Nike Ethics Case Study

Ethics

For Nike, labor and human rights continues to be a top priority and corporate concern. Ethics is essential in crisis communication. Nike’s sweatshop labor crisis demonstrates the importance of ethics. To defend its practices and public reputation during this crisis, Nike responded to allegations in ethical ways, employing truthfulness and transparency, disclosing their corporate social responsibility statements, including a fair employee treatment and a labor report, and commissioning external investigations for the company’s foreign workers (Kim, 2015). Nike’s response is an example of “contingency thinking” (Schermerhorn et al., 2012) and resulted in the company developing its own code of conduct. Eventually, Nike’s ethical
crisis communication overcame the crisis brought on by activists and news media who initiated negative publicity (Kim. 2015).
Ethics is the responsibility of everyone in the organization (Schermerhorn et al., 2012). While the code of conduct addresses contractors that manufacture Nike products, the code of ethics addresses the behavior of the employees. Nike’s code of ethics defines the principles that the company requires its employees to follow and includes a variety of subjects, such as ethical behavior.
Nike, who moved away from the issues that have plagued its past, is currently targeting a consumer-base more concerned with the environmental implications of large multinational corporations (Corporate Governance Report, n.d.). One such example includes their plan, produced in the summer of 2011, to go toxics-free by 2020, in effect preventing suppliers from improperly disposing of toxic waste (Corporate Governance Report, n.d.). By joining forces with their contract manufacturers to become a more invested and greener supply chain, Nike shows dedication to the environment.
Another ethical pursuit that Nike has established is the alliance with Michelle Obama’s campaign called, ‘Let’s Move’. The company donated $50 million to the cause of defending against child obesity. Part of Nike's commitment focuses on Let's Move! Active Schools – an unprecedented collaboration to bring physical activity back to America’s schools (NIKE, Inc. 2013). The program provides simple steps and tools to help schools create active environments to get students moving (NIKE, Inc. 2013).
Competition & Growth
While Nike is the number one brand name in sports apparel, the company faces strong competition.
The competitor gaining the most ground is Under Armour, though “Nike continues to have a more attractive valuation than Under Armour (Keulen, 2014).” Similar to Nike, the Under Armour Company is aggressively pursuing profitable sponsorship deals, giving them a rising portion of market revenue. Nike makes more than 10 times the revenue of Under Armour, but the brand frequently find themselves squabbling over endorsement deals and sponsorship (Goodkind, 2014). “Under Armour has also grabbed Adidas’ spot as the second-largest sporting brand in the United States with Nike being ranked number one (Goodkind, 2014).” But despite this new rank and a predicted revenue growth of 20% each of the next five years, Under Armour finds its total annual revenue to be the equivalent of Nike’s advertising budget (Goodkind,
2014).
Adidas continues to develop new products while trying to compete with the giant.
In 2011, “Adidas’ revenues amounted to $17.42 billion, while Nike leads with $21.77 billion (Barth, 2012).” Historically, Reebok, owned by Adidas, has been one of Nike’s top brand name competitors. Nike gained a large advantage over their opponent when the company took over as the NFL's exclusive maker of on-field apparel, including the players’ footwear. Nike’s new deal took effect in April of 2012, when NFL owners approved a five year exclusive uniform apparel deal with Nike. The New York Times reported that the Reebok/NFL 10 year contract “was originally worth at least $250 million to the league,” and it has most likely appreciated in value over the past decade (Barth, 2012). In an interview, retired President of Nike brand, Charlie Denson, stated, “Partnering with the NFL really puts us in a position where we can continue to fuel the growth in the United States (Bloomsburg,
2010).”
Nike continues to rely on growth from emerging markets and China after revenue from Europe and the U.S., its largest market, slowed during the recession (Bloomberg, 2010). The NFL contract aided the company to bounce back from the recession rather quickly and Nike revenues continue to grow each fiscal year. Nike has been around for almost five decades and still going strong; no other company their popularity and growth (Prableen, B., 2015). As of 2015, “the company currently has a market capitalization of $78 billion (Prableen, B., 2015).”