A Case Review, Nike's Globalization

Introduction

Globalization is the process by which the world is becoming increasingly interconnected as a result of massively increased trade and culture exchange. It has been taking place hundreds of years and has speeded up enormously over the recent half-century. Globalization has resulted in increased international trade, more companies are now operating in more than one country, greater dependence on the global economy, freer movement of capital goods and services, and greater recognization of international brands. Improved international transport, containerization, and improved information technology all contributed to the speed of globalization.

A Case Review, Nike's Globalization

Nike was founded in 1964. Now, it has become a sportswear multinational corporation worth over $100 billion. So, how that magic happens? The story started from just a small distribution that imports Japanese shoes to the US. After operating a store and kept trying to improve the products, Nike could not keep up with the increasing demand. Every new shipment received sold out quickly. Nike's founder has to deal with the issue if he wants to expand his business. So, Nike started to make their own products and branding. Instead of locking itself into an exclusive distributor, Nike can now control all the production and grows its revenues rapidly. 

An Incorrect Expansion Strategy

However, Nike's growth wasn't always smooth. In the 1990s Nike came under scrutiny for various unethical practices. Its expansion strategy was facing a lot of challenges. As Nike gains more and more eyes on its success, unethical news was follow up. The most famous one was the incredibly low wages for their workers in developing countries such as Vietnam, Thailand, Indonesia, Malaysia, China, and South Africa, although it looks like Nike has paid enough living wages. Obviously, Nike took the advantages of globalization to lower its cost of production by outsourcing those jobs to low-wage countries and keeping the high prices of its products to gain tremendous profits. 

How Does It Happen?

So, how does Nike came to that situation through its expansion strategy? Society always wants companies to create high-paying jobs and protect the environment. But on the other hand, these companies want to reduce costs incurred to comply with environmental regulations in the production and improve labor productivity. Lower cost and higher prices of their products are all companies trying to do. But, modern information technologies and changing culture hit the old school concept seriously with negative brand images. What do think if a liar tries to sell you a product compare with a friendly honest person? At some point, trade is built on trust. But information asymmetry makes us hard to trust sellers we unfamiliar with. So, we consider the brands we trust. However, it may not a part of Nike's expansion strategy. During that period, Nike was focusing on its cost of production rather than the possible damage to its reputation.

Positive and Negative Impacts

However, it was not always bad and evil. There are still positive and negative impacts with its strategy. Although Nike's reputation was damaged by those negative news, some positive effects are indubitable. Creating more jobs is one of them. Due to the direct investment to the production infrastructures, these governments also benefit from taxing those workers and Nike. The skills of these countries are also been improved. Furthermore, other companies are also learned from the event, start to rethink their strategies, and improving sustainable development. Negative impacts such as child labor, cutting jobs when the wages are no longer cheap, and environmental pollution while producing are also serious issues that Nike has to put its effort into.

Nike's Response

How did Nike respond to these situations? In order to keep its successful business, Nike learned from its past. Some actions must be taken when the dilemmas occur since this dilemma has direct impacts on not only the quality of products but also the reputation of Nike. To handle these issues, Nike adjusted its strategies for the internal and external environment. For issues like working conditions, Nike established a code of conduct to force its contracting factory to follow and requires its suppliers to pay workers at least the local minimum wage, to make sure the workers get their benefits and improves working conditions. With these approaches, Nike successfully improves the image of the company. When the working condition was improved, workers became to think the company positively. Nike now has abundant resources in persuading the media to get rid of negative thoughts about it. Nike also has a grading system for all its suppliers to reflect the actual situation of working conditions and to prevent unethical issues.

Share of Opinion

In my opinion, Nike's responses are an excellent way to reverse its negative reputation in the past. However, I think some other alternative responses are also great for the same purpose. For instance, Nike can establish a subsidiary in its suppliers' located countries to manage all the supply of its products under its control and also offer some cheaper products to these countries. Or, as a sportswear company, Nike can also promote the atmosphere of physical activity to those countries. It is a win-win strategy since Nike improves the health of the people in suppliers' countries. Moreover, as the income increased and the atmosphere is created, these countries are also contributing to Nike's sales.

What Are The Consequences?

What would the consequences have been then? Another Nike’s reaction was to announce a video of its contracted supplier in Vietnam and Indonesia, Thailand, and China to convey the message, “Nike is a responsible company with a safe working environment, happy and satisfied workers.” However, trust is hard to build but easy to lose. Consumers need more time to reaccept it.

Reference

Nike solution for the ethical dilemmas marketing essay. (n.d.). Retrieved April 13, 2021, from https://www.ukessays.com/essays/marketing/nike-solution-for-the-ethical-dilemmas-marketing-essay.php