Nike’s Strategic Turnaround: Impact Of Corporate Social Responsibility

Has Nike’s strategy been deliberate or emergent over the period 2004-2008?

Discuss about the term for brand image of Nike has improved by a significant amount in the recent years.

In the year of 1991, a report revealed such poor labor practices of the sub-contractors in the factories present in the eastern countries. This started a wave of negativity against the organization, which go fueled till the year of 1997 by various expose and reports revealing several other factories having poor labor practices and poor working conditions. The negative brand image started the organization to lose a lot of business and caused the performance of the organization to be low. In the year of 1999, Nike established a fair labor association which audits the workplace of the organization along with a number of organizations operating in the same industry. The organization started turning around its brand image by integrating the corporate responsibilities into the business model of the organization. The consolidated business strategy of the organization along with the corporate responsibilities has a number of effects on the various business processes of the organization (Burgelman 2016).

The strategy of an organization describes its plans and course of actions to tackle several key issues which affect the business in a negative manner. In other words, the strategy of an organization can be considered to be the plan or course of actions utilized by the organization to achieve the set of goals or objectives set by the management. The strategy of an organization can be classified as deliberate or emergent based on a number of factors. The deliberate organizational strategy defines a structured plan for the actions of the organization, which is shared among all the employees of the organization. So the deliberate organizational strategy allows the employees to clearly understand the course of action of the organization and realize the expected outcome of the strategy (Mahdi, Abbas, Mazar and George 2015). The organizational strategy is considered to be emergent if the plan or course of action of the organization is gradually imposed on the organization over time. In other words, the emergent business strategies of an organization are changed and emerged over time due to the effect of a number of factors present in both the internal and external environment of the organization. The emergent business strategy is generally never planned by the management of the organization and is groomed or imposed over time (Thompson, Peteraf, Gamble and Strickland 2013).

How have Nike’s mission, vision and values changed in relation to CR since the early 1990s?

The case study describes the time through which Nike was struggling with very bad and negative brand image due to abusive labor practices. In the year of 1991, the abusive and low-quality labor practices of the organization were revealed in a report, which started the negative image perception for the brand (Hitt, Ireland and Hoskisson 2012). Through the years 1991-1997, the business strategy of Nike was emergent i.e. the business strategy of the organization was getting affected due to the heavy opposition or negative brand image of the organization in the corresponding markets of operation. During these years, the organization tried creating a department to enhance the laboring conditions in the workplace of the organization and tried to expand its privilege retail stores chain to improve its brand image. All of these changes in the business strategy were forced due to the negativity against the organization in the market. But the year of 1999 allowed the organization to accept the blame for its mistakes and started turning around its brand image. During the years of 2004-2008, the organization created a non-profit organization to audit the workplace of various companies, published detailed reports revealing the working conditions in all of its factories and published the list of all the contractors associated with the manufacturing process. These actions of the organization were the management’s deliberate plan to gain the positive perception of the general public present in the corresponding market of operations. So the organizational strategy of Nike during the years 2004-2008 can be considered to be deliberate (Arora and Aggarwal 2012).

The report in the year of 1991 revealed the abusive labor practices involved in the manufacturing process of the various products of Nike. This led to a long-lasting negativity against the brand image for including poor labor practices in the manufacturing processes being run in the factories present in the foreign countries. During the years of 1991-1996, there were a number of exposing, reports and revelations on the poor working condition and illegal activities by the contractors of the organization. This led the organization to lose its credibility in the market. The brand image was hurt very badly and caused the sales to go down drastically. This, in turn, led to the poor performance of the organization in the corresponding market of operation, which led the organization to lose its market shares in the corresponding market of operation (Stead and Stead 2013). This, in turn, made the management of the organization realize the value of corporate social responsibilities of the organization in gaining and maintaining high performance in the market. This led the organization to the creation of the non-profit organization tasked with the auditing of the workplaces of Nike and other organization operating in the same industry. Nike started publishing lists containing all of its contractors every year, which revealed the various working standards and conditions followed by these contractors. Nike also published a report every year containing the working conditions, labor practices and wage details of all of its workplaces. Over the years of these activities, the management of Nike included the publications of these reports and audit data as part of its corporate social responsibilities. The management also started to include the CSR activities as one of the most important modules of the business model and business strategy of the organization. The organization has also ensured that it carries out the required corporate social responsibilities to develop and enhance the societies present in the markets of operation (Thompson, Peteraf, Gamble and Strickland 2013).

