NIKE INTERNATIONAL LABOUR

PRACTICES

GROUP MEMBERS

M.SHOAIB RIAZ 01-120101-017

MILHAN TAHIR 01-120101-010

CONTENTSBRIEF HISTORY

OVERVIEWLEADERSHIP STYLE

CORP GOVERNANCE MODEL

OUT SOURCINGCORPORATE STRATEGY

CSRMAJOR ISSUES

SAVING THE SWOOSHCONCLUSION

RECOMMENDATIONS

COURSE APLICATION

Bill Bower man and Phil Knight founded

NIKE Inc.

as Blue Ribbon Sports in 1962.

The partners began their relationship at

the University of Oregon where Bower

man was Knight’s track and field coach.

While attending Stanford University, Knight wrote a paper about breaking the

German dominance of the U.S. athletic shoe

industry with low-priced Japanese shoes.

BRIEF HISTORY

BRIEF HISTORY

In an attempt to realize his

theory, Knight visited Japan and

engineered an agreement with

the Onitsuka Tiger company, a manufacturer

of quality athletic shoes, to

be their sole distributor in the

United States.In 1962, Knight received the first shipment of 200 pairs

of Tiger shoes to his parent’s garage in Oregon

Capital of $1000, sales of $8000 in first year

Named the shoe “NIKE”

Introduced “SWOOSH” ,conceived by the

Greek goddess of victory.

BRIEF HISTORY

GOVERNMENT INTERVENTION

OVERVIEW

The company is headquartered near Beaverton, Oregon, in

the Portland metropolitan area

It is the world's leading supplier of athletic shoes and apparel and a major manufacturer of sports

equipment

American multinational corporation that is engaged in the design, development and

worldwide marketing and selling of footwear, apparel, equipment, accessories

and services

OVERVIEW

Diversity came from models designed from different foot types body, weight, gender, speed, running, training schedules and

skills level

By 1981, NIKE led all the athletic shoemakers with

app 50% of the total market share

Developed a new type of sole whose tiny rubber studs made it springier than all the

rest in the market

“ TO BRING INSPIRATION AND INNOVATION TO EVERY ATHLETE” IN THE WORLD”

“ IF YOU HAVE A BODY, YOU ARE AN ATHLETE.”

MISSION

“ To carry on the legacy of

innovative thinking, weather

to develop products that

help athletes of every level of ability reach

their potential, or to create

business opportunities that set Nike

apart from the competition and to provide value

for our shareholders”

VISION

chair man of BOARD BOD CEO

CFO

CORP SEC

PRES, Direct to consumer

operations

New Business development

AFFILIATES

NIKE BRAND

LEGAL AND CORPORATE AFFAIRS

HR

BRAND MGMT

SPORT MRK

MERCHANDISING & PRODUCT

HIERARCHY

LEADERSHIP STYLE

The company has two executive authorities:

Board of directors (BOD)

Chief executive officer (CEO) Dual leadership style

Anglo Saxon Model

CORPORATE GOVERNANCE MODEL

Eliminate excessive overtime

Tailored human resources management systems

Encourage other brands to join us as partners

90 percent footwear lines to lean manufacturing processesSports for social change

NIKE see corporate responsibility as a catalyst for growth and innovation.

PRODUCT LINE

FootwearEquipment

Apparel

OUTSOURCINGNIKE basically outsource their overall manufacturing in order to avail the cost cutting strategy in third world

countries.

In 1982 82% Of NIKE product came from South Korea and Taiwan

By 1990 China and Indonesia were the main outsourcing countries for NIKE

Currently the products of NIKE’s are made by approx 600 contract factories that employ more than 800000

workers in 46 countries.

