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Nike Solution For The Ethical Dilemmas Marketing Essay

2763 words (11 pages) Essay in Marketing

5/12/16 Marketing Reference this

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Business ethics is one of the top issues and is also the most misunderstanding issues in todays business society. Within the last several years, business ethics becomes a problem attracting a lot of attention when the competitive situation is more difficult than before.Society always wants companies to create high-paying jobs and protect the environment. But on the other hand, these companies want to reduce costs incurred to comply with environmental regulations in the productionand improve labor productivity. And Consumers desire to buy the lowest price. From this arises the inevitable conflict in the concept of business ethics that called “ethical dilemma” due to differences in the interests of businesses between stakeholders and shareholders. Similar to other companies, Nike; a sport clothing manufacture; also faces some ethical dilemmas that they need to solve them ethically basing on appropriate ethics theory and interests consideration of stakeholders in the organization.

II/ What is ethics and why ethics play an important role in decision making process.

According to Crane and Mattern, Business ethics is the study of business situations, activities, and decisions where issues of right and wrong are addressed. This concept is extremely important and brings a tremendous value chain for enterprises.For the media, make good business ethics to help businesses improve their public image – a major turning point in the branding. Because of no scandal affection, the value of shares can maintain stability. In addition, the prestige of enterprises will be improved. As the result of it, the business can attract more investments from internal and external relationships. In addition, joint ventures happen all the time. They happen all the time because they are ultimately of great importance to the bottom lines of businesses. A business can be made or broken on just one joint venture and part of the reason that joint ventures are successful is that they combine the forces of two extremely powerful companies on occasion. A business cannot do well in joint venture if they failed to do ethical practices.

IV/ Nike’s background

Despite its almost 40-year history in USA, Nike is a popular sportswear & footwear brand in 180 countries. Besides, Nike also has the history from the stretch until today and it’s so popular across to consumer mind in many countries (About Nike INC, 2011). Nike has begun on 1960; it was established by Bill Boweman&Phill Knight on 1960. Nike was affiliated in footwear, sportswear, apparel of golf and team uniform on 1972 until now. On the other hand, Nike also exports to Japan, Malaysia, Singapore, and UK. At present, Nike is a high standard of design and good quality brand on customer mind (Nike INC -History & Heritage, 2011). -ƒ  Sample

V/ Nike’s Stakeholder analysis

Every decision of the board is affected by the influence of external and internal environment and it affects directly to the target, mission or the effect outcome. According to http://www.pmhut.com, “stakeholder analysis is an important technique for stakeholder identification and analyzing their needs. It is used to identify all key stakeholders who have a vested interest in issues with which the project concerned”. This is a useful tool for Nike to analysis their ethical dilemma for the best solution.

When unethical practice happens, there were several negative effects on Customers. It has made a massive boycott of the community for Nike and customers felt unethical when using Nike products. It happened when a child in US was attacked because he wears Nike’s shoes in 1990 In addition, there were 14-year old boy in a low price apartment was beaten to unconsciousness and was left on the subway tracks just because of shoes Nike’s Air Jordan at his feet (icolor.vn, no date).As a result of it, the firm will meet difficult in their business strategy in advance.

Secondly, shareholder is the next term that Nike needs to consider. When news of unethical practice broke, share prices of Nike will fell down. Such negative publicity has possibly led to decrease in investors’ confidence in the company’s ability to handle situation, which resulted in a drop of the share prices. In 1992, profit of Nike decreased 40%. (Investment report, no date). Moreover, the relationship between Nike and university of Oregon became bad because the university joined Worker Rights Consortium (WRC) to against the firm. Following of this is the objections of other universities in US. (Multiply journal, no date)

Finally, the term relationship between Nike and supplier also has some impacts. Most of products of Nike are made by raw materials that are provided from developing countries because Nike can get more profits with lower price material supply. But, the main point is Nike can be influenced from unethical practices of some suppliers. For example, supplier can do offer a best price of raw material because they tighten interests of employee. One more thing, cheapest is dearest. Nike may face a threat of quality of their products.

VI/ Nike’s ethical dilemmas. ( this is 3.0 part)

Every business has its own dilemmas. Nike is a global corporation that has branches and factories around the world with thousand employees and many suppliers. So, ethical dilemmas are issues that Nike has to face every year. However, the main ethical issue of Nike is whether to place the firm’s benefits ahead of the personal well-being of the employees.

