Nike - Organizational Audit

As such, it applied cultural relativism to justify the use of child labor, unsafe labor practices, and near slave labor in its factories. Since then, Nike has been a driving force to ensure fair labor practices across the apparel industry. In 1999, Nike was a key contributor to the establishment of the Fair Labor Association, an organization that is “…dedicated to protecting workers’ rights around the world” (Fair Labor Association, 2016). Today, Nike continues efforts to ensure that contract factories comply with its Code of Conduct to improve labor standards in overseas factories (Nike, 2016). Because of Nike’s efforts to expand and enforce social responsibility at its factories and given the lessons learned from its sordid past, it is unlikely that Nike would resort to any of the straw men fallacies. However, given the pressure by investors to expect solid returns, one hopes the company continues its altruistic social responsibility efforts while veering away from the Friedman Doctrine and its assertion that “… the only social responsibility of business is to increase profits” (Hill, 2011).

Nike is by far the number one sports brand for shoes and apparel in the world today. With an estimated 30.6 billion dollars made in 2015 and an estimated 32.4 billion dollars to made in 2016, business is going to keep increasing. Nike is a company that always wants to be the best in everything they do. Whether thats the sales they produce, or the athletes they recruit to represent their product. The code of ethics is what separates them from the rest of the pack and allows them to be the best at what they do. Nike’s code of ethics is based on honesty, loyalty, trustworthiness, fairness, and concern for others. Due to those core values, they are able to achieve legendary success.

The ethics of businesses are under more scrutiny than ever before (Bones, 2014). Ethics can be considered as following a code of behaviour agreeable with the context of society and can also be defined as the application of moral and ethical considerations in a business environment (Hurn, 2008). Sport businesses have been targeted a lot more in recent years due to the conditions they place their workers in has become more apparent to the outside world. Nike are one of the world’s leading sports brands but have been faced with many allegations in recent years (Daily Mail, 2011) in regards to the conditions they put their workers in and their ethics and morals have been questioned. This report will critically evaluate the impact ethics has on the business operations of Nike and then analyse the reasons for why ethics impact the sport organisation. Finally, recommendations will be made to improve Nike’s business ethics.

1. Discussion: What factors drive Nike’s decision to stick with some form of network organizational structure rather than own its manufacturing operations?

The highly recognized name brand—Nike— fails to notice the faults that are happening in factories that are violating a few disturbing rules. The company’s reputation has decreased due to demands and claims Nike; implying that they utilize sweatshops to produce more products at a lower pay. The company has been sued numerous times for abusing and exploiting their employees in factories for years. Another problem that Nike has faced throughout the years was making employees work in poor environments that affected the health of many— which contributed to being abused by the manager for not going to work. Nike distributes and sells merchandise of high quality for a high value. The company is giving the satisfaction of quality service to their

One major key component that allowed Nike to get to the elite status they are today would have to be the expectations they have for their employees. In their code of ethics book they clearly state on the fifth page that “every employee must reflect standards of honesty, loyalty, trustworthiness, fairness, concern for others and accountability” (NIKE Code of Ethics). These expectations of their employees shows how much Nike values its company, and it ensures every employee knows what is expected of them. None of these expectations has hindered Nike’s ability to get employees. Most, if not all, of Nike’s employees claim there’s a great work environment at Nike, which all starts with the expectations they put on them in the beginning.

Similarly, Nike’s corporate social responsibility (CSR) practices were in question. Truly, their CSR was insufficient and lacked in moral obligation to the communities in which they operated. Conversely, supervisors in the overseas factories were just trying to ensure they met production goals and kept costs low so Nike would continue to do business with them (Nisen, 2013). As a result, Nike expanded their compliance staff, invested in the training of staff and overseas suppliers, developed additional auditing protocols, hired third-party auditors to check their internal audits, and spent millions of dollars to improving working conditions in overseas factories who made Nike products (Locke, 2013). According to a case study, “Nike auditors and compliance staff to be serious, hardworking, and moved by genuine concern for workers and their rights” (Locke, 2013, p.

Today a shoe is more than something to protect and keep one’s feet warm, it is a fashion statement, an athletic enhancer, rebellion, status, and the ins and outs of coolness. Shoes, mainly athletic shoes have changed drastically throughout the years. From weight, size, look, and comfort ability, Nike has been the leading footwear company to develop and lead such a growing industry. Peter Hitchcock, the author of Oscillate Wildly, wrote,

The interest of Nike is to gain the maximum profit without thinking of the employee's interest, this leads to a conflict of interest.

This paper delves into the well-known Nike Inc. and the ethical dilemma they have been struggling with for years, including the history as well as their efforts to address the issue. While they are have already found ways to try to turn their company around, this paper discusses multiple alternative options as well as the top recommendation and form of application for management to take. With analysis, evaluation, recommendation, and application, this case study will also focus on the impact of the five stakeholders: owners, employees, customers, stockholders, and society at large.

Nike has high expectations to their factory partners through evolving standards of their Code of Conduct that is a straightforward statement of values, intentions and expectations meant to guide decisions in factories. Nike’s Code of Conduct includes strict guidance about child labor, excessive overtime, compensation, forced labor, and freedom of association Nike (n.d).

Nike is a giant company with vast resources. Nike utilized a combination of marketing and public relations to resolve its problems. It has unlimited money for advertising and marketing. With enough money behind a company, the public will quickly forget about its wrongdoings. One example of another company that was in a bad ethical situation was Subway. It was found that Subway used the same material found in Yoga mats in their bread. As time went on and advertising continued, people forgot about what happened. Nike agreed to correct some of their discrepancies. Nike agreed to stop using a hazardous material that proved to be very harmful to its workers. Nike also agreed to raise minimum wage in many of the countries in which it operates. In addition, Nike launched an education initiative for workers in many of the countries that it operates. These

Nike soon realized even though they have attempted to make changes within their subcontracting companies it has not been enough. Nike realized they have an ongoing obligation to the workers, as well to the different cultures that are involved. Nike implemented a process called The Compliance Generation, which involves increasing their business value by establishing the function, fighting fires, building a global team, and establishing partners. Employee management interaction making the work more systematic, building excellence in management audits, building environment, safety, and health global process, creating transparency, and creating ratings. Nike wants to have a transformational focus on building excellence in factory remediation, developing a sustainable sourcing strategy, building business integration and accountability, increasing contract factory ownership of corporate responsibility, and building industry conditions (Nikebiz, 2010).

Nike must cater to a large portion of the new generation that demands the latest trends and styles. Nike should take into account the changing US demographics due to the rising proportion of Hispanics, Asians, and African Americans. These groups have different preferences that Nike should be able to satisfy. Nike should identify the next generation of loyal customers and provide for their needs.

Nike’s management understands how important a relevant strategy is in the global environment, as Don Blair, Nike’s CFO, stated “...we are refocusing our efforts, increasing our investments in innovation, using our voice for stronger advocacy and looking at how we incubate new, scalable business models that enable us to thrive in a sustainable economy.”