Nike Just Do It
Through our research, we focused on five aspects of business that Nike has done well to help them become a successful organization including their management structure and organization, their treatment of their customers and employees, their handling of ethical issues that have arisen, the array of products and services they offer, and the marketing and distribution of their products.
The management structure of Nike is set up as a matrix organizational culture. In this type of setup, there are several different positions of authority that exist and many employees report to two or more managers. At the top of the chain are Phil Knight and Mark Parker. Knight is the current Chairman of the Board of Directors, while Mark Parker is the President and CEO (Nike, Inc.). Under them are executive positions such as the Chief Operating Officer (COO), Chief Administrative Officer (CAO) and Chief Financial Officer (CFO) as well as managers in different areas such as product and merchandising, global human resources and global sports marketing (Nike, Inc.).
Many Nike employees report to team managers, who in turn report to departmental managers. Some of these departmental managers work under their own brand that is associated with Nike such as Hurley and Converse. Departmental managers tend to focus on policy-type issues while team managers and employees focus more on decisions that affect the specification of manufacturing/production; however, the employees of Nike are subject to the authority of both team managers and departmental managers.
A matrix-like structure allows Nike to react instantaneously and allows swift decision-making by the employees, team managers and departmental heads. Nike’s structural method allows them to accomplish both their short and long term goals through the collaboration of their function and divisional structures.
The upper level management team has made a commitment to making Nike a more sustainable company for the future. They have focused on a couple specific areas to make this happen: design and innovation and adaptation to changes in society, the environment, and labor as a whole. Nike’s upper management believes that the sustainability of innovation, and their business, has the potential to shape the legacy of the company (Nike Corporate Responsibility Report). Every successful business has managers that learn from prior mistakes. They believe that in order to meet their goals, they must focus on the lessons they have learned. Some lessons Nike has learned include: transparency is an asset, not a risk; collaboration enables systemic change; every challenge and risk is an opportunity; design allows you to prototype the future, rather than retrofit the past; and to make real change, you have to be a catalyst (Nike Corporate Responsibility Report).
Employee and Customer Treatment
Just like any of the major companies in the United States, Nike also faces many challenges. One such challenge includes always being in the spotlight. Nike must show proper treatment towards all of their employees at all times or risk facing the scrutiny of the media. Nike endured a downturn in public approval when news of their sweatshops and poor working conditions spread; however, Nike took great strides to correct this and has done many great things for their employees.
Nike offers competitive total compensation packages that include benefits providing employees the opportunity to stay fit for themselves and their families with the hope of creating a positive working environment. As a global company, every geographic location is different, but Nike ensures that each factory provides for health coverage, fitness center memberships, time off, and retirement savings. Total benefit packages depend on position, location and years with the company. Considered one of the biggest benefits, Nike employees have access to any local employee store. A Nike employee store consists of a range of Nike products from footwear to golf attire and even jerseys. Anything that Nike has to offer and more (such as limited editions of apparel) are in the store. Everything in the store is 50% off retail value all year regardless of the item. This allows employees to save money on apparel that is otherwise expensive and difficult to afford at retail value. Although many employees receive great treatment and benefits, not all have access to it. Overseas, there has been a much different story.
Nike has had a history of moving its manufacturing plants overseas to cut costs since it is cheaper to make their products as well as cheap labor (Marshall 1997). Along with being overseas Nike has had a tendency to not follow its company’s strict policies towards the treatment of its employees. There have been sweatshop accusations, poor working conditions, low wages, and abuse of their workers in manufacturing plants overseas. According to Charlie Cray, the KuK Dong sweatshirt factory in Puebla, Mexico is rapidly becoming a failure in the test of Nike’s commitment to ensuring that workers’ rights are respected. 800 Kuk Dong workers went on strike in January when 25 others were fired or forced to resign. The original complaints included forced overtime, low wages, bad cafeteria food, and efforts by management to block the formation of an independent union to replace the company-supported union (Marshall 1997).
