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Extra Credit Assignment #2 BUS ADM 330-001 Organizations Spring 2016 Read the Nike case and answer the following questions in 2-3 pages (double spaced, 12ft). The due date for the assignment is Feb 21. The columns of running shoes stretch 8 feet high and 20 feet wide. How do you decide which ones to try on? Price? Color? Nike hopes you narrow down your choices by focusing on brand. The shoe giant, headquartered in Beaverton, Oregon, has been a dominant force in the shoe and athletic apparel markets for decades. Scores of weekend warriors have looked to the Nike Air—that lightweight air pocket in the heels of many Nike shoes—to give them that extra step or that added bit of comfort. In the 1990s, however, many of those same weekend warriors were confronted with the reality of how those shoes were made. That’s when disclosures of sweatshop conditions and labor abuses sparked protests outside Nike stores and boycotts on many college campuses. In 1998, founder and then-CEO Phil Knight was forced to admit that the “Nike product has become synonymous with slave wages, forced overtime, and arbitrary abuse.”" Nike has worked hard to rebuild trust in its brand over the past decade. Nike became the first company in the industry to post the names and locations of its 700 factories—most located in China, Vietnam, Indonesia, and Thailand—on the Web (see www.nikeresponsibility.com). It created a code of conduct that sets standards for wages, the number of hours in a standard workweek, and the rules for overtime pay. It also paid a network of auditors to perform inspections of factories, giving each a grade between A and D. Unfortunately, it’s not clear that those efforts are paying off. A recent analysis of the inspection data by a professor at MIT noted that despite “significant efforts and investments by Nike … workplace conditions in almost 80% of its suppliers have either remained the same or worsened over time.” Almost one-third of the factories in one audit earned D grades because of multiple violations, including failing to pay the minimum wage and forcing employees to work more than 14 days in a row." Why has it been so difficult for Nike to improve the working conditions in its factories? One reason is that government regulations are weak in emerging economies, placing more pressure on companies to police their factories. And many of the facilities compete for Nike’s business, whereas higher employee salaries make their pricing less competitive. Those factories often find themselves working under tight deadlines, with power outages or design adjustments triggering work shift abuses. Other factories have learned to fool the audits by keeping fake records, distributing scripts for employees to read if they’re questioned, or shifting work to secret subcontractors that violate standards. And dropping a troubled facility can raise its own ethical issues, as it results in the loss of jobs that may be vital to that local economy. For its part, Nike has reacted to the limitations of its auditing strategy by helping convert factories to more modern manufacturing techniques and seeking to limit its own last-minute design adjustments. Those sorts of steps will reduce the pressures on the facilities, eliminating some of the need for overtime and excessively long work schedules. Nike’s current CEO, Mark Parker, summarizes this state of affairs by noting, “I’m proud of what we’ve accomplished, but we’re still not where we need to be. This is a never-ending challenge.”" Hannah Jones serves as Nike’s vice president of corporate social responsibility, overseeing a 135-person team and reporting directly to CEO Mark Parker. Jones’s team is charged with weaving issues of corporate social responsibility throughout Nike’s operations. That mission includes auditing and managing Nike’s factories around the world. However, it also includes issues of environmental sustainability. In 1992, a German magazine pointed out that the signature Nike Air pocket included more than just air—it also contained sulfur hexafluoride, or SF6—a potent greenhouse gas more commonly linked to older refrigerators and air conditioners. SF6 breaks up slowly in the atmosphere, which means that even very small amounts have a significant environmental impact. Estimates suggest that at the peak of SF6 production in 1997, Nike Air footwear carried a greenhouse effect equivalent to the tailpipes of 1 million automobiles." It took Nike almost 14 years to devise a new air pocket that was as light, durable, and shock-absorbing as the SF6 version. The breakthrough wound up utilizing nitrogen, held in by a redesigned sole that includes 65 wafer-thin layers of plastic film. The new approach, which debuted with Nike’s Air Max 360, allows the air pocket to stretch throughout the sole, giving even more comfort at even less weight. The company has also devised a program that calculates an environmental impact rating for each shoe, based on use of toxic adhesives, curbing of waste, and use of recycled materials. Even the Air Jordan—arguably Nike’s flagship shoe—was designed with environmental impact in mind, such that the shoe’s sole consists of ground-up bits of old Nike sneakers. You won’t see these issues discussed in television or print ads for Nike shoes however. Unlike Wal-Mart or General Electric, which aggressively trumpet their “green” initiatives, Nike prefers to deemphasize sustainability in its marketing efforts. One independent branding consultant explains that strategy by noting, “Nike has always been about winning. How is sustainability relevant to its brand?”" 1. Do you agree with Nike’s decision to downplay “green” issues when marketing their shoes? Why or why not? 2. Assuming price and quality are both acceptable, to what degree do you consider the ethical reputation of a company when buying a product or service? 3. Does it seem like Nike is doing enough to build and maintain the trust in its brand? If not, what else would you like to see the company pursue?
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