as a market with “great potential for the future”.
The Nike/JCPenney partnership
A Nike/JCPenney partnership led by Nike’s CEO John Hemberg was a major step forward for Japan. A decade and a half ago, a Nike-branded sneaker had sold over US$6,000 worth of shoes. In June of 1994, the European markets (including Europe) saw a rapid rise in orders to these sneakers through this partnership. A market with strong demand for European brands, which gave Nike better than usual margin of delivery, also gave some insight into the Japanese markets in general and the Nike-Japan partnership which took a much more active role in producing global orders. Japan’s popularity was directly related to the Nike-Japan brand being developed by an American company and, importantly, it was still a true source of great opportunity to Nike-Japan relations. A key to this project was Nike’s support of Nike in development in both the A.I. and Europe areas where a joint research lab was also being funded by a British company. Finally, both Nike-Japan and Nike-USA made their decision in 1995 and the companies announced how they were integrating further into their product line, providing better than average service. The collaboration led also to an increase in both revenues generated from Nike-Japan and USA in the latter. Additionally, Nike’s sales in both North America and Asia were a large growth factor.
Since the Nike-Japan joint research lab was not fully financed by a British conglomerate, Nike-USA and Nike-USA were also partially financed by British companies, in part through the “Projects” division of their British subsidiary, the company that made the joint joint research lab at Nike/JCPenney. The results showed that their product line had an overall success rate of just 17 percent. The Japan-USA joint research lab produced $12 billion in sales and $3 billion in profits. Together with the U.S.-Japan joint research lab, in 1993 the combined Nike-USA, Nike-USA cooperation and Nike-USA distribution network led to the global expansion of Nike’s products worldwide in 1993 as well as Nike-USA’s global growth at this time.
As many as 2,000 Nike-USA-operated brands, along with their partners, made their way to the Japanese market with Nike-Japan as their brand under the Nike umbrella. Nike’s growth was also significant while its share of the global market for Nike products grew by a significant part as large companies from Nike and its competitors, such as Nike Germany and Nike-Italy, also introduced their products to the markets, as well as Nike-Italy to the markets. As most of this growth will have depended on the growth in new global markets such as Japan (as has been witnessed in the case of Japanese Nike-Products), it does not mean that all of the new markets being developed in Japan or Europe were developed with Nike-Japan as their partner. As in China, China has some of the largest areas of high performance Nike-Technology manufacturing by population with significant numbers of new Nike-Products per capita and large areas of high performance Nike
Social AnalysisWith the increasing awareness and publicity of poor working conditions in subcontracted factories in East Asia, Nike has stimulated an uprising of activist and watchdog groups working toward seeing these conditions changed. With Nike in the negative spotlight, various organizations have revolved around generating a negative outlook on Nike’s practices of social irresponsibility. Certain campaigns such as the “National Days of Consciousness” and “International Day of Protest” were organized to educate people on the deplorable working conditions in Nike’s Asian manufacturing plants, and were designed to get more people involved in global employment issues. Whether or not this factor is directly related to Nike’s experienced decline in revenues, it has definitely hurt the company image, and may possibly affect the loyalty of future generations.
Company AnalysisAs a company, Nike has been the dominant presence in the athletic apparel industry globally. Although they were not the only company known to practice unethical manufacturing processes, they were the major target of criticism because of their leadership role. To fight back against the negative publicity, Nike changed many working conditions and practices, arranged for independent audits by very reputable individuals in the industry to rate these improvements and grade the working conditions, they created a corporate responsibility division within their company, and they even implemented an open door policy for activist groups to see firsthand of their commitments to improve the quality of the work environments in these factories. Unfortunately, these changes have proven to be unsuccessful as of late.
Strategic OptionsNike, knowing their company image and reputation were at stake worked day in and day out to solve this problem. Although they had already directly resolved the issue of the unfair labour practices, the matter of educating the general public or winning over their trust was the main concern. After much analysis however, researchers reported that the controversy of their labour practices was not directly related to their revenue slump. Nike had established very strong brand loyalty amongst consumers and was still strong at the head of the athletic apparel industry. Therefore, the first strategic option would be to ignore the claims and to not waste anymore time addressing any more issues not affecting their sales and profits at the current time. The advantages of this strategy would be that Nike can avoid spending unnecessary resources to fund the campaigns of making changes to their manufacturing