Nike is a publicly traded apparel company that makes sportswear and sports equipment. The company’s headquarters is in Portland, in the United States. Nike is the primary manufacturer of sportswear and sports equipment with reported revenues in excess of 19 billion dollars (Nike). It is reported that by 2008, Nike had employed over 34, 400 workers in its facilities across the world. Furthermore, its affiliated companies and contractors are estimated to employ 650, 000 people in various contracted facilities across the world. Among these workers, over 75% work on Asian factories including such countries as Thailand, Korea, China, Malaysia, Indonesia and Vietnam (Nike).
The company’s mission statement reads, “To Bring inspiration and innovation to every athlete in the world”. In a statement, Bill Bowerman, who is among the founders of the company states, “if you have a body, you are an athlete” (Nike). Bowerman’s statement has been integrated as a part of the company’s mission statement.
Among the key values of the company, there is its aspiration “to deliver growth in the right way” through the development of sustainable strategies that are capital-efficient, profitable and enhances the company’s brands (Nike). These are the company’s core values significantly the concept of developing brand-enhancing and sustainable initiatives. Though the company had these core values, its production and growth strategies were harming the company’s bottom line as a brand.
The company’s use of contracted sweatshops was among the issues that contributed towards the development of a negative image towards the company. Nike took measures aimed at enhancing the company’s brands and its market sustainability including aiding the creation of the Fair Labor Association (Nike). Consequently, the emergence of issues concerning practices in its affiliates factories led to comprehensive audits of its factories across the world. Though various issues emerged after the audit, Nike has since taken measures to prevent the recurrence of such issues in the future.
The Culture at Nike
Nike is one of the leading companies in the apparel industry specializing in apparel, footwear and equipment. Though Nike has unique differentiation of its products, the company has been able to focus on brand sustainability and grow its operations across the world markets. As such, the company has incorporated this objective into the company’s strategy and mission; it has succeeded in attaining sustainability through the implementation of initiatives that reduce the amounts of waste in the production processes hence promoting recycling and development of green products (Enderle). For instance, the company uses recycled bottles to create jerseys for various teams and nationally recognized sports events. In addition, Nike has developed integrated materials sustainability index that seeks to aid workers reduce environmental issues that may arise in the course of their routine production processes.
Nike’s strategy differentiates it from other players in the industry through its sustainability initiatives and its deep integration of culture and history in its operations (Enderle). As a result, the company’s culture is derived from its rich heritage and history that was began by its two primary founders, Phil Knight and Bill Bowerman. Initially, the company made shoes with waffle irons while selling them to various leaders in the performance and athletic industries. Based on the company’s mission statement, it is evident that Nike has developed from absolute innovation; therefore, its core culture is predicated on innovation as the primary driver of growth.
Nike places significant emphasis on the development of effective communication and teamwork consequently promoting their athletes to more innovative and creative (Nike). For instance, one of the former athletes designed an advertisement for Nike in her spare time. When team leaders saw her design, they were so impressed that they contacted the Nike’s headquarters in Oregon where the advertisement was approved for use on billboards across the country. This is an assertion to the company’s culture of encouraging innovation through pooling of ideas and encouraging creativity among all its employees irrespective of their position in the company (Nike). This in addition to the company’s position on education, creating awareness on its history and products and developing an increasingly strong organizational culture.
Significantly, Nike’s attitude towards criticism and conflict within the organization is positive; as such, instead of ignoring issues, the company demonstrates a tolerance policy towards constructive criticism. Furthermore, the company has adopted organizational maxims as part of the organization’s culture that seeks to inspire employees to optimize their productivity. These include maxims such as, “The consumer decides, It is our nature to innovate, Evolve immediately, Master fundamentals, Nike is a brand and Do the right things” (Nike).
The company recognizes that it is through the development of strong organizational culture that its core beliefs and values will be realized. In addition, employee engagement and motivation are among the strategies that the company uses to enhance its organizational culture; this in conjunction with training on work behavior and conduct, product knowledge and brand dynamics enhance the organizations culture.