A/ Nike has a poor environment for workers

Nike is facing the same dilemma of Foxconn, one of partner manufacture of Apple’s product, is poor environment for workers. This indicates clearly by the protests of Vietnamese. According to “Vietnam Talking Point”, in April 2010, thousands of Vietnamese Nike factory workers went on strike due to poor working conditions and low wages. In fact, this happens around the world where Nike factories are located. Because of keep low costs as one of completive advantages, Nike did not pay attention to the rights of workers. As a result of it, a wave of protests has affected the image of the company and for a long time, Nike was regarded as unethical company. According to Australia Television Station report on july 2008, the workers revealed that the living condition is unacceptable. “Housed in dormitories with overcrowded sleeping quarters, unhygienic toilet facilities and poor kitchen sanitation” is the reality they are suffering. Beside this, the workers are also suffering from violence situation in the workplace. “Nike workers are ‘kicked, slapped and verbally abused’ at factories making Converse” is not only the title of Mail online article on 13 July, 2011, but also what staffs are coping every day. In the factory, employees are treated in a humiliating. Applying Utilitarian theory to justify, this concept is achieving good result but poor environment situation and punishment leads to workers no happy to work. Under the view of egoism theory, employees have the right for their dignity. Nike has wrong action due to provide a poor management to employees.

B/ Nike is a sweatshop, paid low wages and excessive time.

The second issue is Nike paid low wage and to excessive time to worker in developing countries, such as China, Vietnam, and Cambodia etc. Nike is a sweatshop against by large people in developing countries. Sweatshop means that, employees are paid by low wages and work with long hours. In Vietnam, a few workers stated that the 4000 VND ($0.21) meals were not sufficient or healthy enough to sustain productive work. Even after 5% increase in wages, workers were still unhappy (Jennie lee, 2010). Applying Utiliatism theory, Nike is doing the right way because the company contributed to reduce unemployment situation and boost the economy. Under a view of big picture, Nike’s action leads to a lot of benefit to a country and it is a possible moral. However, in micro aspects, the employees are not satisfied with the salary and they may harm the company due to low productivity. Besides that, the theory is failed when scanning it to the basic rules of international labor organization in which “The rules of the global economy should be aimed at improving the rights, livelihoods, security, and opportunities of people, families and communities around the world. ” (International Labourorganisation, 2011). , Nike feels sorry for issues they caused.

VII/ Nike Solution for the Ethical Dilemmas. (this is part 3.0 part)

The action must be taken when the dilemmas occur. It is important in order to make sure that the Company will not faces any problem in future that might give an impact towards the Company. To solve the ethical dilemma, it should be better to carry out a solution that brings a big value to the firm. For the issue of poor environment, this dilemma is very important because it has direct impacts on not only the quality of products but also the reputation of Nike. In case of sweatshop issue, this issue is associated with non-profit organization of human rights such as FLA (Fair Labor Association) and it could make negative impacts forward to Nike’s stakeholders. To handle these issues,Nike has appropriate strategies for internal and external environment. At first, Nike conducted an internal survey among staffs based on the “satisfaction pyramid” to carry out “worker satisfaction chart” as below:

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Via this chart, Nike established the “Code of Conduct” (Appendix) to force individual factory follow it.Nike requires suppliers to pay workers at least the local minimum wage and any additional benefits outlined in individual employee contract or collective bargaining agreement. A remediation action will be made for any factories do not meet the standards. This issue is to make sure workers get their benefits and improves working conditions.

To enforce compliance with “code of conduct”, Nike conduct monitoring teams based in 21 countries to monitor these partners. As long as with the establishment of “SHAPE”, inspection of general picture of labor, environment, safety and health standard. Next one is “M-audit” that provides in depth assessment of the labor management practices and working conditions at the factory. And the last one is “FLA” with the duty of unannounced inspections of supplier factories. When gathering all the output from these teams, Nike began grading systems (A-D) (appendix) for all their suppliers. This grade reflects all the information about actual situation of working conditions. Via this, the company will have appropriate solutions to prevent unethical issues.

