Introduction
The paper’s purpose is to analyze an American sportswear company, Nike. The company owns one of the most recognized brands in the world – the Nike brand. Nike is an important company because it managed to achieve the balance between adhering to sustainability goals and winning the competition with its rivals in the industry. The changes introduced by the company in 2008 were the driving factor behind its future successes.
Although Nike currently has the reputation of a socially responsible company, it took decades for it to achieve this status. Ranging from unfair labor practices to the use of production processes that harm the environment, Nike had to overcome numerous challenges over the course of its history. Understanding how the company is organized is essential in ascertaining how it managed to advance corporate responsibility while sustaining financial results.
Nike
Structure and Size of the Business
The person heading Nike’s management structure is Mark Parker, the company’s CEO. Subordinate to him are vice-presidents, one of whom was Hannah Jones. The next level in management comprises directors, represented by the director of corporate responsibility Sarah Severn. Category Footwear Leader Amy White is an example of a manager overseeing more specific tasks. The employee base was comprised of workers who regularly voiced their opinions on important managerial decisions, such as adopting the Considered strategy.
Nike is one the most successful brands outstripping its competitors on the market. The company’s financial history is characterized by 2008 when Nike reported $18.6 billion in revenues (Nike considered, n. d., p. 3). The company had close to 700 factories, employing more than 800,000 workers (Nike considered, n. d., p. 3). Legally, the Nike brand belongs to the public company Nike Inc. Three types of investment holdings can be identified: investments in the reverse supply chain, machinery, and investments in environmental improvements.
Business Environment
Nike is a company specializing in producing and distributing sports equipment, footwear, and apparel. Prominent competitors of Nike include Adidas and footwear-specific Brooks. Nike comprises a large portion of the market, holding “a 36% share of global athletic footwear, well ahead of top competitor Adidas’ 22% share” (Nike considered, n. d., p. 3). The customer base consists of athletes, sports enthusiasts, and people drawn to an active lifestyle. The major change the company experiences is the rise of the environmental agenda. Before the company started to address the problem, sports apparel production had been taxing on the environment. In response, “the company launched programs to replace the greenhouse gas SF 6 in its flagship Nike Air system with climate-neutral nitrogen and develop water-based cements to replace toxic solvents” (Nike considered, n. d., p. 4). Subsequently, Nike started to release lines of sustainable products, which were made with less harm to the environment.
Key Issues
Mitigating the Environmental Impact
As Nike’s business executives became more aware of the ecological consequences of the company’s operations, they began to look for ways to mitigate the impact while maintaining performance. It was also an important topic for investors who started to value ecologically-friendly companies more. The environmental agenda was a part of a larger shift in the company’s priorities. Nike’s management has realized that committing to corporate responsibility has benefits beyond a positive reputation. It would also generate more revenues due to investor trust and customers’ interest in sustainable products.
Labor Crisis
The second problem that Nike was trying to solve was the employee crisis. Like any other company, Nike sought ways to increase its financial performance while decreasing expenditures. One of the methods the company attempted to achieve a better performance was via the use of overseas workers. The workforce in developing countries is cheaper and less aware of workers’ rights than its counterpart in the Western world.
Subsequently, numerous social issues became prominent, such as child employment and illegal pay practices. As criticism of Nike increased, the company’s reputation was severely damaged, which forced the management to search for ways of addressing labor issues (Nike considered, n. d., p. 4). It also showcased the inconsistency between the management’s declaration of commitment to corporate responsibility and the actual labor practices performed by the company’s subsidiaries.
Response to Key Issues
The environmental problem was tackled with the introduction of the Considered group. A group of consultants analyzed the company’s environmental impact and developed solutions for its alleviation. The first step was to reassess product designs and ascertain what components or production processes impacted the environment. The second step was to teach the production teams to spot these predictors. For this purpose, the team introduced the Considered Index, which “evaluated a product’s bill of materials” (Nike considered, n. d., p. 4). This score allowed the production teams to design new products with environmentally sustainable materials. As more product lines started to look more favorable on the Considered Index, the environmental damage was significantly reduced as more ecologically-friendly materials were implemented.
