TMA02

Nike And Its Environment

:Introduction
Training shoes are global product. And there are
three companies dominate sales of training shoes
.worldwide: US, Nike and Reebok
,In this report we will talk just about Nike company
Nike is the biggest shoe company in the world and that
has created a great influence, which could effect and be
affected by its surrounding environment. This large force
of control over the market is one of the environmental
.effects
Managing the book emphasized that; All organizations
are affected differently by their external environment.
It has gathered the environmental affects under five
:factors
Communication technology Regulation and deregulation Globalization Competition Working practices The outcome of these elements can directly or
indirectly be measured in the economy, the society, the

state and the system which are so called Environment

Nike is a global company operating world wide as
being mentioned by PHILIP H. KNIGHT the Chairman and
CEO of Nike when he once said, Global citizenship is
important to our company and to our consumer. The
performance of Nike and every other global company in
the 21st century will be measured as much by our impact
on quality of life as it is by revenue growth and profit
.margins
To gratify out ambition in answering the abovementioned question to its highest extend we need to
start talking about each environmental factors and their
.effects

:The Body
:STEP Analysis :1

a) Society.
:Relevant factors from Nike's perspective might include
The values and expectations of (a particular) society.
Its social divisions, particularly in terms of the
distribution of wealth.

 Its degree of freedom, especially as regards freedom

of information.
The level of education would be important both for
the recruitment of suitable local staff (if the
company has an office there) and also because
literacy is a basic requirement for computer-usage.
b) Technological Factors.
The changing nature of technology in the world at any
given time.
Preparedness of local rivals.
Crucially, the national/international infrastructure of
cables, telephone lines, etc.
c) Economic Factors.
Economic growth (nationally and internationally).
Projected stability of the economic situation.
Public/market confidence in the dot.com sector

 Consumer confidence (for the purchase of expensive

computers!)
d) Politics/Law.
The Federal Communications Commission, of course,
and its analogues elsewhere in the world.
Local laws such as the companies act in the UK and
laws such as the law of contracts, which apply to all
businesses regardless of type.
Local states desire to control and regulate their
telecommunications.
International treaties.

2: Exploring the impact of these forces.

a. Society.
Globalization has fashioned a shift in the apparent size and
shape of our world. New, more rapid forms of transport

have

brought

this

about,

by

mushrooming

of

telecommunications and by new agreements between nation

states. These processes will almost certainly continue,
although how they will alter the lives of the new global
citizens is unclear.

Class structures, too, have shifted, (How they have

shifted, of course, depend on how you define class). This is
mainly relevant insofar as it affects educational standards and
aspiration, as well as incomes. Computer literacy, as well as the
more general kind, might be impaired (as Hutton (1995), among
others would argue) by the current trends in UK education,
leading to a poorly trained pool of potential workers, while
income differentials have an effect on potential markets.

Striving to achieve our long-term aspiration goal of

100% recoverable product leads us to focus on ways to "close

the loop" on a product's life cycle. That is, rather than

throwing away old products, we want to use them to make new
ones. In our case, it's a process that begins at the end-with
designers, chemists and others contemplating the fate of an
old, worn-out athletic shoe. A shoe just about to be thrown
away.

In addition, we also now use some of the byproducts from the

manufacturing of outsoles of new Nike shoes as Nike Grind
rubber material.
Nike Grind Rubber, from outsoles and manufacturing
byproducts, helps make football, baseball and soccer fields,
as well as golf products, weight room flooring and running
tracks. (Nike licensee Field Turf uses Nike Grind material
from manufacturing byproducts exclusively.)
Nike Grind Foam, from mid soles, is used in synthetic
basketball courts, tennis courts and playground surfacing.
Nike Grind Fluff, from textile and leather uppers is used for
padding under hardwood basketball floors.

b) Technological

Factors.

