Nike Case Study
Shiffaun L. Alston
Jack Welch Management Institute
Professor R. Chua
Sunday, December 7, 2014
Nike’s business model was based in outsourcing its manufacturing, then using the money it saved on aggressive marketing campaigns. However, the process of outsourcing work internationally proved to be problematic for Nike in a variety of ways particularly in regards to low wages provided workers and poor working conditions and environment. This paper intends to evaluate Jeff Ballinger’s argument against Nike, as well as determine how convincing Nike’s response was to Ballinger’s allegations. Lastly, strategies are ...view middle of the document...
Furthermore, considering the value chain model by Porter and Kramer, Ballinger’s argument attacks both Nike’s Indonesian Human Resource Management System (SUPPORT ACTIVITIES--compensation) and Operations (PRIMARY ACTIVITIES--sporting apparel and equipment assembly). Yet, considering Ballinger’s perceived dislike for Nike, it is not unfair to assume that arguments made were not totally objective. Safety standards and worker age can be universally applied across the globe; however, “fair” wages cannot considering not all countries are developed fully. It’s important to note that a company really has to be careful when interacting with foreign societies.
Nike’s response to Ballinger’s allegations—convincing or not?
Overall, Nike’s response to Ballinger’s allegations was not convincing at all. It is not absolutely definitive whether or not consequences of having cheap and irresponsible labor practices abroad could’ve been forecasted; however, extensive research to ensure that policies and culture of international partners are in alignment with your own company is good practice.
Nike’s initial response could be summed up as “without an in-house manufacturing facility, the company simply could not be held responsible for the actions of independent contractors”. This response was a total PR blunder, if ever there was one. All other efforts in the year’s following were half-hearted attempts to address the situation including the internal Code of Conduct & Memorandum of Understanding, The Ernst & Young audit, Apparel Industry Partnership, internal Labor Practice Department, and Andrew Young audit.
Moreover, had Nike proactively tackled the issues immediately before it spiraled out of control the way it did, it is my assumption that a very convincing argument could have been made in regards to Ballinger’s allegations. Crisis is inevitable! Yet, Jack Welch notes that there are 5 assumptions that can be assumed about how crisis will unfold—(1) assume the problem is worse than it appears, (2) assume there are no secrets in the world and that everyone will eventually find out everything, (3) assume you and your organization’s handling of the crisis will be portrayed in the worst possible light, (4) assume there will be changes in processes and people. Almost no crisis ends without blood on the floor, and (5) assume your organization will survive, ultimately stronger for what happened. Had Nike kept these assumptions in the forefront of their mind, then there could have potentially been a more convincing argument presented early on versus years later. There was a terrible lack of understanding in regards to the situation, as well as foresight on the part of Phil Knight and Nike management at the onsite of this crisis. While in the thick of it, it’s hard to see a way out or resolve all that is going on in one single swoop. However, now that the smoke has cleared quite a few strategies and policies, if put in place and implemented...