College of Business Administration

Nike Case: Executive Summary

Company Background:
In 1964, Bill Bowerman - the World-renowned track team coach from the University of Oregon, and Phil Knight - one of Bowerman's former students, formed Blue Ribbon Sports, around the concept of producing a better running shoe. In 1971, Bill Bowerman developed a new type of shoe sole, and the Company changed its name to "Nike". The rest is history. In 1995, Nike Corporation had worldwide sales of nearly $4,761 million, and in 2000, those figures reached above $8,995 million.

Negative Publicity:
However, Nike's tremendous financial success also brought harsh criticism of their production strategies and labor practices. After spending 4 years in Indonesia trying to assist workers in establishing unions, Mr. Jeff Ballinger began to raise awareness about Nike's abusive labor practices in that country. CBS picked up on the story, and flew Ballinger back to Indonesia in 1993, to narrate the story of the worker's struggle with Nike's contractors for a decent wage. Other news media organizations followed suit, and in 1994, Nike received criticism from major news papers and publications around the world, such as: The New Republic, Rolling Stone, The New York Times, The Los Angeles Times, The Economist, and BBC Worldwide Magazine.

Primary Issues & Moral Dilemma:
According to the CBS report, put out in 1993, the primary issues in the Nike case, were centered on two indecent labor practices. First, the CBS report claimed that the minimum wage of Indonesia was deliberately set below the poverty line to attract foreign investors. Second, many workers who had attempted to organize free trade unions suffered retaliation, such as physical and verbal harassment, illegal docking of pay, and termination. Essentially, then, the moral dilemma was framed as a conflict between shareholder wealth maximization and fair wages for overseas workers, and the conflicts have still not been resolved. On April 3, 2001, members from the Living Wage Project briefed Congress on Nike's labor abuses, "the men and women working in Nike factories cannot afford their basic human needs. This is outrageous considering their working up to 15 hours per day, 6 to 7 days per week for the most profitable sportswear company in the world."

Nike's Alternatives:
So, faced with negative publicity and a potential boycott of its products, Nike began its own public relations campaign, in the mid-1990s, aimed at improving its corporate image and brand identity. However, many issues have yet to be resolved. In this case, the Nike Corporation has the following basic alternatives:

· Do nothing.
· Pull production out of foreign countries and use only domestic labor sources.
· Improve conditions in the foreign labor sectors. A multitude of additional options abound, but most are derivatives of these three choices.
· Hold overseas production facilities to the SA 8000 standards.

Naturally, the optimal alternative will be the option that resolves the moral conflict from an ethical as well as a managerial perspective. We will address the alternatives, in turn, and we will provide suggestions for implementation of these alternatives as well.