Nike: From Sweatshops to Leadership in Employee Practices

Nike: From Sweatshops to Leadership in Employee Practices

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Nike: From Sweatshops to Leadership in Employee Practices
A. Introduction
Nike is on of the world leaders in the footwear industry. It is doing very well in the environment and overall in the footwear industry. Nike has had some problems with its reputation due to the location of its suppliers and the linkage of Nike to sweatshops. Nike was publicly criticized for these things and it proceeded to avoid the problem and even mislead the public. Finally after having to settle on a legal case brought about by this lying Nike actually addressed the problem. Nike began taking an interest in its suppliers developing new ways of testing and screening the suppliers. The changes have lead to Nike earning many different awards or recognitions and Nike has become a leader in employee practices.
B. Situational Analysis
1. Environmental Analysis
Environmentally the US and entire world economy isn’t doing well. Every since the terrorist attacks in 2001 the US economy has been doing poorly. The housing market has crashed and oil prices have risen reaching over $100 a barrel. Both of these things have lead to higher prices on gas, groceries, and more. Consumers are afraid that their investments are going to default so they are pulling out of the stock market and losing faith; this had lead to dramatic drops in the stock market. In order to fix these problems Bush and the US government made $700 billion bailout for the US financial institutions. This helped the US regain some faith in its investments but overall has been ineffective. Outside of the US there have also been many economic problems; all markets are doing poorly.
2. Industry Analysis
Overall, the footwear industry is growing and it is doing fine in comparison to the environmental problems. The footwear industry is still seeing growth in the casual athletic footwear segment, basketball footwear segment, and running shoe segment. Growth is also expected in equipment and apparel, which is good for Nike because it has branched out to sell these things. The problem facing this industry is price deflation, which has lead to casual styles taking on more importance and a decline in the demand for premium-priced performance athletic shoes. Overall the industry is doing well as long as Nike can adapt its styles, features, and pricing to follow demand.
3. Competitor Analysis
Nike’s major competitors are New Balance, Reebok, and Adidas. Other competitors could include different brands of sports equipment and apparel.

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New Balance is a leading manufacturer of technically innovative, width-sized footwear. It also sells a wide range of products including running, walking, cross training, basketball, tennis, adventure sports, kids, working and hiking boots, sandals, boat shoes, and rugged casuals. Reebok focuses on athletic shoes and is number two in the US and fourth globally. Reebok also sells sportswear, accessories, casual wear, walking shoes, and casual shoes. It also has the advantage of being partnered with 17 of the 26 NBA teams with hopes of partnering with all 26. Lastly, Adidas is fourth in the US and second worldwide. Adidas has three distinct divisions, Adidas Sports Performance, Adidas Sports Heritage, and Adidas Sports Style. These three divisions sell footwear, apparel, retro sneakers, and upscale sportswear collections.
4. Internal Analysis
Internally, Nike has been doing well and despite the fact that its growth has slowed it continues to do well. Nike holds 40% of the US market share and is first in the industry. Nike has different retail formats in the US including 78 Nike factory stores, 4 Nike stores, 13 Niketown showcase stores, 4 employee-only stores, and 61 ColeHaan stores. Nike’s products range from specialty footwear for tennis, golf, and more to athletic footwear. Nike also sells equipment, apparel, and more. It also sells globally through independent distributors, licensees, and subsidiaries in 140 countries. Also, 99% of Nike’s manufacturers are in Southeast Asia. This gives Nike lower labor costs, better tariffs, better materials, and better industries. It also lead to Nike’s reputation problems with critics claiming Nike was involved in sweatshop labor and that Nike would leave certain countries or areas as employee treatment got better because it lead to higher costs for Nike. Finally, from a financial standpoint Nike is doing very well with good profits and enough money to invest in R&D.
C. SWOT Analysis
1. Strengths
Nike has many strengths pertaining to how it handled its sweatshop reputation and its business as a whole. First Nike has the strength of being the industry leader in footwear. Nike holds 40% of the US market share and the US market makes up 53% of Nike’s total revenues. Nike also sells in 140 countries outside of the US and offers the broadest range of products. Nike has even branched outside of shoes to sell apparel, sports equipment, and other items. Shoes account for 58% of Nike’s revenues while the other things Nike sells account for the remaining 42%. Nike also has the strength of 99% of its manufacturers in Southeast Asia. This gives Nike lower labor costs, better tariffs, better materials, and better industries. Nike also has celebrity and team endorsements such as Air Jordans which were endorsed by Michael Jordan. These things account for Nike business strengths but Nike also has the strength of becoming a leader in employee practices. At first Nike acted poorly to try and recover from its bad sweatshop reputation but once Nike took it seriously it developed the strength of becoming an industry leader in treatment of employees and suppliers.
2. Weaknesses
Although Nike ended up handling its sweatshop problems correctly it still ahs some weaknesses that should be addressed. Nike allowed for its reputation to be tainted in the first place. This shows that Nike isn’t good enough to take care of its own problems until after the problems become public. This may make some footwear customers avoid the store altogether. Nike also acted badly by lying to the press about the conditions in its supplier’s factories. This came to a head in Nike vs. Kasky where Nike was sued for misleading the public. Nike had to settle on the case saying a settlement was the best choice because the focus was on benefits to the workers and corporate responsibility. This case and Nike purposely misleading the public are more Nike weaknesses because there is a good chance this happens have caused consumers to lose faith in Nike. It further hurt Nike reputation and potentially drove away more customers.
3. Opportunities
Nike has many opportunities to continue on its path for good employee practices. Nike can continue its evaluation of suppliers and continue to offer better wages to employees. On top of this Nike can strive to become a leader in supplier development. Helping its suppliers to get and maintain the highest quality machines and technology in order to eliminate waste. Nike can also continue to reduce the number of toxic chemicals in its footwear. It should also keep researching in order to make its footwear out of recycled materials and to make a new program that allows for the recycling of old footwear. If Nike can continue to be a leader in employee practices and adopt new practices to help it become a “green” company then it will lose its bad reputation and remain the industry leader.
4. Threats
Nike ended up handling its reputation problems correctly; therefore, they are no longer a threat but the changes Nike has made to change its reputation are threatening. Nike had to invest much more time and money into its suppliers and workers. Nike also had to spend money on litigation in its case Nike vs. Kasky. All of this extra money could potentially hurt Nike’s profits. Nike also has the threat of lost customers, due to its bad reputation, that it can no longer get back. This could also hurt Nike’s profits and market share. Nike is also threatened due to the fact that it has become a leader in employee practices because it may have set consumer expectations too high. If Nike can’t keep up its new ideas and leadership consumers may begin to move away from Nike and shop at its competitors. Nike is also threatened by its competitors, which include New Balance, Adidas, and Reebok. If these competitors develop the same or better practices as Nike then they may steal customers away from Nike. Lastly, the industry and environment are threats to Nike. First the footwear industry, which has always seen big growth, is starting to slow down. Also like any other company Nike is threatened by the downturn in the economy some people are no longer going to buy the type of shoes Nike sells they may turn to cheaper shoes at stores such as Wal-Mart or Target to save money.
D. Conclusion
In conclusion, Nike had problems with its reputation but after being publicly criticized Nike worked on new programs that lead to it being recognized for its employee practices. Nike has continued to do well in the footwear industry since problems with its reputation but it needs to continue improving in order to keep it leadership in the industry. Nike should continue with supplier development while trying to get all others in the footwear industry to adapt certain standards for suppliers. It should also branch out a “go green” by using recycled products in its shoes, reducing toxic chemical use in its shoes, and recycling old shoes.
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