Nike+ Gambling

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Posted At: December 1, 2008 12:13 PM
by Jessica Ayers

Successes, failures and successes
In the first article of this series, we left Nike growing at an unprecedented pace in organizational size, sales and market share at the end of the 1970s. By the early 1980s, the company went public and passed Adidas to claim the position of the top sports apparel company in the industry (Locke, 2002). The next 20 years would bring more growth and incredible success, but not without encountering serious failure.

Success
After the initial move past Adidas, Nike slipped from the top of the industry in the mid-1980s as a result of underestimating the growing popularity of aerobics. It did not take long, however, for the company to regain the number one spot.

Nike gambled on a young rookie basketball player from The University of North Carolina in 1985, pinning on Michael Jordan the hopes of the company’s line of basketball shoes. His success along with the impact of the new Air Max line of shoes and its commercial featuring the song “Revolution” by the Beatles catapulted Nike back to the top of the sports apparel world.

Another gamble on cross training shoes, a two-sport athlete named Bo Jackson and the slogan “Just Do It” also paid off in a big way in the second half of the 1980s.

In the 1990s Nike opened a new world headquarters in Portland, Ore., as well as a new shopping experience called Niketown. The company focused more on soccer, golf and cycling in this decade, again taking chances on unproven athletes Tiger Woods and Lance Armstrong. By the end of the 1990s, Nike sponsored the Brazilian national soccer team and U.S. men’s and women’s national soccer teams (Nike.com).

Failure and success
Unfortunately, not everything was coming up roses for Nike. In the 1990s, human rights activists fiercely attacked Nike for its human rights abuses in foreign production factories. The accusations were printed in mass media across the United States, including The New York Times, Rolling Stone, Foreign Affairs and The Economist (Locke, 2002).

Allegations included lower than minimum wage payments to workers, child labor, forced labor, poor working conditions and verbal abuse.

Nike suffered from these blows, losing contracts and its good rapport with many consumers. Initially the company denied responsibility for the shortcomings, saying that the factories were run by independent contractors and therefore were not employees of Nike.

In 1992, the company took a step to remedy the problem by creating a code of conduct to be displayed in each factory. The response escalated from there when the company raised the minimum age of workers to 18 in footwear factories and 16 in all other factories. The company also required factories to meet U.S. labor standards and increase wages, among other improvements (Locke, 2002).

PR in Success
Nike’s success was very public. The more successful the company was, the more pervasive the company became.

Nike moved from track and running shoes to basketball, cross training, golf, soccer and cycling products in these two decades. Each time focus shifted to a new sport, Nike signed a new athlete – or team of athletes – to signify the company’s entrance into the market in a big way.

Allowing professional athletes to be the spokespersons for the company gave Nike a sort of superpower mystique, as well as credibility in the eyes of consumers.

Success in PR
No company wants to be faced with the accusations with which Nike was hit in the 1990s. However, Nike overcame this challenge using simple PR techniques:

1. Admit Responsibility
Although initially denying fault for the abuses occurring in its factories, Nike earned credibility and sowed the seeds of a reputation of social responsibility with CEO Phil Knight’s admission of guilt:

“The Nike product has become synonymous with slave wages, forced overtime and arbitrary abuse” (Locke).

2. Fix the Problem
Nike initially addressed those grievances specifically mentioned by attackers: child labor, health and safety standards and wage issues. However, Nike did not stop there.

The company created a Labor Practices department and the Nike Environmental Action Team, now covered by the Corporate Responsibility and Compliance Department. The company also placed employees responsible for ensuring the quality of working conditions at each factory. All new personnel involved in the maintenance of these factories go through training in all areas of Nike’s corporate responsibility standards and are present in the factories daily. Factories are now also audited and inspected by outside organizations.

Nike became a founding member of the Global Alliance for Workers and Communities, and became a member of the Fair Labor Association.

These solutions to corporate responsibility problems showed the public Nike’s commitment to being the top company in the sports apparel industry in ethics and in sales and market share.

3. Manage the Message
Throughout the campaign to rebuild Nike’s image, CEO Phil Knight was a visible primary spokesperson. For a company whose main spokespersons were professional athletes, to have someone at the head of the organization deliver the company’s message of responsibility and change was significant.

After the initial apology, the message was not one of remorse or of lighthearted delusion, but one of positive action. Nike even invited British documentary cameras into one of its Vietnamese factories (Haig 91).

4. See the Message Through
Since these first scandals and attacks, Nike has demonstrated a long-term commitment to corporate responsibility.

To this day Nike makes factory audits available online at Nike.com, as well as the most current version of the Code of Conduct and list of factories.

Through numerous programs addressing the grievances in working conditions and creating opportunities for people around the world to better their situations, the company has become the gold standard of responsible outsourcing and philanthropic programming.

What’s next
Nike is the gold standard of corporate responsibility and the leading, most pervasive sports apparel company in the industry. In the third and final installment of this series, Nike capitalizes on technology and mass media globalization.
Sources
Nike.com

Haig, M. Brand Royalty. Sterling, Va.: Kogan Page Limited, 2004.

Locke, R. M. (2002, July). The promise and perils of globalization: The case of Nike. MIT Working Paper IPC-02-007.

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