With approaches above, Nike not only improves the image of the company but also to improve the issues that stakeholders are facing.At first, by using the outcome data from the teams, Nike can control well the operation and can answer 3 questions that are “how good or bad are working conditions among Nike’s supplier? “Should the data reveal variation in working conditions among Nike’s supplier? , “are working conditions improving over time in factories?” .When the working condition was improved, workers will have critical change of positive thinking to the companyand they will be the abundant resources in persuading the media to and they will be the abundant resources in persuading the media to get rid of negative thoughts about Nike in the past and instead is anethical company. Next, the firm can evaluate the effectiveness of the renovation. Some factories appear to be in or close to full compliance with Nike’s code of conduct while others appear to suffer from persistent with wages, work hours and health, safety issues.

Another Nike’s reaction is a 12 minutes recording video tour of its contracted shoes facilities in Vietnam. It also produced video films of its factories in Indonesia, Thailand, and China. Via this activity, Nike wanted to convey a message “an open company with safe working environment, clean, happy and satisfied workers.” Although this action had some positive impact, it is not enough to convince the media because the accuracy of information is not high.

Viii/ Best practice and Value.(CSR) (this is 4.0 part, now understand ha, cute beautiful blah blah blah girl.

In order for the company to take advantage of business ethics in the improvement of their brand image, it will be important to focus more on the improvement of the environment, social condition as well as human resource. First is that it will be important to focus on the different activities that will help the company to improve their organizational identity and employer image.This is because of the fact that it has a great impact towards the interested stakeholder if the company will have an image of great employer which provides good working environment and benefits. In addition, it will be important for the company to focus on implementing more projects or programs that will focus on the interests of the youth; this is because of the fact that the primary target market of the company is that population. The company must focus on the aspect of education by giving different scholarship and tutorial projects. Above all, it will be important for the company to focus on the interests of the entire community regarding the environment.

Children play an extremely important role for Nike in the implementation of the above objectives. In CSR activities, the fast food company, Mc Donald, is one of the successful companies in the implementation of this issue. One of their famous CSR is the event of the title “UNICEF, McDonald’s® and Ronald McDonald House Charities® Team up to Raise Funds for Children” (Csrwire report, 2012) .Unicef ​​is a large and prestigious organization on the world in social activities.Mc Donald did a very good job in working with organizations to enhance their image and Nike should follow Mc Donald to achieve the best value associated with this organization.Nike can corporate with UNICEF to conduct appropriate CSR that related to children like: fund to school, charity for children, education, children protection, poverty reduction, children health care…etc.

PepsiCo is one of the large companies to contribute to disaster relief in Haiti in the amount of up to $ 1 million (Csrwire report, 2012). In case of Nike are faced with images is an irresponsible company with people, Nike can learn follow PepsiCo in disaster relief will greatly contribute to improving the firm’s image.

IX/ Recommendation.

The managing director of the Nike should plan to visit those of the factories always in developing countries. For example, visit the factories to ensure not any child labour work under illegal age, to make sure not any poor environment condition on developing countries.   Other than that, technologies nowadays have minimizes the problems caused by long distance communications. Video calls, telephones can be easily available to manager to communication with the suppliers and manufacturer. 

Second, Nike could be hires controller(s) to help to monitor the organization, help to coordinate the various departments, reducing the problems and mistake between the employer and worker. Controller is also responsible for the quality of the product to ensure that the material meets the quality standards, Check on the manufacturing process, such as the type of skills and control the types of material.

Last but not least, Nike has solved some problems start from the 2007 to 2009, also low wages still occurring on some developing countries. Nike could follow the national minimum wages rate to make sure that employees paid by enough wage and search some information of salary before they set up the factories in developing countries. 

Conclusion

Nike was the first sports organization to give the names and the addresses of all the factories that they receive products from. This has allowed the nonprofit organizations to check up to ensure that the working conditions have improved and all laws have been take part in to account when employing staff for the job. Nike has to do some CSR to make people around feels grateful by supporting the Nike’s activities. Moreover, any dilemma that occurs during the business activity should be settling down professionally in effective and efficient way to make sure that people around feels appreciated and not been a victim of circumstances. In conclusion, Depending on each of theory that is used to analysis, it is called that ethical or unethical. For Worker, their requirement is ethical because of theory of egoism. In contrast, Nike’s action is right due to ultilitarism. Right or wrong is not important; the important is Nike need to balance benefits of both sides.

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