The Nike Scandal
Nike faced a scandal in 1998 when it came under criticism as a result of the deplorable conditions observed in sweatshops of its factories in third-world countries and china (Baker). Investigations were conducted and revealed that employees were subjected to constant sexual abuse, physical harassment and exposure to unsafe working conditions. In addition, poor wages that barely reached the stipulated minimum wage level, risks in the work environment as a result of poorly constructed facilities and lack of basic protective gear were among the issues that emerged in Nike’s factories in countries such as china and Vietnam among others (Baker). Furthermore, there was the accusation that Nike was using child labor in countries such as Pakistan escalated the scandal.
Nike acted in a similar manner that most companies do through outsource a significant part of their operations. The rationale behind outsourcing to third-world countries or countries that have flexible laws is the minimization of production costs and availability of cheap labor. The issue emerged from the fact that Nike neglected to take action and implement policies that ensured that its companies, affiliates and contractors adhered to best practices in the conduct of their operations (Baker). However, since the company sought cheap labor and low-production costs, it did not take any measures to prevent the abuse of worker’s rights or ensure the development of safe working environment for its workers.
Nike took advantage of the fact that third-world countries have high unemployment rates and relaxed labor laws that can be easily exploited. Furthermore, the fact that children workers were among the contentious issues in the scandal illustrated the extent to which the company stooped to access cheap labor. Significantly, the company did not take any action to remedy these situations because it contracted its operations in foreign countries. Therefore, the legal and ethical implications associated with mistreatment of workers, poor wages and working conditions including child labor are not applicable to the company in the United States (Hill 67). Hence, Nikes observed exploitation of workers in such countries.
What the Management of the Company Has Done To Resolve These Issues
In response to issues of mistreatment and abuse of workers, infringement of their basic rights, poor wages and child labor accusations, Nike’s management undertook a comprehensive audit with the aim of establishing the nature and extent of these claims. As a result, Nike’s chief executive officer and founder made several commitments that sought to remedy the situation. These included the assertion that all the company’s factories would adhere to the United States Occupational safety and Health Administration’s standards in as far as indoor air integrity is concerned.
In respect to the claims of child labor, Nike’s CEO stated that the minimum age for workers would be increased to 18 years and 16 years for footwear and apparel factories respectively. In response to claims of infringing on workers’ rights, Nike’s CEO stated that the company will incorporate the services of non-governmental organizations in monitoring the operations of its factories including making summaries of their findings public (Hill 201).
Additionally, the company committed to expanding its employees’ education initiatives and programs including free courses that are equivalent to high school education available to all employees in its footwear factories. Furthermore, the company would increase its micro-enterprise loan program with the aim of benefiting a significant number of families in Pakistan, Vietnam, Thailand and Indonesia. Nike offered to expand its funding for university research programs and open forums seeking solutions towards responsible business practices as among its strategies to remedy the situation presented by the scandal (Hill 183).
In 2004, Nike announced that it would be developing a balanced scorecard to integrate corporate responsibility into its business (Nike). The sports goods manufacturer said it would introduce corporate responsibility as an integral part of its contract manufacturing business. Sourcing decisions were to be based not just on price, quality and delivery but also the contractor’s pledge towards labor management and environmental, health and safety programs.
What the Company Should Have Done To Avoid the Scandal
Though Nike is a US based multinational company, it does not mean that its practice of business ethics is limited to the boundaries of the United States. Nike is founded on innovative business practices that encourage the inclusion of employees in the development of the company brands and sustainability strategies. The enforcement of best business practices across all its factories would have prevented the occurrence of the issues brought forward in the scandal. Since Nike is bound and expected to uphold business ethics in its operations, it could have avoided the scandal. However, the company used contractors in the various foreign countries; as such, it failed to enforce proper business ethics in its contractor’s factories in third-world countries.