Bells (1973) description of an information society was largely

flawed. Mackay et al., with, it must be said, rather more hindsight
available from a lapse of 26 years,
Using an innovative mechanism devised by the Oregon
Office of Energy, Nike is redirecting $1 million of its state
income tax liability directly to Oregon public schools. The
Business Energy Tax Credit (BETC) reduces tax bills for
companies that invest in energy-saving projects; the reductions
are meant to offset some of the higher initial costs of a more
efficient system. Because public schools don't pay taxes, they've
missed out on the incentive - until now. In 2002, Nike began giving
what would have been state taxes directly to schools, paying for
27% of an energy-efficiency upgrade in schools across the state.
Schools get improved learning environments and reduced
operating costs, and Nike gets to dedicate a portion of its state
taxes to help schools.
By experimenting with material made from recycled
athletic shoes, students study recyclability, are challenged to
create their most effective recycled product, and discover the
benefits of a sustainable environment. The Air to Earth
curriculum includes lesson plans, activities, materials and a video.
Join the 6,000 teachers who have taught the ATE curriculum to
an estimated 450,000+ students in the U.S. since the program
began in 1998

c) Economic Factors

In the United States, Nike introduced NikeGO, a

program designed to battle a national epidemic of inactivity.
Aimed at 8-to-15 year-olds, the program's mission is to get
kids moving and to give them the means to get active. NikeGO
launched in 2002 with $50,000 ($25,000 in cash and $25,000
in Nike product) grants to 32 after-school programs designed
for, and with the help of, kids in Boys & Girls Clubs across the
country. In Fall 2003, NikeGO and SPARK (Sports, Play and
Active Recreation) launched PE2GO, a pilot program designed
to increase the quality and quantity of physical activity in
schools across the U.S. where P.E. programs have been reduced
or eliminated. The intended result: kids across the country who
are healthier, happier and more likely to make positive life
choices.

Employees in the United States who travel for Nike

business have the option of choosing Delta Air Lines to allocate a
portion of their ticket cost to a fund established by Nike and
Delta Air Lines. The Eco-Class fund is aimed at mitigating the

annual climate impact of Nike's air travel on Delta flights by

offsetting the equivalent carbon emissions. Eco-Class began in
2001, with the first fund enabling a local middle school near
Nike's world headquarters in Beaverton, Ore. to change its fuel
source from oil to natural gas. In 2002 and 2003, the Eco-Class
funds were donated to The Climate Trust, a Portland, Ore.-based
non-profit organization committed to reducing greenhouse gas
levels through a portfolio of projects aimed at offsetting carbon
emissions. In the future, Nike Travel hopes to expand on the EcoClass program's success by growing Nike's portfolio of
environmental travel partners to include other preferred
suppliers.
Nike is acutely aware of the need to drive sustainability
in everything we do and strives to minimize the environmental
impact of our products throughout the product lifecycle. ATE
encourages students to think about the Earth's cycles and
relates it to the "stuff" we use every day.

d) Law:
Government Programs in the US
At our world headquarters in Oregon, we continue to reduce the

percentage of employees who drive alone to work. The US

Environmental Protection Agency (EPA), through its "Commuter
Choice Leadership Initiative," suggests that leadership company
drive-alone rates should be no more than 86%. In 2001, our drivealone rate was 76%, a drop of 22% from our first measurements
in 1992.
Our USA Delivery organization has a voluntary agreement with
the EPA focusing on ground transportation, called the SmartWay
program. Nike and other Smart Way partners have agreed to
work with the EPA to develop performance measures or goals to
improve air quality, reduce greenhouse gas emissions, save fuel,
and protect public health.

Essay a bout Nike

There has been much debate and controversy recently
concerning Nike's Asian labor practices. This is a very complex
issue and one that is a long way from being solved. It is very
difficult to determine which side of this argument to defend, as
both sides acknowledge the facts, yet put a completely different
spin on them. Do you believe Nike's critics who say they're
exploiting workers? Or, do you believe Nike when they say that
they are giving workers in these countries wonderful
opportunities to raise their standard of living? The consensus
answer to this question by all sides seems to be that Nike is
.improving but still has a ways to go

Nike's Asian ties can be traced back to the birth of the

company. The CEO, chairman of the board of directors, and cofounder, Phil Knight, wrote his masters thesis at Stanford
University in the 1960's on the prospects for using Asian labor to
produce goods cheaper and more effectively. In order to
incorporate this plan in to Nike's business structure, a
partnership was set up with a Japan based company called Tiger
Sports. Tiger Sports would manufacture shoes for Nike in Asia
then shipped them to the United States to sell. In the 1980's
however, this aspect of Nike's partnership with Tiger Sports was
dissolved, and Nike was forced to expand production from the
United States to countries such as Taiwan and Korea where their
products could be manufactured at the same relatively low cost
that Nike enjoyed through the Tiger Sports partnership. Over
the last five of years, however, the production numbers for these
countries have been decreasing at an alarming rate due to the
fact that their economies expanded at a very rapid pace. This, in
turn, caused the cost of labor to increase dramatically, and
therefore Nike could no longer produce their product as
efficiently as before. In lieu of the rapid economic growth in the
pacific rim, and the increased production cost, Nike has moved
more into countries such as Vietnam and China where the labor is
cheaper and labor laws less stringent. (VLF, VN Fact Sheet)

