Nike Issues Impacting The Organisation Busisness Essay
Nike, a US-based Fortune 500 company, is a sportswear, equipments and accessories manufacturer and is considered as one of the famous brands that are being recognised world-over. The branding of Nike has been done so perfectly that it’s swoosh is being recognised by people in an instant, without the need to spell the name of the brand. Further, the slogan, ‘Just do it’ has also become integral to the success of the brand’s popularity, providing motivation and inspiration to sportspeople as well as the general consumers.
The company has an internal public relations/communications function that manages the company’s image and brand in the market. The purpose of public relations function is to help the company deal with the public as well as manage its relationship with the consumers, media and other stakeholders. Public relations manage the image of a company in the minds of the people, especially the target audience. The practice also involves creating a brand value of the company through which the officials of the company could communicate effectively with the consumers and help the consumers identify with the values of the company (Grunig 2000). Nike uses its public relations function for building rapport with customers, employees, investors and even general public. The practice requires consultants to critically analyse the present condition of the company in terms of its image and reputation in the market and develop resolutions in case of any issues. Public relations are especially helpful in responding to negative publicity or handling crisis situation and maintaining social order (Edwards 2008).
Over the years Nike has faced several issues, especially related to its un-ethical treatment of workers in its manufacturing units in Asia. Although, Nike has taken several steps to improve its image among its target audience, the issue is still creating problems for the company and therefore, it is imperative for Nike to manage its reputation in the market and its relationships with its key stakeholders in the next 12 months through proper communication channels and strategic media usage.
Issues impacting the organisation
Nike has been facing negative press due to several issues such as un-ethical treatment of workers in its factories, using subcontractors without proper credentials, encouraging child labour and sweatshops, controversies related to its advertising campaigns using glamour and sportsperson. Due to the negative press the company received regarding the sweatshops allegations; Nike lost most of its trusted consumers, especially its young university students. Further, its reputation was dented in the market and created a bad image for the company. Media reports also indicate that consumers were not too happy with the excessive use sportspersons in their advertisements. They felt that the sports people were no longer sharing about their real experiences, instead were paid by Nike to publicise their products. Such bad press definitely dents the image and reputation of the company, which needs to be managed effectively through proper PR and communication channels.
The key stakeholders who are or would get impacted due to these controversies include the workers, consumers as well as the shareholders of the company. These stakeholders may loose their faith in the company and its reputation, with the workers and consumers abandoning the company to move to better brands, while the shareholders may refuse to invest into the stocks of the company. Thus, it would lead to not only damage to its reputation, but also denting the bottomline of the company as well (Bowie and Vaaler 1999).
It is therefore, imperative for the company to reconsider its policies related to the above mentioned issues by employing effective public relations strategies and assisting the company to resolve these issues in a satisfactory manner, while enhancing its reputation in the market. Although, all the issues discussed are important, at present, the company should focus on the issue of sweatshops as it is critical to address this issue for the success of the company in the coming 12 months.
In the contemporary business world it has become imperative for companies to at least outsource a part or its business processes to other parts of the world to save costs and provide products at competitive prices. Nike is also not an exception has many manufacturing units all over the world, and especially in Asia. Nike in fact had become one of the major multi-national companies that was scrutinised for outsourcing work to lesser developed countries and for exploiting the labours in these countries by providing them lower wages and deplorable working conditions, taking advantage of the weak or non-existent employment rights in these countries (Hill 2009).
Nike has been outsourcing work to manufacturing units in South Korea and Taiwan, which did not have stringent laws regarding labour wages and conditions. Post the governments in these countries coming out with strict laws, Nike decided to establish its units in countries such as Vietnam, China and Indonesia, where the government bans unions and therefore, giving strategic advantage to Nike (Hill 2009).
Nike received negative press due to its sweatshops, un-ethical treatment of labours and encouraging child labour in these countries over the last one year well. Most of the attentions towards this issue were created by several civil rights organisations in the US such as Global Exchange, Education for Justice and Students Against Sweatshop Labor (Hill 2009). Together with the pressure from these organisations and growing public scrutiny, the workers and native of these countries also protested against the malpractices.
This case study of Nike focuses on the ill-treatment of the employees by the company in its Asian factories, emphasising on the violation of local labour laws and child labour issues. Nike was accused of not paying minimum wages and appropriate working conditions to its employees. Further, the company also did not take considerable steps to ensure the safety of the employees or to provide them with proper health benefits. Additionally, Nike did not address the issue of child labour in its Asian factories. Although, Nike stressed on undertaking measures for improving the working conditions of its employees, the attempts only resulted in failure (Florini 2003; McCabe 2000).
The story about the ill-treatment of the workers in Asian factories was first shown by CBS News on October 17, 1996. The story showed the supervisors paying less than the minimum wages and abusing women sexually in the manufacturing plants of Nike in Vietnam (Boje 1998). It was also found that the workers were being physically assaulted by the supervisors. The team leaders were given a monthly salary of $45, while the temporary workers were only given around 20 cents for an hour’s work. CBS obtained a labour contract copy and showcased it on the show to prove their claims (Kahle et al. 2000).
CBS however, was not the only media channel to report such irregularities in Nike’s Asian factories. Reuters also reported about a Nike factory in Asia forcibly asked 56 women to work in the factory which resulted in 12 of them fainting and being admitted in the hospital (Boje 1999).