The scandal emerged because Nike failed to implement comprehensive business ethics in all its operations thus leading to issues emerging of worker mistreatment, violation of their rights in the workplace, child labor and unsafe working conditions. Evidently, Nike only observed business ethics and upheld its core values in its US operations. because the reason is that, in the United States, there are stringent laws and institutions that ensure companies adhere to stipulated business ethics. Furthermore, if the company did not observe its core values in the United States, it would have faced numerous challenges in establishing a niche in the local market.
It is evident that the scandal occurred as a result of Nike’s negligence in enforcing its core values and observation of business ethics in its factories in foreign countries. If Nike had implemented its core values and observed business ethics in its various foreign factories in the same manner it did in the United States, then the scandal would not have occurred. The company’s pursuit of low-production costs and access to cheap labor can be attributed as the primary reasons that led the company to ignore such critical issues in its contractor’s sweatshops in countries such as China and Vietnam.
Position on the Core Values That Drive the Company
Nike’s core values include the development of sustainable strategies that are capital-efficient, profitable and enhance the company’s brands; they focus the company’s attention towards product development and profit maximization. In addition to this, Nike encourages innovation among its employees; however, the company’s core values fail to take into consideration factors that involve its workers hence the company.
While I agree with Nike’s business-centric core values, I do not agree with the company’s failure to develop and implement values that safeguard the company’s workers irrespective of their location. For instance, had the company enforced employee-centric values across its various factories including the sweatshop managed by contractors, the issues that emerged in the scandal could not have occurred in the first place. In this respect, I disagree with the fact that Nike’s core values focus on the company’s products and profit maximization only.
If I was the chief executive officer of Nike, I would make a number of changes such as ensuring that the company develops and implements a comprehensive policy that defines the scope, nature and extent of its foreign interests in as far as basic employee rights are concerned. Significantly, employees must feel empowered, appreciated and motivated irrespective of the factory’s location. Therefore, I would ensure that before contractors are approved, they must agree to implement and uphold ethical business conduct, protect employee rights and pay reasonable wages to workers. This would ensure that cases of abuse, harassment and poor wages are eliminated.
In addition, as the CEO of Nike, I would ensure that all the factories adhere to industry safety standards including issuing all employees with protective clothing in the work environment. Though the company’s foreign operations in countries such as Vietnam, Indonesia or China may not be bound by the same laws as the companies in the United States, it does not mean that Nike should abandon ethical practices or best practice in its operations. Therefore, the implementation of these strategies would ensure that the company benefits and so do the workers.
Though Nike is among the top companies in the athletic and apparel industry, it has faced significant challenges in the management of its foreign operations, as well as on issues that relate to its management of employees in foreign countries. Nike should develop and implement core values that are not only applicable to its US factories, but also to its foreign interests.
In addition, the company should take an interest in what its contractors are doing and how they are doing it; therefore, issues that may potentially impact Nike’s image and bottom line are addressed promptly before they escalate.
In this respect, enforcement of business ethics, sexual harassment policy and ethical conduct in the work place are critical to the company’s posterity. Nike should take control of all its factories and operations in foreign countries through provisions in the contract that ensures that these provisions are implemented hence avoid scandals in its factories.
- Baker, Mallen. Corporate Social Responsibility - Companies in the News: Nike. Mallenbaker.net, 16 May 2014. Web. 15 July 2014. <http://www.mallenbaker.net/csr/CSRfiles/nike.html>
- Enderle, Kim. Strategic Analysis of Nike, Inc. DePaul University, 14 March 2000. Web. 15 July 2014. <http://condor.depaul.edu/aalmaney/StrategicAnalysisofNike.htm>
- Hill, Charles. W. International business: Competing in the global marketplace. (7th Ed.). Boston: McGraw-Hill, 2009. Print.
- Nike. Annual report. Nike, Inc., 22 September 2008. Web. 15 July 2014 <http://investors.nikeinc.com/files/doc_financials/AnnualReports/2008/docs/Nike_2008_10-K.pdf>
- Nike. History and heritage. Nike, Inc., 2014. Web. 15 July 2014. <http://nikeinc.com/pages/history-heritage>