Use the value chain to identify areas of Nike’s business which should be impacted by the Considered strategy

Mark Parker, CEO of Nike said, “Corporate responsibility is no longer a staff function at Nike. It’s a design function, a sourcing function, a consumer experience function, part of how we operate”. This statement from the CEO suggests the importance of the corporate responsibilities in the business model of the organization and its integration with the various modules of the business model of the organization. Such a business strategy of the organization would surely affect the overall business of Nike. As mentioned by Mark Parker, the corporate responsibilities of Nike are included in the design phase of the various products manufactured by the organization. So the design process of the business model of Nike ensures that the corporate responsibilities of the organization are kept in the focus during the entire process irrespective of the available resources, timeline or scope of the work. So the product design phase of the business of the organization is affected by the corporate responsibilities. The sourcing function of Nike takes the responsibility of selecting efficient contractors present in the corresponding market of operation and outsources various business functions to them. The sourcing function also includes the responsibility of procuring high-quality materials for the manufacturing of the various products sold by the organization. The inclusion of the corporate social responsibilities in these business functions of the organization impacts the organization’s business in terms of the utilization of the extra resources and the lack of timeline in the project schedules (Lesser and Ban 2016).

As mentioned earlier, the corporate social responsibilities of Nike play a significant role in the business model of the organization. So all the business functions of Nike include the focus on the completion of the corporate responsibilities of the organization. But there are a number of challenges involved in the completion of the corporate social responsibilities of the organization along with the business functions as most of the business functions of Nike involve a number of external agencies and partners. This section mentions some of these challenges faced by Nike in carrying out corporate responsibilities along with its business functions (Verbeke 2013).

The involvement of the corporate responsibilities in the business model complicates the planning and resource management activities for the various business processes.

The involvement of various external partners like the suppliers of the raw materials and the contractors for the manufacturing of the products, the completion of the corporate responsibilities faces risks. These external agencies or partners may not comply with the CR guidelines set by the management of Nike, which stops the organization to achieve its CR goals and objectives (Werbach 2013).

Discuss the challenges Nike faces in carrying out its CR policy through its network of alliances and explain how it is mitigating its risks

Most of the corporate responsibilities of Nike require the organization to reveal a lot of information regarding their business to the public. The disclosure of all this information might affect the business of the organization through the competitors (Swayne, Duncan and Ginter 2012).

The training and influence required for the employees to understand and adhere the corporate responsibilities of Nike are another challenge to carry them out efficiently.

Risk mitigation

The challenges and risks mentioned above for Nike to carry out its corporate responsibilities are mitigated by the management of the organization in a number of ways. Some of these risk mitigation plans are mentioned in this section.

Nike provides a code of conduct and behavior standards guideline to the suppliers and contractors involved in the manufacturing process. This guideline and code of conduct forces the external agencies involved in the manufacturing process to carry out the corporate responsibilities of the organization through legal contracts (Eden and Ackermann 2013).

Nike also ensures that all the employees in the workplace are trained efficiently about the corporate responsibilities of the organization along with their importance. The management of Nike also ensures that the employees comply with the corporate responsibilities of the organization by including them in the code of conduct and the employment agreement of the employees. This allows the organization to ensure the employees to carry out the corporate responsibilities (Harrison and John 2013).

Nike ensures that the raw materials being procured for the manufacturing process are of high quality and clear of any CR violation through a number of external agencies. Based on the reports of these external agencies, Nike selects the external agencies to be included in the manufacturing process to ensure the compliance with the corporate responsibilities of the organization (Slack 2015).

The positioning of Nike in the corresponding industry determines the overall demand for its products among the customers and the overall market share that the organization owns or has the capability to own. The consolidated strategy of including the corporate social responsibilities of the core business functions of the organization certainly affects the positioning of the organization in the corresponding industry. The matrix of Porter’s generic strategies is a tool utilized to understand the positioning and recommended strategy of an organization at a particular situation of the market. The matrix shows two major factors in focus i.e. competitive scope and competitive advantage. The competitive scope of an organization can be either the narrow target or the broad target. The competitive advantage of an organization can either be lower costs of the products or the differentiations of the products in comparison to that of the competitors. So the overall position of an organization is determined to be cost leadership, differentiation, cost focus or differentiation focus (Evans, Stonehouse and Campbell 2012).

Cost leadership

This positioning of an organization allows it to develop and implement a business strategy which allows the organization to increase its profits by reducing the costs and charging an average price for the products in the corresponding industry. The cost leadership strategy allows the organization to realize profits from the sale of the products at a low price, because of the reduced costs of the various business processes of the organization (Lasserre 2012).

Differentiation

This strategy of the organizations allows them to keep their products clearly differentiable both in terms of quality and functionalities from that of the competitors operating in the corresponding industry (Gamble and Thompson 2014). The efficient implementation of a differentiated position and corresponding business strategy requires the organizations to have extensive research and development activities. Then the organizations have to deliver high quality and innovative products to the customers present in the corresponding market of operation. The differentiated business strategy of the organizations requires them to have a number of effective sales and marketing activities. These activities allow the customers to understand the unique properties of the products sold by the organization and their differences from the similar products being sold by the competitors present in the corresponding market of operation (Bharadwaj, Sawy, Pavlou and Venkatraman 2013).

