Nike Case study

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Nike’s response came in two sequences. Initially, the firm replied that it did not feel responsible for its subcontractors’ practices and labor conditions, considering them fully independent and auto determining. Even stronger, Nike ignored the critics and continued to run its business as before. That strategy led to Nike becoming the emblem of the “Third Word exploiter firm” and was boycotted by public opinion as well as most American Universities. After a while however, Nike realized that, due to this image, it was losing major contracts and market shares and changed its position and communication strategy. Nike therefore decided to confess that non acceptable working conditions occurred in its suppliers’ factories and committed to adopt a Corporate Social Responsibility attitude. First of all, Nike set up a Code of Conduct and Memorandum of Understanding which contains labor regulations such as: safety standards, environmental regulation and worker’s insurance that all its contractors should engage on. Then, the company joined the Apparel Industry Partnership (AIP) initiative, a program initiated by President Clinton directed on labor. And Nike changed its external audit supplier, substituting Ernst & Young by the Fair Labor Association, considered more independent and objective. Nike also partnered with several universities, in Vietnam for example, in order to instore continuous improvement initiatives by asking students to analyze the local situations, provide critics and advice and help implement ideas.

Phil Knight could have reacted much earlier and thus avoid Nike's Market share to decline. In 1999, Nike's turnover dropped for the first time in the companies' history to 8,7 billon dollars whereas 1998's turnover 9,5 billon. A much quicker reaction to critics and more transparency on the plans to improve suppliers' conditions would probably have avoided this.

Nike changing its Strategy on suppliers employing Children

But all this did not end the story. Nike was also assimilated with a strong ethic scandal on Child labor. Various pictures and reports were published showing for example of a 12-year-old boy making a Nike ball.[3] Subcontractors exposed children to important danger, working with chemicals and polluted air causes lung infections. Moreover, the future of working children is condemned, since they don’t go to school, remain illiterate and thus will have to continue working in low-qualified jobs textile industries are keen on. This created an enormous contrast of Nike bringing self-development to American and European children with the new Nike shoes making them progress in football or basketball while, on the other hand, the company destroyed the future of children in non-developed countries. This caused American students, opposed to children exploitation, to fully reject the brand.

In 1997, Nike answered by increasing the minimum level age from 12 to 14 years old. One year later, Phil Knight announced new regulations: the minimum age of employees producing sneakers increased to 18 years old and to 16 years old in the other industries. The premises were modernized, implementing, where appropriate, new air conditioning systems in order to reduce risks of illness, Nike improved its control system, created a school program and rented low rents premises to its workers. However, some opposition raised in the countries concerned by Nike's improvement on children's labor, since their families thus had to deal without the income their children contributed, which also raised social problems.

Phil Knight could have systematically verified all factories to insure no child is working in them. Moreover, when the scandal was at its highest, he could have accepted the critics and engaged in public on doing all his possible to stop the exploitation of children. Instead, during an interview with Michael Moore in The Big One, he stated that, to him, 14-year-old children working in his factories appeared legal, normal and thus acceptable. At that specific moment, he could have defended himself better, explaining that children working at the age of 14 do so in order to help their families. He also could have argued on work not preventing them from going to school and that Nike allowed and even incited them to do both. However, he did not use any of these arguments.

So, since its creation Nike has faced numerous controversies. First, Nike was driven by a cost reduction strategy regardless the consequences it would have on workforce treatment. Nike adopted a role and acted like it wasn’t aware of what happened in its subcontractors’ industries. This associated the brand to ethical scandals and made Nike to be considered the Third World Manager. Nike’s CEO, Phil Knight pure played the companies slogan to “just do it” and kept on going. As the critics became severe and lobbies impact increased and market shares declined, he realized that the brand had to change its image to avoid sales to continue dropping. Nike then wanted to become a sustainable firm far from its previous issues. Thus the brand engaged itself in the Human rights fight by initiating guidelines and codes for its suppliers, taking part in associations, mandating students case study and communicating reports about their social management. Initially focusing on how to become a market leader, assuming what happened with transparency after denying what happened in its factories for a long time, Nike regained credibility and esteem by becoming a Social Responsible Brand. Thus Nike products won’t be associated with mistreatment and child labor anymore, they will be a proof of respect, honesty and non-discrimination of workers.

Both sides of a story...

This however raises a question that will probably never find an answer: Nowadays, would Nike be one of the major sportswear companies in the world if it had adopted an socially and morally acceptable strategy right from the start?

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