NIKE,assignment for MCD2040: MANAGEMENT 1: Managing People and Organisations

1. Executive Summary


Sustainability is becoming a hot topic in recent years. It requires that when managers are making decisions, financial profit is no longer the only thing to be focus, but also needs to concern about the effects on environment and social community.

Nike is a famous sports clothes and equipment supplier in the world, its famous products includes Air Force 1, Jordan and so on. It has very good financial performances in recent years. But it also faces some problems with environment and human rights, such as industry pollution and sweatshop. In this report, it will analyse Nike’s background and situation, then find out how to maximise the benefits of a focus on sustainability. It will discuss this issue from planning and organising aspect. And during the discussing, it finds that Nike has some opportunities to improve its performance in planning and organising aspect. At the end of this report, five recommendations will be given about how to maximise its benefits of a focus on sustainability.

The main sources of information contained in this report are from textbook (Management, Robbins et al), Internet and some academic journals. Also some information from other books and some are from Nike’s annual reports.

2. Introduction

Nike is a major publicly traded sportswear and equipment supplier based in the United States. The company is headquartered in Beaverton, Oregon. It is the world's leading supplier of athletic shoes and apparel, (Alexandria, 2008) and a major manufacturer of sports equipment with revenue in excess of $18.6 billion USD in its fiscal year 2008. As of 2008, it employed more than 30,000 people worldwide. (Nike, 2008) Nike has outstanding performance in the past, and it is believed that it will perform better in the future.

Obviously, the fundamental purpose of running a company is making profit, but recently Nike faces some legal issues about environment and labour power. Consequently, sustainability is needed to be considered by Nike now. According to Drever, Stanton and McGowan (2008, P194), sustainability refers to equitable consumption of resources that does not compromise the needs of future generations. That is to say, when company makes a decision or takes an action, profit is not the only thing need to consider or focus on, it also need to consider the impact on environment and its social responsibility (Shannon , Anderson and Henri, Dekker, 2009).

In this report, it will identify, discuss and evaluate how to maximise the benefits of a focus on sustainability in Nike from two functions of management- planning and organising. And at the end of the report, a conclusion and recommendations will be given.

3. Discussion

3.1 Planning

Planning involves defining the organisation’s goals, establishing an overall strategy for achieving those goals, and developing a comprehensive set of plans to integrate and coordinate organisational work. It is concerned with both ends (what is to be done) and means (how it is to be done). (Robbins, Bergman, Stagg and Coulter, 2009, P246). There are two old saying about planning- Failure to plan is planning to fail, and each hour spent planning is worth two hours saved during implementation. It indicates that planning is very important for the company. Especially for today, the competition in the market is fierce, the company can not survive without a adequate plan or strategy. Some markets are very competitive, with a number of vendors selling the same kinds of products or services. Conversely, some markets have low or no competition, particularly if the industry is protected by government legislation. (EcnomyWatch, 2009) For Nike, it can be classified in apparel industry. This market is very competitive because there are so many other companies sell the similar products like Nike, such as Adidas, Puma and Umbro. So a suitable plan is extremely important for Nike.

Generally, there are some advantages of planning. Planning provides direction, reduces uncertainty, minimises waste and redundancy, and sets the standards used in controlling (Loasby, 1966). Also, plan can be classified in different way. The most popular ways to describe organisational plans are by their breadth (versus operational), time frame (short term versus long term), specificity (directional versus specific) and frequency of use (single use versus standing). These planning classifications are not independent, strategic plans are long term, directional and single use. Operational plans are short term, specific and standing (Robbins, Bergman, Stagg and Coulter, 2009, P246).

Strategic plans are plans that apply to the entire organisation, establish the organisation’s overall goals, and seek to position the organisation in terms of its environment. Plans that specify the details of how the overall goals are to be achieved are called operational plans. (Robbins, Bergman, Stagg and Coulter, 2009, P251)

Go back to Nike, according to Fortune (2009), Nike is the number 1 company in apparel industry in US, and ranking in number 2 in the world following Christian Dior. So now, Nike’s actions or plans should let it keep the top 1 position in US market, and catch up with Christian Dior in the world market. The main way to achieve that is increasing its profit. But as mentioned above, nowadays sustainability becomes a hot issue in the world, it suggests that the company should not only focus on its profit, but also environment, social responsibility and other stakeholder. To meet this objective, Nike’s strategic plan should be increasing Nike’s profit as well as considers sustainability.