Another incident occurred in Vietnam according to Thuyen Nguyen when 56 women were punished for failing to wear regulation shoes. The women were forced to run around the factory premises in the hot sun on March 8, International Women’s Day. Twelve of the women fainted during the run and were taken to the hospital. “We found that verbal abuse and sexual harassment are frequent, as is corporal punishment” (Nguyen). Upon further investigation, Nguyen found that the Nike workers in Vietnam make an average of 20 cents an hour, or $1.60 per day. Clearly there is a problem with the enforcement of Nike’s policies overseas. Although Nike has done great things for their employees, they have failed to enforce policies leading to a tainted reputation in the process of manufacturing overseas.
One of the biggest strengths of Nike is their ability to outsource and their network of strategic alliances. In fact, `ninety-nine percent of the 120 million pairs of shoes that Nike makes each year are made in Southeast Asia’ (Jones, George). It is, however, these relationships that have caused Nike to come under scrutiny in recent times as critics have revealed how workers in other countries were being treated. These critics pointed out that Nike factory workers earned anywhere from 80 cents a day up to $1.60 a day depending on their location, but that $3.00 was needed to maintain an adequate standard of living (Jones, George). Nike’s reaction to scrutiny is one of the reasons they have been a successful corporation in recent times.
Kristen Bell DeTienne, a professor of Organizational Leadership and Strategy at BYU, says that `almost three quarters of American investors consider social responsibility when they make investment decisions’ (DeTienne & Lewis, 2005). How a company is viewed, then, can go a long way to helping or hurting the company’s bottom line. The problem that many companies face is how to ethically, legally and effectively engage public dialogue to disclose information while maintaining a positive image. Maintaining integrity becomes more challenging when a company must report less attractive details or respond to criticism (DeTienne & Lewis, 2005). Nike has taken important steps to respond to their criticism by showing virtual tours and visiting college campuses.
Shortly after Nike was hit with their criticism, they placed on their web page a virtual tour of some production facilities so interested parties could see the inside workings and be reassured that the facilities were not sweatshops (DeTienne & Lewis, 2005). Nike also invited teams of graduate students from Dartmouth to tour Vietnamese and Indonesian factories for 3 weeks at Nike’s expense. The students wrote reports of their findings that Nike posted on their website, providing further evidence for students and critics of reasonable manufacturing practices (DeTienne & Lewis, 2005).
Still, there was a large group of student activists at UNC Chapel Hill who had concerns and arguments about how Nike’s factories were run. Phil Knight visited the campus to lecture to these concerned students about the fairness of Nike’s labor practices. It was another method; however, that Nike took most advantage of. `The newspaper was the most ubiquitous instrument the company used to distribute evidentiary materials supporting its production methods’ (DeTienne & Lewis, 2005). Nike issued numerous opinion articles and press releases indicating the fairness of their factories. To the New York Times, Phil Knight wrote a letter to the editor saying that `Nike has paid, on average, double the minimum wage’ (DeTienne & Lewis, 2005) in the countries where their factories are located and that Nike’s presence in these countries actually helped improve the impoverished economic conditions (DeTienne & Lewis, 2005). The reason Nike has expanded into these countries is the opportunity to reach new markets and design a wide array of products.
Products and Services
Nike, being an apparel company, provides customers with clothing options. Some of these include shirts, shorts, jackets, hats, gloves and more. They also have a large inventory of footwear and provide specific gear for sports such as basketballs and footballs.
One of the first decisions that Nike made was to expand its product range to cover a wider array of sports, including sports that were not as popular in the United States such as, initially, soccer and rugby. Nike also decided to extend their products to not only include sportswear, but to also provide apparel that was suitable for casual wear.
Rather than ship all products to stores for sales, Nike decided to sell their own gear in their own stores. They called their retail stores Niketown. These retail stores allow Nike to directly deal with their customers and learn from them (Larson, 2011).
Nike has constantly set the benchmark in the apparel industry and one of the first things Nike did to set themselves apart from the competition was the design and development breakthrough of the `Air’ characteristic which incorporated air cushion into a shoe’s sole and heel’ (Larson, 2011, p. 8). A second thing Nike did was to have an option on their website to customize and personalize products through Nike ID (Larson, 2011). Nike ID is a way for consumers to pay a little extra money to have the ability to customize the colors and stitching on some of the products they offer. This unique way to enhance the product gives Nike an edge over many other sports wear providers.