The labor crisis was addressed with the introduction of new labor policies. The first step was to create a position overseeing the company’s adherence to corporate responsibility. Afterward, it became apparent that overseas suppliers were the major contributor to the negative statistics regarding the lack of compliance with the Code of Conduct. However, procurement teams ignored it because of the company’s focus on efficiency and performance. There was no incentive to draw attention to illegal labor practices since they were cost-effective. Specifically, it created a new strategic approach “emphasizing that business decisions included financial and corporate responsibility returns” (Henderson et al., n. d.). Essentially, Nike’s solution shifted from prioritizing efficiency to focusing on corporate responsibility.
Successes and Failures
Successes
The major success of Nike is its market position and reputation. The company has become the most renowned footwear and apparel company globally because of its unmatched operations and production of high-quality products. The company manufactures high-quality shoes that have caught the attention of athletes globally, thus, increasing the popularity of the company and its sales. The company has high noticing power, making it easily recognizable among other companies that deal with footwear and apparel. The company’s products easily catch its customers’ attention, making them purchase the products despite the presence of other brands in the market. The further success of Nike is its ability to streamline its operations to adhere to the environmental operation standards. Before 2008, the company was characterized by operations threatening the environment’s well-being (Henderson et al., n. d.). However, the company has been able to strategize its operations to adopt environmental-friendly processes that have helped achieve great results.
Nike has been winning awards because of its strong brand and good reputation in the market. For instance, Nike, Inc. won two awards in 2019 and three awards in 2018. Despite stiff competition from other footwear and apparel companies like Adidas, Nike managed to be rewarded (Grubic, 2021). These awards have helped the company to continue its streak of producing high-quality products and adhering to environmental operation standards (Grubic, 2021). The company has employees with excellent skills and knowledge needed in the industry. Besides, the company has highly qualified staff and top administration. The company won the award of the top and best CEO in 2018 (Saini et al., 2022). The winning of awards and good reputation in the market has helped Nike to overcome contemporary issues that might derail it from achieving its goals and targets in the industry.
Failures
The biggest failure of Nike came in 2019 when Zion Williamson suffered a knee injury in the middle of a crucial match when the shoe he was wearing broke open. That failure led the company to an unimaginable loss of $1.1 billion (Rasmussen, 2021). The company’s reputation and sales declined drastically after that event because it portrayed a negative picture of the quality of products manufactured by Nike. The other failure of Nike is its delay in supply chain management. The company’s supply chain management has been unreliable in most cases regarding the delivery of shoes to customers. There have been numerous cases of delayed delivery of ordered shoes to its customers (Nani et al., 2022). The failures in the supply chain management have become a competitive advantage to other footwear and apparel companies to expand their operations in the market.
The company has been involved in several labor issues. For instance, Nike has been accused of using Asian sweatshops as a source of cheap labor for its outlets globally. The company has also been accused of imposing restrictions on its employees concerning restrooms and water usage in various workplaces. As a result, the company’s reputation in public has not been stable. There are instances when the company’s top administration has used abusive language on employees, portraying racism and discrimination against employees (Alazzawi, 2019). All these unethical practices have been globally criticized and threatened to tarnish the good reputation that the company has for many customers (Nani et al., 2022). There is a need for the company’s top management to adopt ethical workplace practices that feature well in the public so that the company can remain relevant in the market for longer.
Analyzation
The best analysis method of the successes and failures of Nike is Porter’s five forces. Nike has strong bargaining power over buyers because of its reputable and globally recognized brand. The company ensures that its products meet the environmental standards and requirements and provide the durability of the products. As a result, the products manufactured by the company have become the most preferred among athletes (Li, 2022). Athletes have significantly helped the company market its products to the public, which has helped the company increase sales and profitability. Nike has high bargaining power over suppliers (Rasmussen, 2021). Since the company is the best globally, it has a wide range of suppliers wishing to trade with it to supply materials and deliver the finished products to customers (Alazzawi, 2019). Therefore, the company has a stable supply of raw materials and reliable distribution channels.
