A Case Study of Nike's East and Southeast Asia Business Ethics and Compliance

A Case Study of Nike's East and Southeast Asia Business Ethics and Compliance

Introduction

What are the key exemplary components of a worldwide enterprise? How should such entity play out its role in a world where stakeholders are from various nationals and no single standardized laws are in existence?

These enquiries form the way worldwide enterprises execute their business operations. Even though such entities are innate in pursuing available business prospects attributed to the rise of global assimilation, they are progressively conscious of the consequences which their approaches trigger, affecting both home-based and abroad-based business operations. Despite such awareness, these entities often conform at unsatisfactory levels on what constitute a good enterprise citizenship concept. This is largely due to insufficient effort executed to reach a unified agreement and understanding on what makes a good worldwide enterprise that could be applied to all corporations.

Nike, Inc. is one particular cases study of a worldwide enterprise which is inevitably exposed to both risks and benefits attributed to an assimilated world of stakeholders. This case study assesses several predicaments and intricacies that the corporation struggles with in pursuit of good enterprise citizenship and performance balance.

Athletic Footwear Market

Over the past 20 years, athletic footwear market saw a rapid growth. The U.S athletic footwear market expanded from $5 billion in 1985 to $13 billion in 2001, with total pair of shoes sold increased from 250 million to 335 million shoes. While the market is heavily classified by price, model, and sports types, three corporations dominate the industry, namely, Adidas, Nike, and Reebok. Referring to Table 1, 70% of athletic footwear industry is controlled by ten worldwide athletic footwear enterprises. As illustrated in Figure 1, Nike emerged as the most dominant corporation after gaining over Reebok (1990s) and Adidas (1980s).

[pic 1]

[pic 2]

Just Do It — Nike

Nike, Inc. is a U.S worldwide enterprise which trades sports gear, sportswear, footwear, and clothing. The headquarters is located around Beaverton, Portland, Oregon area. As of 31 May 2012 (fiscal year), the worldwide enterprise remains as the world’s top provider of sports gear, apparel, and athletic footwear, employing 44,000 employees and profiting over $24.1 billion. Nike, Inc. brand stands at a valuation of $10.7 billion, placing it at the top among other worldwide enterprises that manufactures and supplies sports items. As reported by The Oregonian, Precision Cast and Nike, Inc. are the only Oregon-based corporations that make it into Fortune 500 list.

Bill Bowerman and Phil Knight co-founded Nike, Inc, which was initially branded as Blue Ribbon Sports in late January 1964. It was re-branded on 30 May 1978 as Nike, Inc. The word ‘Nike’ has a Greek origin, which represents the goddess of victory. Among brands marketed by Nike include, Converse, Umbro, Hurley International, Cole Haan, Nike Skateboarding, Nike+ Air Jordan, Nike Pro, and Nike Golf, apart from its own brand. In addition, from 1995 to 2008, Nike was a legal owner of Nike Bauer (previously known as Bauer Hockey). Nike, Inc. owns numerous brick-and-mortar stores operating under Niketown stores as well. Apart from that, the corporation often executes advertisements displaying its ‘Swoosh’ logo with the famous tagline, “Just Do It” featuring well-known sports teams and athletes.

History of Nike, Inc.

Prior to rebranding, Blue Ribbon Sports was the early brand name for Nike, Inc. It was co-founded in late January 1964 by Bill Bowerman and Philip Knight, who were both involved in athletic world in the University of Oregon. At its tender age, the company started out by operating as a reseller for Onitsuka Tiger (ASCIS), a shoe supplier that is based in Japan. At that time, most sales were made from Knight’s car when he meets his peers during sporting events.

Blue Ribbon Sports (BRS) launched its first brick-and-mortar store in Santa Monica, California in 1966. After seven years of operating as a reseller for Onitsuka Tiger, BRS launched its own brand, through a new logo design, ‘Swoosh’ logo, by Carolyn Davidson. The logo was officially used in mid-June 1971 and registered as a trademark in 22 January 1974.

