The Impact of Boycotting Campaigns on Nike - Case Study Example

Boycotting Campaigns Introduction A boycott is the act of voluntarily abstaining from the purchase, use or dealing with aperson, organization, product or country as an act of expressing protest usually for political or social interests1. For the purpose of this study, the definition of boycotting will be narrowed down to apply to marketing and business sense. As such, boycotting will be defined as the act of voluntarily refraining from purchasing the products or services of a company as a form of consumer activism and campaign against the said company. Narrowing down the definition of consumer boycotting will result in the same being defined as the attempt by a party or parties to achieve specific objectives through urging individual consumers and consumer groups to refrain or abstain from making selected purchases from particular companies in the market place. In the recent past, academic studies have been applying serious scrutiny to the subject of boycotting. Harrison, for example made key findings that every boycott is essentially a moral act and an expression of disapproval as well as attempts of dissociating from the object of complaint in the case of products and services sold by a company. Harrison further stated that boycotts are not usually the exclusive preserve of a consumer. Economic consumer boycotts which entail the collective choice by individuals not to purchase a product or service are presently a frequently used tool by lobby groups and NGOs in protesting against social and environmental practices as well as unfair marketing2. In the essay, the researcher will critically discuss the impact of boycotting campaigns on Nike, which will be the case study. The essay will cover a review of literature and define major terms as well as give examples of boycotting campaigns among consumers. The researcher will then use the case study company in discussing the impact of boycotting campaigns to companies as well as outline some of the issues that a company faces when consumers initiate boycotting campaigns. The study will then be concluded by a summary of the facts and key findings of the study. Review of Literature The term boycott was coined during the disputes between Irish peasants and the British landlord class in the periods of the Agrarian revolution. In the said time, the word “ostracism” was the closest which would be used in describing the actions that the peasant farmers took against their landlords3. However, as the meaning of the word was not known to the peasant farmers at the time, two leaders took it upon themselves to create the new phrase “boycott”. As such, instead of ostracizing someone, these leaders felt that it was more appealing to say “boycotting someone”. Ultimately, the word boycott was born which describes the many consumer movements that are often initiated by a group of individuals who have less power against a group of powerful individuals (corporations). The aim of boycotts by consumer groups is usually to express dissatisfaction with certain situations and circumstances. Types of Consumer Boycotting There are a number of consumer boycotts. One such type according to Friedman is the instrumental boycott which is designed to force an organization to retreat by applying economic pressure. Such a type of boycott is the most predominant across ethical consumer boycotts by consumer groups. A report by Harrison showed that there were 37 successful instrumental boycotts in the past 15 years. Instrumental boycotts tend to require coordination, resources, and determination all in equal measure. The expressive boycott is another type of boycott. Such a boycott is usually more concerned with “discourse” or simply, political discussion in interesting ways on what is right or wrong. A classic example of such a type of boycott is the consumer boycott of the 25 biggest defense contractors in the U.S that took place in the 90s. Expressive boycotts allow for the raising of issues which may have otherwise never been. Expressive boycotts raise such issues in a manner that is less awkward when compared to how the issues may have been raised by other avenues. The Question Effectiveness vs. Success Boycotts may be effective in reducing the sales of a company but not successful in changing behavior or policy adopted by the firm. The case of the Nestle boycott is the best example of such a scenario. On the flipside, boycotts can, however, be successful in changing policy without being effective in causing a reduction in the sales of a company. There are instances where successful threats to boycott by campaign groups can cause success in the change of a policy without the launch of an actual boycott campaign. The best example of such is the PETA campaign that was pitched against Unilever. Background Information The company to be used as the case study for illustrating the impact of boycotting campaigns will be Nike. Very few emblems are usually recognized on a global scale to the level of the tiny check mark which constitutes the Nike Swoosh. The 32-year-old company owns a multi-billion dollar fortune and occupies a premier position in the American market as well as the global footwear industry. Over the years, Nike has grown to be