Nike does not own any of the factories that produces its
products in Asia, and subsequently they do not directly employ
the workers or management. They contract out work to factories
that make all of the products and run all of the factories. They
do, however, have a massive amount of leverage when dealing with
these factories because of the huge contracts they supply. To
ensure good labor practices, Nike has a Code of Conduct that

every contractor must agree to abide by in order to get a

contract. The Conduct Code in theory condemns and prohibits
child labor, requires that workers be paid fair wage, imposes caps
on the days and hours a worker can be forced to work, prohibits
mistreatment or discrimination of workers in any form, obligates
factories to implement programs that benefit worker's health
and safety, and recognizes and respects the workers right to
freedom of association. There are 1000 Nike employees
worldwide monitoring operations at the subcontractors and
.specifically the Code of Conduct adherent
The most consistent criticism of Nike is that the
workers in the factories contracted by them are not aware of the
Code of Conduct that was agreed upon, and/or it is not enforced
(especially the wages and overtime aspects) by the factory
officials. Critics contend that the factories pay less than
minimum wage at times, force too many overtime hours, and fail
to make the workplace as clean and as safe as standards dictate.
Many of the factories that are contracted have workers and
management from different countries, causing some problems in
communication. Some factories in China have Taiwanese Managers
while factories in Vietnam have Korean managers. This is one
reason offered by Nike in defense of the factories failure to
comply with the Code of Conduct. To look into this issue, earlier
this year Nike commissioned Andrew Young, a former civil rights
leader and United Nations ambassador to do an analysis of how
well the Code was working. Young and his staff visited four
factories in Vietnam, Indonesia, and China for three to four hours
each led by Nike's people. Young's conclusion proved not only to
be uninformative, but somewhat aggravating to the public due to
its elementary tone. "Nike is doing a good job, but could do
better" was the statement released by Young at the end of the

report. Another aspect of the inquiry that bothered the public

was the fact that Young chose not to look into the issue of wages,
a prime component of the Code. The reason for this being "such
an exercise was well beyond the technical capacity of our small
firm." (Good Works, Executive summary)
Stephen Glass calls into question Young's work in his
article. He criticizes Young and Good Works International LLC
(Young's company) for not using their own interpreters, not
spending enough time in the factories, not consulting with
"experts" on the issue, and using this report as a public relations
ploy for his new company. He states, "But if the Nike report was
'classic Andy Young,' it was also a classic sham, marred not just
by shoddy methodology but by frequent misrepresentations"
(Glass). Young even admits that he and his company are not "labor
practices experts" (Good Works, disclaimer) yet they were
.chosen to do this job
About a month ago a secret internal audit performed by
Ernst and Young was leaked to press (Audit). In it was
information about dangerous levels of carcinogens, as well as
overtime abuse suffered by workers. This information directly
contradicts Young's statement of "clean, well-lit, ventilated
factories." This report makes it appear that Young's report was
strictly for public relations and had no real impact on rectifying
the situation, or bringing to light any of the issues that
.surrounded the situation
Recently, Nike commissioned a study by graduate students
from the Amos Tuck School of Business at Dartmouth College to
determine if workers in Indonesia and China were earning a

livable wage. The intent of this study was to shed some light on
the areas that the Young report failed to cover. The students
spent three weeks interviewing workers in each country, and at
the end of the study, three main conclusions were found. The
first conclusion, "Nike contract workers consistently earn wages
at or above government mandated minimum wage levels." The
second conclusion states, "workers living on their own can
generate discretionary income in excess of basic expenditures
such as housing, transportation, and food." The third conclusion,
"for workers living in extended family households, Nike contract
factory worker wages are typically used to increase or augment
total household income to raise overall household living
standards" (Nike, Press Conference). Although these conclusions
support Nike's insistence that they do not sacrifice their
workers well being for their own financial gain, critics bring to
light a valid point when they argue that it is impossible to paint an
accurate picture of the pay scale in three weeks time by
interviewing approximately 1% of the workers, sometimes in front
of management, which doesn't allow the worker total freedom of
.speech

:References
Environment Book, Supporting Notes, Nikes web sites.