STAKEHOLDERS

Private organization

Supply chain associates

Governments

Employees

Investors, shareholders and lenders

Customers and users

Unions

Regulatory authorities

Local communities and citizens

Joint venture partners , alliances

REEBOKADIDAS

UNDERARMOR

PUMA

RIVALS

MC-KENZIE

KICKERS

QUICK SILVER

RALPH LAUREN

PORTER’S FIVE FORCES MODEL

NIKE

New entrants

low

Suppliers low

Rivalry high

Buyers moderat

e

Substitutes high

CORPORATE STRATEGY

Cost cutting Out source all manufacturingNo manufacturing linesLow cost manufacturingIndependent contracting factoriesVirtual corporation

Intensive Marketing

Heavy marketing Celebrity

endorsements

Differentiation strategies Brand identities

Fashion driven The swoosh

STRENGTHS:

Professionally competitive company

No physical factories

Well branded

World wide offerings

Strong marketing campaign

Chains of retail stores

Ventured rebranding opportunities

Incorporating Lunarlite foam material

SWOT ANALYSIS

WEAKNESSES:

Highly depended on foot wears

History of violations of over time laws and minimum wage rates in Vietnam

Accusations of poor conditions in the work place.

Accusation of exploiting workforce that will work for cheap in overseas countries.

Constant focal point for negative criticism by anti globalization groups

SWOT ANALYSIS

SWOT ANALYSIS

OPPORTUNITIES:

Creating sports wear item by incorporating the waste from regular manufacturing

Stepping into the line of economy boosting projects that will encourage recycling

Expansion into sports sun glasses and jewellery lines

Expansion in the global markets to create larger brand recognition

Reducing controversy surrounding their trade and production practices.

SWOT ANALYSISTHREATS:

Currency value fluctuations

Competitors are becoming more aggressive and creating high quality products that are taking from the profits of NIKE

Sensitivity to price among consumers lead them to purchase he most cost effective pair of sports shoes

Maintaining the reputation of being eco friendly

Managing the financial conditions in the economy today.

CSR

NIKE has developed a considered response, supported by corporate website reporting.

It now has a well developed focus for its corporate responsibility on improving conditions in contracted

factories, aiming for carbon neutrality, and making sports available to young people across the world.

NIKE work tirelessly to bring other manufacturers into the

FLA.

CURRENT MARKET SHARE & ANNUAL REVENUES

MILHAN TAHIR

INTERNATIONAL LABOR

PRACTICES

FINANCIAL ISSUES

MARKETING ISSUES

STRATEGY FORMULATION

MAJOR ISSUES

• Underage workforce

(child labour)• Coerced

overtime issue• Dangerous

working conditions

• Declined stock market price

• Declined sales revenue

INTERNATIONAL LABOR PRACTICES

FINANCIAL ISSUES MAJOR ISSUES

CHILD LABOUR ISSUE IN PAKISTAN

A PAKISTANI CHILD NAMED TARIQ WHO IS WORKING FOR NIKE IN POOR WORKPLACE CONDITIONS

• Departure of Michael Jordan

• Vague marketing campaigns

• Non traditional athletic companies e.g. old navy

• Poor prediction regarding consumers and fashion trends

• Cyclicality in footwear and apparels

• Offerings were limited to athletes.

MARKETING ISSUES

STRATEGY FORMULATIONMAJOR ISSUES

NO. OF STRIKES

1988 1989 1990 1991 1992 1993 1994 1995 1996 19970

50

100

150

200

250

300

350

400

JEFF BALLINGER’S ROLE1988

Labour activist

AAFLI office in Indonesia

Investigating labour conditions

Conducted crucial research

“Exploitation of third world factory workers by rich US companies”.

JEFF BALLINGER ARGUMENT

Nike's policy of competing on the

bases of cost fostered and even

encourage contractors to mistreat their

workers in pursuit of unrealistic

quotas .

Ballinger’s findings gained the interest of media groups

Stories become big news

Indonesian and US govt had to pay

attention.

EARLY REFORMS

In 1992, Minimum daily wage in Indonesia increased.

(2100Rupiah– 2500Rupiah)

NIKE addressed seven different aspects of working conditions.NIKE’s Response

Denial of responsibil0ity Stubborn attitude

ALTERNATIVES Shift the out sourcing from low wages countries to higher

Leave the countries having poor working conditions.

Evade the criticism through denial and criticism.

Change its business practices.