a global trendsetter and leader in the sports apparel, as well as the footwear industry. The company prides itself with the brand association with healthy lifestyles, competition, optimal performance, love for sports and gaming as well as the iconic relationship held with champions such as Michael Jordan. Despite the positive PR by the company, it has for a long time faced criticism from the market due to allegations of maintaining sweatshops. In these allegations, the company is accused of having suppliers in China, Indonesia and other third world countries who work under poor conditions and are lowly paid4. The allegations which started in the 70s accused Nike of taking advantage of workers in the developing nations. The company has the majority of its operations in Vietnam and China which prohibit labor unions responsible for regulating labour standards, as well as working conditions in the market. The boycott campaign from consumers was thus a result of the criticism that the company was selling products acquired from sweatshops in third world nations. Internationalisation Nike’s internationalisation strategy is the primary attribute to the company’s global success. For the most part, the company’s product offering is the same across the globe in regard to price, quality and reputation across the global markets. The company’s marketing slogan “Just Do It” as well as the “Swoosh” logo is ingrained in the mindset of the public. In essence, the company’s end product in China is the same as the one that will be sold in Brazil, America or any other part of the globe where the company has operations. The greatest exploit by the company is the gaining of access to low-cost factors of production as well as establishing new consumers for their products. The company utilizes a centralized hub approach in which every pertinent decision concerning the company and its brands is made in the company’s headquarters in Beaverton, Oregon. Only a few operational and manufacturing decisions are made in local markets. Nike does not incur production costs as no single shoe is manufactured by the company. Rather, Nike outsources all production processes across the globe and implements its cost reduction strategy due to the close to zero costs incurred in the creation of its products. Once manufactured, the company ships its products to the nearest markets the company resides in thereby implementing a form of international integration in which the company enjoys economies of scale. Lastly, Nike conducts thorough market analysis in emerging markets and areas where it can sell its products. This world-over research has allowed the company to outpaceits domestic level annually since 2003. Largely in part to this success is the access to the emerging markets of Turkey, Russia and China. As the product line remains virtually unchanged, the company rarely exploits internationalisation within its product lifecycles. Nonetheless, the company keeps this potential as a competitive advantage to be used in managing uncertain market reactions and times. Competitiveness For a long time, Nike has been known across the globe as the only shoe to wear. The company remains competitive by maintaining a “cool” brand image among teenagers and youthful individuals through its “swoosh” brands. In addition, the company beats its competition by having renowned celebrities such as Tiger Woods and Michael Jordan advertise their products through endorsements. Kids, as such, have always wanted to wear Nike’s shoes as opposed to other brands so that they can also be like their sports stars. Market Entry Strategy The market entry strategy by Nike is a simple one which focuses on the popularisation of its product. When entering new markets, the company offers its diverse range of high-quality sporting shoes and attire to individuals in the market. The company provides its goods at premium prices and can compete with rivals such as Adidas in new markets due to its financial muscle. Sponsorship is continuously used by Nike in creating brand recognition and authenticity in new markets. Boycotting Campaigns As aforementioned, Nike encountered boycotting campaigns as a result of allegations of the company running sweatshops in developing nations. A coalition based in Oregon by the name “Justice. Do It Nike” called for a boycott on Nike in response to the working conditions of individuals in factories that Supply Nike with its products. The coalition worked in conjunction with other coalitions and organisations across U.S to persuade Nike to treat the employees in its factories in a much fair manner. The coalition encouraged the Oregon-Based company to allow the independent monitoring of the subcontracted factories and production facilities in China, Vietnam and Indonesia to mention but a few. In addition, the boycott aimed at ensuring that the company raises the average pay-per-day for its workers to above $1.8, support and uphold the rights of workers, organize better wages and salaries as well as improve the working conditions of individuals in factories. In addition, the group calling for the boycott insisted that the company was to refrain from allowing the Indonesian military to suppress peaceful strikes within the factories, stop the use of child labour as well as