PESTLE analysis of Nike

PESTLE analysis of Nike Nike is a global brand specialising in the design and manufacture of athletic apparel, footwear, accessories and equipment; it is headquartered in the United States, Europe, and the Asia Pacific Region (Whitehead, 2012). Its products are available through over 20,000 retail outlets, including those in its own footfall outlets, e.g. Nike Factory stores (Whitehead, 2012). This study considers the contemporary business environment of Nike using a PESTLE approach, paying particular attention to any human resources management (HRM) issues that may arise under each heading. Overall, it is argued here that Nike has attempted to address various business and social challenges by harmonising its value proposition to ‘Consumers, shareholders, business partners, employees, and the community.’ (Ferrell et al. 2009, p.417). Political In the estimation of some observers, Nike has benefited considerably from the growth-orientated policies of the US government, which has maintained low interest rates, currency exchange stability, and internationally competitive tax arrangements (Whitehead, 2012). Nike has also benefited from cooperation with government initiatives in terms of transparency in the global value chain; one example of this lies in membership of the Clinton administration’s 1997 Apparel Industry Partnership (Wagner, 2009). As will be discussed further below, political pressures have featured more negatively in concerns over Nike’s employment practices (Whitehead, 2012). Economic In common with all consumer-facing organisations, Nike faced challenging trading conditions since the financial crises of 2008-9 and contingent economic slowdown; this has applied in both Western markets (such as the US) and the Asia-Pacific region (Whitehead, 2012). Conversely, Nike has used its established brand equity to take advantage of growing consumer demand in emerging economies (Whitehead, 2012). The corollary to this has been an expansion of Nike’s value chain in which it has also taken advantage of the lower wage rates paid in those economies (Whitehead, 2012). Nike has defended the contingent CSR critiques by arguing that it has provided employment in otherwise underdeveloped economies, and paid the established local rate for labour (Whitehead, 2012). In HRM terms, this implies a considerable divide between the higher-value strategic and design function retained in the US, and those in outsourced manufacturing (Davies, 2006). Social/Societal In the macro-economic sense, Nike (and its competitors in the sportswear sector) are the beneficiaries of a growing societal preoccupation with health and fitness (Davis, 1992). As Elliot and Percy (2007, p.52) indicate, ‘Brands can also be used to counter some of the threats to the self posed by post-modernity, such as fragmentation, loss of meaning and loss of individuality’. However, Nike also faces continuing challenges arising from its CSR (corporate social responsibility) position, chiefly related to the nature of its global value chain (Foster and Harney, 2005). Nike was caught up in the ongoing debate around globalisation, perceived by many pressure groups to be ‘Increasing the inequalities of political power and influence, as well as highlighting new dimensions of inequality’ (Hurrell and Woods, 1999, p.1). From the 1990s onwards, Nike adopted the standard industry practice of outsourcing much of its skilled, semi-skilled and unskilled manufacturing to emerging economies, including those in the Asia Pacific region (Foster and Harney, 2005). Sweated labour (including that of children) was allegedly being used in a manner that contravened both local and international standards, as well as Nike’s stated CSR position (Foster and Harney, 2005). Moreover, the corporation’s compliance with requirements regarding pay and working conditions was brought under further scrutiny, when it emerged that the relevant workplace and HR records were not being properly maintained (Foster and Harney, 2005). In some circumstances, it was suggested that these lapses were achieved with the connivance of local officials (Foster and Harney, 2005). To counter these allegations, Nike began to incorporate greater transparency in its reporting, providing the locations of specific manufacturing facilities (Carter, 2005). In 1993 it published its Memorandum of Understanding, clarifying its expectations regarding the conduct of suppliers and subcontractors (Hadjikhani et al., 2012). The point here is that Nike has to avoid being caught up in consumer boycotts, especially where these can be globally popularised via the internet; as Goul Andersen and Tobiasen (2006, p.205) point out, ‘Within the framework of globalisation, political consumerism takes on a particular significance, sometimes providing the only opportunity to influence outcomes as trans-national companies are outside the regulatory powers of national governments’. In HRM terms, these kinds of lapses can also undermine employee confidence in leadership regarding CSR issues (Schwartz et al., 2012). Technology In common with most consumer-facing corporations, Nike has been able to use enhanced levels of digital metrics to analyse customer demand and revise its segmentation accordingly (Myerson, 2007). In the optimum model, transaction and supply chain event management are linked via SOAP (Simple Object Access Protocol) and MPPS (Massively Parallel Processor System) systems (Myerson 2007). Meanwhile consumers will be able to make contact-less payments via mobile phone platforms (Myerson, 2007). These processes may however accelerate the speeding-up of the hollowing-out of the workforce, reducing the amount of employment on offer (Davies, 2006). Legal Nikes growth strategies have relied on internationalisation and, correspondingly, the corporation has to adapt rapidly to the legal and policy frameworks in all of its trading areas (Legendre and Coderre, 2012). Countries with a common law legislative framework (i.e. the United Kingdom and United States tend to favour a less interventionist approach that supports the interests of shareholders. Meanwhile, states which have code-orientated legal systems (e.g. Germany, France and Spain), tend to acknowledge wider stakeholder interests (Legendre and Coderre, 2012). However, Nike has still faced legal difficulties in the course of its international expansion; following allegations of sweated labour, it closed some factories in Pakistan and moved its operations to Thailand and China (Grisini and Seppala 2010). However, the contingent unemployment led to difficulties with the Pakistani authorities, as well as criticism over the resulting unemployment (Grisini and Seppala 2010). As the Asia-American Free Labour Institute (AAFLI) has argued, ‘Nike’s strategy is to pit six factories against each other and have them compete for orders based on who produces the cheapest shoe. The government doesn’t protect the workers, the union is complacent, and Nike looks the other way’ (Hadjikhani et al., 2012, p.23). In 2003 Nike countered claims that it paid below the minimum wage in countries such as Indonesia, stating that it had paid, on average, ‘Double the minimum wage as defined in countries where its products are produced under contract. History shows that the best way out of poverty†¦is through exports of light manufactured goods that provide the base for more skilled production (Jennings, 2012, p.156). Nike was subsequently sued under California’s Unfair Competition and False Advertising laws, on the basis that its statements were false (Jennings, 2012). Following initial defeat and later appeals to the California Supreme Court, Nike settled privately with the plaintiff, prompting speculation that it had done so to avoid further damaging revelations (Jennings, 2012). Again, such crises can undermine the role that CSR has in harmonising the HRM effort across the organisation (Schwartz et al., 2012). Environmental In formal terms at least, Nike maintains a positive position with regard to green (i.e. environmental) issues, with ISO 14000-compliance presented as part of its overall policy (Gallagher and Weinthal, 2012). Launching its initial sustainability policy in the early 1990s, Nike appointed 100 ‘sustainability champions’ to oversee pilot projects in various aspects of its business, such as the reduction of carbon emissions and elimination of waste (Holt et al., 2009, p.4). As Willard (2002, p.80) explains, externalised costs, such as those arising from human resources, ‘Must be considered if the market’s â€Å"invisible hand† is to reconcile the basic conflict between making decisions based solely on short-term profit and making decisions based on social and environmental responsibility’. In HRM terms, the involvement of employees in the operation aspects of environmental policy is calculated to have a positive effect on both productivity, and the psychological contract of staff (Schwartz et al., 2012).