However, the company is threatened by its principal rival, Adidas. Adidas manufactures high-quality products and can easily outdo Nike in the market if appropriate operation strategies are not implemented. The competition in the industry has remained high and requires constant research and implementation of new methods to stay relevant to the customers. The presence of Adidas and other footwear and apparel companies also raises the threat of substitute products and services (Li, 2022). The products manufactured by the competitors of Nike in the industry can quickly become reputable if the failures witnessed by Nike company are not appropriately addressed. Technological advancement makes the footwear and apparel industry prone to new entrants. New entrants in the industry will become a threat to the existence and profitability of Nike.
What Would You Do?
Nike should maximize its successes and rectify failures to remain relevant in the market. Since the company has globally reputable products, the administration of the company should encourage continued research to ensure the production of high-quality products. The study will help the company identify unique production methods to ensure customer satisfaction and sustainability in the market (Saini et al., 2022). On the other hand, the top management in the company should ensure that ethical practices are observed in the various workplaces. Employees should not be exposed to any unethical practices because that would demotivate them and derail them from attaining the expected standards of performance set by the company.
In addition, the organization should develop a corporate social responsibility program that would improve its public image. Social factors have been playing a pivotal role in the company’s performance. Increased lobbying for social responsibility in physical health has also increased demand for sports and fitness apparel and equipment. In recent times, the American public has become more empowered, educated, and sensitized on the quality of products and services. With improved quality delivery and creating a positive brand image to the public, Nike products have been preferred among many consumers of sportswear and equipment.
Further, corporate social responsibility has been a critical area of concern because Nike has been accused of outsourcing labor from developing nations. Noting this trend, American consumers have frequently been questioning the company’s commitment to CSR, which momentarily slows consumer growth (Shtal 2018). Hence, there is a need to re-strategize the company’s recruitment and placement mechanism.
Conclusion
Future Challenges
One of the main future challenges the company will likely face is competition with new entrants with unique production techniques due to technological advancement. Technical innovations have increased the research and identification of special production techniques. Therefore, if Nike does not escalate the incorporation of modern technology in its operations, it might be outdone by new entrants in the future. Nike might also face increased legal actions following workplace and employee rights advocacy escalation. There has been increased advocacy for workplace and employee rights in modern society. Therefore, Nike has to adhere to the contemporary workplace and employee rights to avoid facing legal actions.
Final Thoughts
Ethical operations have become instrumental in most business organizations. They ensure that business organizations adhere to the operating standards set in the workplace. Due to ethical operations, Nike has become a successful company in the footwear and apparel industry. Nike is the leading footwear and apparel company, with over 800,000 employees globally and numerous outlets. However, the footwear and apparel industry is competitive. Nike’s major competitor is Adidas, the world’s second most prominent footwear and apparel company. Nike must prioritize research and adherence to workplace and employees’ rights to remain relevant and profitable in the market.
References
Alazzawi, A. A. (2019). Brand personality dimensions of Nike sportswear-an empirical analysis. Journal of Business and Retail Management Research, 13(4).
Grubic, A. (2021). Just wear it: Media coverage of the Nike Pro hijab. In Fuller, L. K. (Ed.) Sportswomen’s Apparel Around the World (pp. 83-94). Palgrave Macmillan, Cham.
Henderson, R., Reavis, C., Locke, R., & Libby, C. (n.d.). Nike considered: Getting traction on sustainability – MIT sloan.
Li, H. (2022). Research on how products and marketing strategy affects the market shares of Nike and Adidas. In 2022 International Conference on Creative Industry and Knowledge Economy (CIKE 2022) (pp. 197-202). Atlantis Press.
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Rasmussen, K. (2021). Brand activism and gender: Nike as a case study (Doctoral dissertation, Brigham Young University).
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Shtal, T.V., Buriak, M.M., Amirbekuly, Y., Ukubassova, G.S., Kaskin, T.T. and Toiboldinova, Z.G., 2018. Methods of analysis of the external environment of business activities. Revista Espacios, 39(12).