It is more important and challenging to make operational plan, because operational plans mean specify the details of how the overall goals are to be achieved. The bottom line of Nike’s operational plans is to solve current problems such as sweatshops in developing countries and industry pollution.

Traditionally, running a business is for making profit, and all business activities are around this purpose. Consequently, many companies set up factories in some developing counties such as China, India and Vietnam because of low labour power cost. Nike also built up in this kind of countries. Nike was stung by heavy public criticism in the 1990s for using sweatshops in developing countries for the production of many of its products. The new operational plans should cover this issue. But this is really put Nike in an economic dilemma. If Nike set up in a developed country, not only labour power would increase, but also some overhead cost such as electricity cost or water cost. But in the other hand, if Nike continues using its factories in these developing countries, people will still argue about the sweatshop issue, and that will not good for Nike’s future. If people begin to dislike or hate some products or brand that will defiantly be a nightmare for the company. When people stop buying this brand or product, the only thing the company can do is shut down. The most pressing matter of moment is balancing the economic benefit and human rights (stop sweatshop). That should be the new operational plans concern about. Nike can still use its factories in developing, but the employees’ benefits should be increased, such as increase their wages and decrease their working hours. There are two benefits from using this kind of plans. In one hand, it can stop people from arguing about sweatshop. And on the hand, although the cost will increase because of increased wage or decreased working hours, it still cheaper or more economic than set up a new factory in developed countries. In the short run it may increase its cost, but in the long run, Nike may attract more customers because of its social responsibility, so that it can maximum its benefit.

3.2 Organising

Organising is arranging and structuring work to accomplish the organisation’s goals. It is a management function that involves determining what tasks are to be done, who is to do them, how the tasks are to be grouped, who reports to whom and where decisions are to be made. (Robbins, Bergman, Stagg and Coulter, 2009, P12) It is a process through which managers design an organisation’s structure. That process is important and serves many purposes. The challenge for managers is to design an organisational structure that allows employees to do their work effectively and efficiently.

When managers develop or change an organisation’s structure they are engaged in organisational design, a process that involves decisions about six key elements: work specialisation, departmentalisation, chain of command, span of control, centralisation and decentralisation. And the purposes of organising are: divides work to be done into specific jobs and departments; assigns tasks and responsibilities associated with individual jobs; coordinates diverse organisational tasks; clusters jobs into units; establishes relationships between individuals, groups and departments; establishes formal lines of authority; and allocates and deploys organisational resources. (Robbins, Bergman, Stagg and Coulter, 2009, P342)

According to the recent situation of Nike and sustainability, Nike missed two purposes of organising- allocates and deploys organisational resources, and divides work to be done into specific jobs and departments.

Allocates and deploys organisational resources. Generally, two kinds of resources need to be allocated effective and efficiency. The first one is human resource. As mentioned above, Nike didn't do well in this aspect in the factories in the developing countries. And a way to solve this problem is increase employees benefits. The second one is material resource. The consistently growing textile industry often negatively impacts the environment. Because Nike is a large participant in this manufacturing, many of their processes negatively contribute to the environment. One way the expanding textile industry affects the environment is by increasing its water deficit, climate change, pollution, and fossil fuel and raw material consumption. In addition to this, today's electronic textile plants spend significant amounts of energy, while also producing a throw-away mindset due to trends founded upon fast fashion and cheap clothing (Textiles Intelligence, 2008). This is not an easy problem for Nike because of the limitation of the textile industry. It also makes that Nike is in an economic dilemma. In one hand, if Nike wants to change its material which is used to make products, the Develop and Research expense will increase dramatically. And the outcome of using the new material is unsure, such as the demand of the new material and customer satisfaction. But on the other hand, if Nike continues using the old material to make products, people may boycotted Nike because of lack of social responsibility.