Nike has also taken the reigns with incorporating technology into their products and sales. With recent trends shifting towards e-commerce, Nike has partnered with Apple, Inc. to integrate capturing athlete performance metrics via the iPod or iPhone (Larson, 2011). This is known as Nike+ fitness tracking (Marketing Week, 2013). Nike+ is a social network that lets runners track their runs with GPS, upload their times and maps to the network and share them via Facebook, Twitter and Path.’ (Kevin, 2012) They also launched the Nike+ Fuel Band in 2012. This band allows users to measure performance and goals with others. The Fuel Band measures motion and translates it into NikeFuel (a score for activity). Every day the user can set a `fuel goal level’ and as this goal is reached the Fuel Band’s series of 20 LED lights change from red to green. This data syncs itself with the Nike+ website, through a built-in USB or wirelessly through Bluetooth, to a free iPhone app to record each day’s activities and track their goal progress (Marketing Week, 2013). Nike is adding wearable computing devices to their long list of products offered.
Marketing and Distribution
Two factors that have helped Nike to be a successful organization are their distribution and marketing. Nike has pursued techniques that allow Nike to distribute their products all over the world. They make their products readily available to consumers by distributing them in several different ways. One way is for customers to visit an outlet or retail store. These outlet stores are located in forty-one different states in the U.S. (Nike, 2013). However, Nike realizes that some consumers do not live close enough to visit an outlet store, so they have created an online store that allows for consumers to view all of the new and innovative products that Nike has to offer. After accessing the online website the consumers can choose to add items that they wish to purchase to their shopping cart. After all the items are chosen by the consumer they can pay online via credit card and their products will be shipped to them in a timely manner. Aside from having company stores throughout the United States, and an online website to purchase goods, Nike still makes its presence known in other retailing stores. The brand name Nike is seen in many retailing stores around the world such as Dicks Sporting Goods, JC Penny, Kohl’s, and many shoes stores such as Footlocker and Payless. Although these retailing stores may not carry as much of a variety as the company stores or the online website, they still provide a way to get Nike’s product on the shelves and, in turn, raise their revenue.
Marketing is one of the most important aspects of a company being successful. Ultimately, Nike hopes to fulfill their mission statement of `bring[ing] innovation to every athlete in the world’ (Nike, Inc.) where they define an athlete as anybody who has a body. They push themselves to everyone; however, Nike has identified several target markets as their highest priority. These target markets consists of athletic males and females and most everybody between the ages of 15 to 40 years of age. The athletic consumer is targeted because of the sportswear products that Nike offers, while the pre-teens to early adults are targeted not only for sports, but for style purposes. With Nike’s wide range of product variety, they can reach interest in most consumers on the market. Most people in the United States today know of Nike and their products regardless if they own any items themselves (Larson, 2011). Aside from just getting the target markets attention, Nike also does much more for their marketing aspect. Nike adds value to their particular product line in several different ways. As shown in the Products and Services section, the creation of Nike ID is a huge bonus. Although some see Nike products as expensive, many realize that they have high value because the products are high quality items. Given all of the factors that play into marketing to consumers, Nike has become a globally successful company that excels in marketing its goods all around the world.
From management to the treatment of customers and employees, from ethical issues to what products and services they offer, and then to distribution and marketing, we get a clear understanding of why Nike has been unstoppable for many years. Their management structure is in the form of a matrix. This makes it easy for changes to be made with no time wasted. Nike has produced a wide range of products for their individualized consumer groups, and has learned how to market and distribute those products to the consumers. They have dealt with some ethical issues that tie into how they treat their employees, such as child labor in their overseas factories. The strengths of this company are stated to be `robust market position bolstered by strong brand equity, competent technical innovation in products enhancing Nike’s competitive advantage and brand equity, and a broad distribution network’ (NIKE Inc., 2013). The weaknesses of Nike could include the `dependence on third-party manufacturers and [having] limited control over contract manufacturers’ (NIKE Inc., 2013). Opportunities for Nike are stated to be `the association with NFL [that] would consolidate Nike’s leadership position in the US, growth opportunities in India, brand reorganization initiative, and growth in global footwear market’ (NIKE Inc., 2013). Nike’s threats as stated are `intense competition and a growing counterfeit goods market’ (NIKE Inc., 2013). Despite these weaknesses and threats, Nike has remained on top as the most successful leader in athletic footwear and apparel.
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