Summary
The purpose of the paper is to analyze an American sportswear company Nike. It owns of 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. 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 inconsistencies 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.
Structure and Size of the Business
The person heading Nike’s management structure is Mark Parker, who is the CEO of the company. Subordinate to him are vice-presidents, one of whom was Hannah Jones. The next level in management is comprised of directors, who are 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 voice their opinions on important managerial decisions, such as the adoption of 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 reverse supply chain, investments in machinery, and investments in environmental improvements.
Business Environment
Nike is a company specializing in the production and distribution of sport 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, sport enthusiasts, and people who are drawn to active lifestyle. The major change the company experiences is the rise of the environmental agenda. Before the company started to address the problem, production of sport apparel 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 done to the environment.
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. 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 the positive reputation. It will 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. As any other company, Nike was seeking ways of increasing its financial performance while decreasing expenditures. One of the methods the company attempted to achieve it was via the use of overseas workers. Workforce in the developing countries is cheaper and less aware of workers’ rights than its counterpart in the Western world.
Subsequently, numerous social issues, such as child employment and illegal pay practices, became prominent. 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. It was a group of consultants who analyzed the company’s impact on the environment and developed solutions to 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 that would oversee adherence of the company 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, the reason why procurement teams ignored it lay in 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 both financial and corporate responsibility returns” (Nike considered, n. d., p. 5). Essentially, Nike’s solution was to shift from prioritizing efficiency to focusing on corporate responsibility.
Reference
Nike considered: Getting traction on sustainability. (n.d.).