Two years later, John Brown and Partners advertising agency was employed by Nike, Inc. to carry out marketing campaigns. Under the agency, “There is no finish line.” tagline was promoted as Nike, Inc.’s branding advertisement. In 1980, half of U.S athletic footwear industry was controlled by the company, which was subsequently publicly listed later in December, the same year.

By 1988, Nike employed Wieden+Kennedy advertising agency which created the famously known tagline for Nike brand, “Just Do It”. The man behind the tagline was Dan Wieden, a co-founder of the advertising agency. The tagline was selected as one of 20th century’s top five taglines by Advertising Age. It was even honored and kept in Smithsonian Institution. Nike’s advertisement in 1 July 1988 making use of “Just Do It” slogan had included Walt Stack. The slogan, according to Dan Wieden, was inspired by Gary Gillmore’s last words, “Let’s do it”, prior to his execution. Nike continued to grow globally in 1980s with products spanning from various sporting goods to clothing.

Products

[pic 3][pic 4]

Figure 2 A Nike brand athletic shoe              Figure 3 A pair of Nike Air Jordan I basketball shoes

Nike, Inc. not only manufactures but distributes numerous sporting items as well. Athletic footwear was Nike’s early product. The company continues to produce sports gear encompassing cricket, basketball, lacrosse, football, tennis, ice hockey, baseball, as well as sports clothing including, base layers, shorts, jerseys, and shoes. Nike released Air max shoes in 1987. This was followed by shoes for other sports types including, skateboarding, Nike SB Shoes, Nike NYX, and Nike 6.0. The latest series of sports shoes released by Nike is Air Zoom Yorker, targeting cricket athletes. The shoes are claimed to have a lighter weight by up to 30% than other competing brands. Meanwhile, Air Jordan XX3 was released in 2008, focusing on shoes that support players to perform well in the sport.

Headquarters

Nike is headquartered in Beaverton city, surrounded by Washington County.  The company struggled with annexation attempt by Washington County over its headquarters, causing Nike to file a lawsuit. The company’s lobbying was successful which saw an Oregon senate Bill 887 passed in 2005. The bill prevents annexation of Columbia Sportswear and Nike’s lands for 35 years, while prevents similar annexation of Tektronix and electro Scientific Industries’ lands for 30 years.

Manufacturing

Globally, Nike owns over 700 stores and offices. Predominantly, Nike’s manufacturing units are situated in Malaysia, Philippines, Pakistan, Vietnam, Thailand, India, Taiwan, China, and Indonesia. Despite its global eminence, Nike safeguards contractual information it deals with its manufacturing units in foreign countries closely. Despite this, after receiving CorpWatch’s punitive condemnation, Nike began to reveal these contractual information in its Corporate Governance report.

Footwear Production

Even during its early age, Nike had always kept a close eye on Asia’s cheap resources encompassing raw materials, production costs, and labor forces. Nike’ shoe manufacturing business does not require much technical skills but rather labor-intensive basic procedural tasks. These tasks are split into several hundred operations run concurrently, which are mainly categorized into shoe packing, shoe quality final check, coating, lasting, needlework, item cutting, sole shaping, pattern and model creation, and designing tasks. In competing for competitive pricing while maintaining shoe quality, Nike needed to have accessibility to cheap and low-skilled labor forces. Figure 4 lists the costs involved in producing shoes.

[pic 5]

Figure 4 Costs Involved in Manufacturing Shoes

Nike subcontracted its shoe manufacturing line in Asia. This allows Nike to hold zero responsibility over the welfares of the labor forces. Nike would only hold responsibility over the end products produced (i.e., sports shoes and sports gear), as they do not have any ownership over manufacturing units that belong to subcontractors that they deal with.

Due to this, Nike focuses solely on distributing, designing, and marketing its products. From time to time, in order to ensure products manufactured in Asia’s manufacturing units are up to Nike’s quality standards, quality inspector from Nike would manage production operation. The staff liaises with R&D team and Nike Beaverton head office to make sure that quality is maintained and development procedures are adhered to by employees. In addition, Nike supports tasks that involve joint development between its team and the manufacturing units including, production process enhancement and exploration of new materials to support production line.