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Nike case : hitting the wall

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  1. Key issues
    1. Societal pressures
    2. Brand image
    3. A questionable outsourcing policy
  2. Strategic choices
    1. Integrating factories instead of keeping on outsourcing
    2. Focusing on Human Rights rather than on fashion
    3. A balanced choice
  3. Our recommendation

A firm's success depends on its social legitimacy. Usually, in the consumer's mind, the importance of a firm relies on what it can bring to the society. Therefore, for Nike, relocations basically mean that the company takes away jobs from US citizens. Moreover, Nike's labor scandals have highlighted some ethical issues: low wages, child labor, dangerous working conditions, environmental awareness and so on. At first, Nike didn't pay attention to the criticism as the charges were leveled upon them by a little group of activists, but later on the societal pressure became so high that Nike was compelled to take some measures to calm down public opinion; hence the significance of keeping an eye on the societal reaction to the brand management.
In this type of industry, brand image is essential. Nike has been associated with ?coolness?, with ?success? and ?fashion?. However, labor scandals have sullied Nike's reputation. Even though currently Nike's revenues have been little affected by the bad image, the firm needs to improve its reputation quickly: step by step, Nike has lost numerous partnerships (especially with US college campuses) and its labor practices have become the center of attention of the average consumer. Although Nike was not the only one with bad labor practices, the firm ended up being the scapegoat, and therefore the target of media criticism.

[...] As for the marketing, Nike would remain focused on its historical core values: fashion, coolness and performance. Nevertheless, it should also find a way to silence criticism by taking minimal measures to improve working conditions. III. Our recommendation We have chosen the ?balanced choice? described previously for the following reasons. First, the outsourcing process enables the firm to save money. As the supplier bargaining power is low (cf Porter's five forces), Nike can compel its contractors to respect some code of conduct concerning the working conditions and minimum wages. [...]

[...] Concerning the image, this strategy is quite hypocritical because Nike would just adopt minimal measures to comply with exterior pressures; the firm would be doing it unwillingly. To conclude, we find this solution the most appropriate one as on one hand it doesn't constitute a rupture with Nike's historical strategy and values, and on the other hand, it is not very costly and it enables to effectively tackle the issue of wages and reputation. Appendix SWOT Strengths Weaknesses A corporate success story: amazing Domestic public opinion awareness: growth (from $60,000 to $49 million publications in serious newspapers, in 10 years), ability to dictate students' boycotts, Doonesbury fashion trends cartoons, etc. [...]

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