IN THE SPOT LIGHT

Michael Jordan endorsement contractPortland Oregonian published serious of critical articles during 1992 Barcelona Olympics.Hard to take a leave for women even on Sunday

GOVERNMENT INTERVENTION Sensing a hot issue, several senators and

representatives jumped into the action and began to suggest legislative solutions

George miller’s campaign “NO SWEAT”

President Clinton convinced a presidential task force to study the issue, calling leaders from

apparel and footwear industry known as APPAREL INDUSTRY PARTNERSHIP (AIP)

COUNTER STRIKE

Hiring Earnest & young

Conducted formal audits of overseas factories

DAMAGE CONTROL

• Nike is doing good but can and should do better.

• Should publicise their code more widely

• Improves systems for reporting workers grievances.

• Implement cultural awareness and language training programs

• Argument of biased findings

• Failed to address the issue of factory wages.

ERNST & YOUNG’S COMPREHENSIVE REPORT

REPORTS REVIEW

HITTING THE WALLChild labour issue raised by life magazine.

Michael Jordan asked to investigate the labour conditions.

Doonesbury ,comics strip highlighted the issue for 15 odd days in newspaper

The wall street journal published ,”Nike had been its own worst enemy”.

Embarrassments for Michael Jordan & Jerry Rice at opening of Nike town.

Health and safety issues revealed ho Chi Minh city.

Respiratory ailment caused by poor ventilation and exposure to toxic chemicals.

University of Oregon track team choose Adidas over Nike.NIKE 7.2m endorsement deal with the university of north Carolina was breached in

1997.Soccer coach at St. Jones university James Kead publicly quits his job rather than

wear the swoosh

HITTING THE WALL

STILL WAITING FOR NIKE TO JUST DO IT “ISSUE OF WAGES”

Issue raised again in 1997

Nike arrange a survey at Dartmouth's Amos tuck school of business to conduct

detail survey on “ The suitability of wages and benefits paid to Vietnamese

and Indonesians contract factory workers”.

OUTCOMES

82% of workers

surveyed, either saved

wages or contribute

d each month to

their families

after incurring essential

expenditures.

Most of the workers were not

the primary wage earners.

Indonesians put typically their

excess wages in banks while Vietnamese likely to hold

their savings in form of rice or

cows.

1.67$ were paid to Vietnamese

workers, so criticism

continued to mount.

SAVING THE SWOOSH

• Slave wages• Forced over

time• Arbitrary abuse

• Raising the minimum age limit of sneaker workers to 18

• Raising the minimum age limit of apparel worker to 16

• Adopting US OSHA clean air system in all factories

• Expand monitoring program, educational program

• Availability of micro loans available to workers.

• Significant restructuring charges and lay off to 1600

workers.

NATIONAL PRESS CLUB, MAY 1998 CONFESS OF

PHIL KNIGHT OVER

SERIES OF SWEEPING REFORMS

FAIR LABOUR PRACTICES

Corporation, combination of internal monitoring and audit by accounting firms.

Minimum age of workers was set 15

Workers could not work for more than 60 hours per week.

Companies make compliance, have to monitor internal systems to apply code of conduct.

30% of outsource factories will be audited in first 3 years, rest will be later on

Adidas Liz Claiborne Reebok Levis L.L.Bean Philips Van

Heusen

AFFILIATED WITH FLA BY AUG 1999

Nike is still not able to understand the main reason

behind all the criticism.

Its not the minimum age that needs raising, its the minimum

wage.

Labour leaders accepted the FLA as the best compromise

possible.

Some still think that it was simply a cover, provided to the

US corporations.

CONCLUSION

REVISED MISSION To lead in corporate citizenship

through proactive programs that reflect caring for the world family of Nike, our team mates, our consumers, and those who

provide services for Nike

REVISED CSR

International Day of The Girl

Corporate Governance Model

Short loan programs to 1000 families of

Vietnam, Indonesia, Thailand and Pakistan

Energy & climate change strategy

Revised design

Change the business practices to improving condition in foreign manufacturing plants

Consider wages, age requirements and safety issues.

Protect NIKE's image through a code of conduct.

Develop and coordinate strong linkages with country and factory managers.

Proactive approach to become socially responsible.

Allowing opportunity for growth and advancement for child labour.

Ensure transparency and accountability.

Improve public relations.

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