Promise and Perils of Globalization - Nike

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The Promise and Perils of Globalization: The Case of Nike1
Richard M. Locke
Alvin J. Siteman Professor of Entrepreneurship
and Political Science
MIT
1 This case was prepared for the Sloan School of Management’s 50th Anniversary celebration and should be read in conjunction with “A Note on Corporate Citizenship.” This case was prepared with the active involvement and research assistance of the following Sloan MBA students: Vanessa Chammah, Brian Curtis, Elizabeth Fosnight, Archana Kalegaonkar, and Adnan Qadir. I would also like to thank Miguel Alexander, Maria Eitel, Dusty Kidd, Joseph Tomasselli and Dara O’Rourke for their helpful comments and assistance during this project.

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1. Introduction
How should global corporations behave in the new international world order? What constitutes good corporate citizenship in a world where the stakeholders are diverse and dispersed around the globe and where no clear or consensual rules and standards exist? These questions shape the behavior of most multinational corporations (MNCs) today. Although multinationals are eager to pursue the opportunities of increased global integration, they are increasingly aware of the reactions which their strategies induce – both at home and abroad. Thus, they tread warily, lacking clear and agreed-upon definitions of good corporate citizenship.

Through a case study of Nike, Inc. – a company that has come to symbolize both the benefits and the risks inherent in globalization – this paper examines the various difficulties and complexities companies face as they seek to balance both company performance and good corporate citizenship in today’s global world. 1. The Athletic Footwear Industry

The athletic footwear industry experienced an explosive growth in the last two decades. In 1985, consumers in the United States alone spent $5 billion and purchased 250 million pair of shoes.2 In 2001, they spent over $13 billion and bought over 335 million pair of shoes.3 Although the industry is highly segmented – by different sports, models and price – the branded shoe segment is dominated by a few large companies 2 Miguel Korzeniewicz, “Commodity Chans and Marketing Strategies: Nike and the Global Athletic Footwear Industry,” in Gary Gereffi and Miguel Korzeniewicz, eds., Commodity Chains and Global Capitalism, (Greenwood Press, 1994): 248.

3 National Sporting Goods Association, 2002; www.sbrnet.com
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(e.g., Nike, Reebok, Adidas). In fact, the top 10 footwear companies control over 70% of the global athletic footwear market. (See Table 1). Since displacing Adidas in the early 1980s and Reebok in the early 1990s, Nike has become the largest and most important athletic shoe company in the world. (See Figure 1).

Table 1: Market Share
Athletic Footwear Market
Share
1991 1992 1993 1994 1995 1996 1997 1998 1999
Nike 22.5 25.4 24.4 22.7 27.1 32.1 35.3 30.4
Reebok 18.8 20.0 18.9 18.3 17.4 14.7 14.5 11.2
Adidas 13.6 10.0 9.3 10.3 9.9 10.2 10.3 15.5
Fila 0.9 2.1 2.7 3.0 4.1 6.0 5.7 3.9
Converse 3.4 3.5 4.0 4.2 3.3 2.7 3.2 2.2
New Balance 1.8 1.8 2.1 2.2 2.5 2.9 3.1 3.8
ASICS 4.7 5.4 5.2 4.7 4.2 3.5 3.0 2.5
Puma 4.6 3.8 4.3 3.1 2.4 2.4 2.1 2.1
Keds/Prokeds 3.0 3.9 3.9 3.0 2.4 1.9 1.5 0.0
Airwalk 0.0 0.0 0.4 1.1 1.2 1.4 1.1 0.0
Top 10 73.3 75.9 75.2 72.6 74.5 77.8 79.8 0.0 71.6
Others 26.7 24.1 24.8 27.4 25.5 22.2 20.2 28.4
Totals 100.0 100.0 100.0 100.0 100.0 100.0 100.0 0.0 100.0
Sources: HBS Case #9-299-084 "Nike, Inc.: Entering the Millennium, March 31,1999 and Footwear News, December 27, 1999. Sources: HBS Case #9-299-084 "Nike, Inc.: Entering the Millennium, March 31,1999 and Footwear News, December 27, 1999. Figure 1: Global Athletic Footwear Market Share - Top 6

0
5
10
15
20
25
30
35
40
1991 1992 1993 1994 1995 1996 1997
Nike
Reebok
Adidas
Fila
Converse
New Balance
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2. The Promise of Globalization: Nike, Inc.
Founded in 1964 through an investment of $500 each by Phil Knight and Bill Bowerman, the company (then...
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