Fortunately, Nike makes some changes on allocating the resources. Although these combined effects can negatively alter the environment, Nike tries to counteract their influence with different projects. According to a New England-based environmental organisation Clean Air-Cool Planet, Nike ranks among the top 3 companies (out of 56) on a survey conducted about climate-friendly companies (Zabarenko, 2007) Nike has also been praised for its Nike Grind programme (which closes the product lifecycle) by groups like Climate Counts.(ClimatesCounts, 2009) In addition to this, one campaign that Nike began for Earth Day 2008 was a commercial that featured Steve Nash wearing Nike's Trash Talk Shoe, a shoe that had been constructed in February 2008 from pieces of leather and synthetic leather waste that derived from the factory floor. The Trash Talk Shoe also featured a sole composed of ground-up rubber from a shoe recycling program. Nike claims this is the first performance basketball shoe that has been created from manufacturing waste, but it only produced 5,000 pairs for sale. (Janoff. 2008) Another project Nike has begun is called Nike's Reuse-A-Shoe program. This program, started in 1993, is Nike's longest-running program that benefits both the environment and the community by collecting old athletic shoes of any type in order to process and recycle them. The material that is created from the recycled shoes is then used to help create sports surfaces, such as basketball courts, running tracks, and playgrounds (Zales, 2008). From mentioned above, it is clear that, Nike really did a lot of effort on exploring and using new material to make less negative effect on environment. It should continue doing that, although in the short run it will increase a lot of expense. But in the long run, Nike will get more benefit than its expense.

Divides work to be done into specific jobs and departments. So far, in Nike’s annual report, it rarely discloses about Corporate Social Responsibility (CSR). And from the facts mentioned above, it shows that Nike did a lot thing about CSR, so this maybe a problem or mistake of account department which prepares the annual report for external users. Nike should make give account department more details task or mission about CSR. Although disclosing CSR may increase the cost of making annual report, but in the overall level and in the long run aspect, its benefits are far more than its cost. Nike can make a triple bottom line report. Triple bottom line is a practice that reports on the economic, social and environmental management and performance of a firm. (Elkington, 1997, 2004) Triple bottom line reporting is the provision of information that allows stakeholders to determine not only the economic value added by the firm, but also the environmental and social value (Elkington 2004, P3) Some advantages of environmental and social reporting (triple bottom line reporting) are: improving public image, which attracts investors and helps build reputation over the longer term; and benefits for management from eco-efficiency in terms of reduced waste, disposal and associated costs. Compared the advantages and disadvantages of CSR, it is clearly that, Nike’s account department should prepare the CSR reporting as well as annual report.

4. Conclusion

In conclusion, so far Nike has outstanding financial performance, it ranks in number one in apparel industry in US market. But Nike also faces some issues about sustainability, and that would affect Nike’s financial performance. As mentioned above, it indicates that Nike can solve these kinds of issues through planning and organising. It can have a new strategic plan about what company should achieve in the long run about both financial aspect and sustainability aspect. Also, it needs some operational plans to backup its strategic plan. Operational plans also have more details than strategy plan. In the organising aspect, Nike should organise both its human and material resource. And Nike needs do more about triple bottom line reporting. From the better planning and organising, Nike can maximise the benefits of a focus on sustainability in the organisation.

5. Recommendations

According to the situation of Nike and discussed above, there are five recommendations for Nike to maximise the benefits of a focus on sustainability:

1. Continue using the factories in developing countries, but increasing the employees’ benefits such as increases wages and decreases working hours.

2. Continues focus on research and using new material which is economic-friendly to make its products.

3. Prepared Triple Bottom Line reporting as well as financial reporting every year.

4. Using various means (marketing methods) to let more people know how Nike engages in sustainability stuff. It can increase Nike’s reputation and potentially increase its customer size.

5. When Nike in an economic dilemma (such as profit verse environment), it is better to put environment or social benefits before its environment benefits. Because in the short run, concerning environment or social benefits will lose some financial profit, but in the long run it will bring Nike more benefits.