Due to the continuous reporting of such news some Vietnamese Americans decided to contact several journalists and labour groups in Vietnam, which resulted in the formation of the Vietnam Labor Watch (VLW), a group that focused on studying the actual working conditions of the people employed in Vietnam’s factories. Further, the group also monitored the labour practices of Nike on a regular basis. The group even visited various factories of Nike in Vietnam to meet with the workers, team leaders, labour union members and even lawyers to understand the situation in the country. The group published a report in 1997 that charged Nike of infringing various labour laws in the country. The report stated that Nike not only failed to pay minimum legal wage but also did not provide good working conditions and safety measures in the factories. Nike also did not address the issues of sexual harassment and child labour in many of its factories. The report also stated that the company had given a very different account of its labour practices in Vietnam to its consumers in the US (Kahle et al. 2000).
Post the release of the report, the company faced a series of such news in prominent dailies and journals of the US, which included the Wall Street Journal, The New York Times and the USA Today. Although, the company enjoyed a good reputation in the US, such negative news dented the image of Nike considerably. However, Nike had always denied any involvement in the ill-treatment of workers in its factories in Asia (Florini 2003).
PR approaches to the issue
As the company is facing constant inflow of news against its unfair labour practices, the PR function should focus on maintaining that the Nike’s labour policies were not at flaw and deny these reports by providing supporting facts and figures, together with quotes and interviews from the workers employed in these factories. In order to salvage its reputation among its biggest target audience, college and school students, the PR function needs to conduct various seminars in educational institutes and universities in the US to convince students about the company’s equitable treatment of its employees in Asia (Vitell & Muncy 1992).
Further, the company may also use media propaganda in the countries affected to promote its side of the story as well. Such a move would provide an authentic account of the situation as the journalists in the impacted countries would be able to provide a more realistic picture by visiting the factories themselves rather than journalists who were reporting from the US and based their story on the report of other media stories. The PR function may also shot video tours of the factories and upload them online so that the general public is made aware of the real situation and not being influenced by the media reports (Argenti & Forman 2002).
Further, due to its necessity to deal with suppliers and vendors, Nike also become responsible for any corporate action undertaken by these vendors as well. When the issues of ill-treatment of the employees in Vietnam were reported in the media, the trade union, human rights activists along with the citizen’s groups put pressure to the company to take responsibility of the workers who were hired by its contractors as well . Thereafter, Nike decided to change its code of conduct regarding labour policies and incorporated various clauses that would ensure the safety, security and welfare of such employees as well. It also stated that the company not just follows the code of conduct as a regulation practice to combat irregularities in labour policies. For instance, the company stated that in case of any breach in child labour laws, the company initiates various other policies as well to combat the situation. Nike in fact revamped its code of conduct to increase the minimum age required to work in its factory from 14 years to 18 years, which is considered to be quite high by the standards of ILO as well (Florini 2003). However, this did not get reflected properly in the media or with the consumers. The PR function therefore, should highlight the past decisions taken by the company and the impact it had in improving the conditions of the workers in the factory.
Some of the facts that the PR function should definitely bring forth through the media include the following. The company had hired auditing firms to monitor the situation and provide neutral reports on any practices of unfair pay, child labour and sexual abuse. This helped in enhancing its image and providing a true picture of its employee policies in the Asian countries. Thus, the company accepted its responsibility to prevent causing any damage to the employees and look after the welfare of its people. With increasing pressure from various groups and the media, Nike decided to intensify its activities related to combating ethics issues during the mid 1990s. For instance, in order to provide proper working conditions to the workers, the company re-evaluated its code of conduct and controlled the working hours as well. Further, the company undertook various training to teach cultural sensitivity to its supervisors and contractors, along with improving and monitoring the working conditions in the factories. Nike also started with a program focusing on internal compliance, wherein the working of the supervisors was monitored closely (Florini 2003).
Although, Nike had adopted various measures to counter the allegations against them regarding unfair employee policies in Vietnam factories, experts believe that these measures were undertaken only after the pressure from the trade union, media, human rights organisations and other agencies mounted on the company. This negative image also needs to be addressed through proper PR implementation and instead the company should be projected as one with strong business ethics and therefore, undertook such steps rather than undertaking them under pressure from various groups .
Timetable for the PR programme
Curbing negative news
Strategic positioning of neutral or positive news in the media
Showcasing the labour policies of Nike by providing supporting facts and figures
Salvaging reputation among college and school students
Conducting seminars in educational institutes and universities
Filing positive stories from the impacted countries
Highlighting the past decisions taken by Nike and the impact of the decisions on improving the working conditions
Creating a positive image of the brand by projecting it as a company with strong business ethics
In order to evaluate whether the PR programme has been successful or not, after a month of its implementation, the company should review the media reportages and understand whether Nike is still receiving negative press or not. It may undertake a dipstick analysis to understand the media mindshare regarding positive, negative and neutral stories. Further, articles filled from the impacted countries should be analysed separately to understand whether it created any positive image for Nike or not. Also, the company should definitely study the post-sales figures of its products before and after the launch of the PR programme to understand whether the programme has helped in contributing towards the bottomline of the company or not.
Nike’s communication strategy therefore should focus on emphasising the fact that the company has forbid child labours in its factories and provide equal wages and working conditions to its employees throughout the world. It may also launch an advertising campaign proclaiming that it denounces malpractices such as child labour and un-ethical treatment of workers and have made necessary changes in its policies. Further, the company may decide to share part of its profits in the towns where the factories are located use the funds to open schools or provide health facilities to the workers and their family. This also should be advertised in the media through strategic article positioning, seminars and meetings with the civil rights groups and students groups and advertising these initiatives as a part of the company’s corporate social responsibility (CSR).
Nike may also consider publicising about the subcontractors who were dropped due to following inappropriate practices. This would help in solidifying Nike’s commitment towards its workers. However, as disengaging subcontractors may result in unemployment, Nike should also create plans to provide sustenance to the workers employed by the subcontractors and advertise its initiatives in the media and through conferences.
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