Focus strategy

The focus strategy can be considered to have two separate segmentations i.e. cost focus and differentiation focus. Both of these strategies allow the organizations to focus their business strategy on a narrow target market. The focus strategy allows the organization to focus most of its resources on a narrow target of customers which allows the business strategy to be more effective both in influencing the customers to purchase the products sold by the organization and influencing the customers to accept the better quality of the products than that of the products of the competitors (Mudambi, 2016).

The positioning of Nike along with the consolidated business strategy is differentiation as the competitive advantage that Nike possesses are based on the products differences from that of competitors’ and the competitive scope of Nike is focused on a broad target. The differentiated positioning of the organization allows Nike to attract number of customers towards the unique qualities of the products sold by the organization. This, in turn, allows the organization to gain and maintain competitive advantages over the other organizations operating in the same industry. The differentiated position of Nike also helps it to strengthen the brand image of the organization and allow the organization to be considered as a responsible entity in the corresponding societies of operation (Bettis, Gambardella, Helfat and Mitchell 2015).

Conclusion

The brand image of Nike has improved by a significant amount in the recent years. Nike is a perfect example of organizations who turn around their brand image through efficient organizational policy and strategy planning. The organization faced a lot of challenges to maintain good performance in the corresponding industry when there were a number of revelations which pointed to the inappropriate labor practices being carried out in the workplace of the organization. Nike turned its brand image to positive through effective planning and establishment of a dedicated non-profit organization to audit the labor practices and working conditions in the factories under various sub-contractors. Nike then integrated the activities of publishing regular reports about its subcontractors and working conditions in all of its factories as part of its corporate responsibilities. Effective organizational strategy planning to include the corporate social responsibilities in each of the functional business processes allowed the organization to turn around its image in the society.

References

Arora, R. and Aggarwal, G., 2012. OPERATIONS MANAGEMENT AT NIKE: FROM BREAKDOWN TO ACHIEVEMENT. International Journal of Management Research and Reviews, 2(7), p.1293.

Bettis, R.A., Gambardella, A., Helfat, C. and Mitchell, W., 2015. Qualitative empirical research in strategic management. Strategic Management Journal, 36(5), pp.637-639.

Bharadwaj, A., El Sawy, O.A., Pavlou, P.A. and Venkatraman, N., 2013. Digital business strategy: toward a next generation of insights. Mis Quarterly, 37(2), pp.471-482.

Burgelman, R.A., 2016. Complex Strategic Integration at Nike: Strategy Process and Strategy-as-Practice Combined. The Handbook of Strategy Process Research from a Middle Management Perspective. Edward Elgar Publishing.

Eden, C. and Ackermann, F., 2013. Making strategy: The journey of strategic management. Sage.

Evans, N., Stonehouse, G. and Campbell, D., 2012. Strategic management for travel and tourism. Taylor & Francis.

Gamble, J.E. and Thompson Jr, A.A., 2014. Essentials of strategic management. Irwin Mcgraw-Hill.

Harrison, J. and John, C.S., 2013. Foundations in strategic management. Cengage Learning.

Hill, C., Jones, G. and Schilling, M., 2014. Strategic management: theory: an integrated approach. Cengage Learning.

Hitt, M., Ireland, R.D. and Hoskisson, R., 2012. Strategic management cases: competitiveness and globalization. Cengage Learning.

Lasserre, P., 2012. Global strategic management. Palgrave Macmillan.

Lesser, E. and Ban, L., 2016. How leading companies practice software development and delivery to achieve a competitive edge. Strategy & Leadership, 44(1), pp.41-47.

Mahdi, H.A.A., Abbas, M., Mazar, T.I. and George, S., 2015. A Comparative Analysis of Strategies and Business Models of Nike, Inc. and Adidas Group with special reference to Competitive Advantage in the context of a Dynamic and Competitive Environment. International Journal of Business Management and Economic Research.

Slack, N., 2015. Operations strategy. John Wiley & Sons, Ltd.

Stead, J.G. and Stead, W.E., 2013. Sustainable strategic management. ME Sharpe.

Swayne, L.E., Duncan, W.J. and Ginter, P.M., 2012. Strategic management of health care organizations. John Wiley & Sons.

Thompson, A., Peteraf, M., Gamble, J., Strickland III, A.J. and Jain, A.K., 2013. Crafting & Executing Strategy 19/e: The Quest for Competitive Advantage: Concepts and Cases. McGraw-Hill Education.

Verbeke, A., 2013. International business strategy. Cambridge University Press.

Werbach, A., 2013. Strategy for sustainability: A business manifesto. Harvard business press.