settle the claims by workers in Indonesia who were unjustly blacklisted for attempting to lobby for the improvement of the working conditions in their factories. The boycott was both effective and successful as changes were seen in how the company conducted business and responded to the criticism and the boycott campaign. Impact on Environmental and Strategic Elements The 90s global boycott campaign against Nike was successful and made boycotts become an objective lesson on how consumers can bring to account large multi-national corporations5. The company was targeted by campaigners due to the world-class status of its brand. In addition, the act of denying responsibility for the malpractice in its factories is what angered consumers and sparked the boycott campaigns. The campaign scored a direct hit on the company’s bottom line making the corporation operate today with transparency and openness which would have otherwise been close to impossible20 years ago. An instance of this change can be witnessed across websites such as the Fair Labor Association webpage which records reports of inspections within Nike’s supplier factories that are conducted by independent third parties. Nike has also published plans of going toxic-free by the year 2020 in a bid of conserving the environment and encouraging healthy livelihood. This positive move influenced key competitors such as Adidas and Puma alsoto initiate similar plans. Stopping the dumping of toxic chemical wastes by suppliers into waterways was the first aim of the plan. Environmental Issues Faced by the Company during and After the Boycott Not only did Nike face issues of sweatshops during the time of the boycott, but also other allegations related to environmental pollution. The company, through its suppliers, was accused of dumping toxic chemical wastes into rivers and large water bodies. In Asia, for instance, Nike was linked to the pollution of a number of water bodies in China and Indonesia with toxic substances that affect sperm count, build up in food chains as well as pose adverse effects on an individual’s liver. The boycott campaigns also highlighted the scandals and environmental pressure that Chinese factories producing for Nike faced due to environmental pollution. The hypocrisy in the environmental issues was the fact that western outsourcers such as Nike promised rich consumers back home high safety standards even as they traded with firms that benefited from laxity in environmental regulations6. After the boycott, Nike was faced with reduced environmental issues as a result of the company paying attention to the allegations and causes of the boycott. The company, for example, set out an objective of conserving the environment. In light of this, Nike stopped its suppliers from dumping toxic wastes into water bodies. The goal of the company, as stated earlier on, is to become toxic free by the year 20207. The environmental pressure and issues that faced Nike during the periods of the boycott resulted to the creation of a better company that has an objective of going green. Reaction to Boycotting During the boycott, Nike reacted by conducting extensive training programs for the managers and other key personnel in the overseas factories. Employees in these factories were trained in cultural sensitivity as well as language and communication so that they would have deeper and meaningful interactions with other colleagues in the factories. This act by the company came as a realisation that it was not prudent for the company to ignore the supply chain responsibility. The top management of Nike realized that the company’s global reputation which was a key source of the company’s competitive advantage was at stake. In the long-run, the company changed its attitude and strategy and decided to improve the general labour practices within the Asian labor force. The company provided leadership and guidance to factory managers and strived to improve the working conditions within factories. In addition, wage increment, as well as the stoppage of child labor, was among the initiatives that the company took in response to the criticism and boycott campaigns that it was facing. What began 20 years ago as Nike’s horror show of internationalisation and globalization has slowly evolved to what is presently an inspirational story to the transformation of a company into becoming a sustainable global enterprise8.The company is passionately committed to building a sustainable business as well as creating value for itself and its stakeholders. For the company, sustainability is no longer about the management of risk but rather about Nike’s growth. Conclusion Boycott campaigns entail the act of voluntarily abstaining from the purchase, use or dealing with a person, organization, product or country as an act of expressing protest usually for political or social interests. Economic consumer boycotts which entail the collective choice by individuals not to purchase a product or service are presently a frequently used tool by lobby groups and NGOs in protesting against social and environmental practices as well as unfair marketing. Some of the types of boycotts include instrumental and expressive. The instrumental boycott is designed to force an organization to retreat by applying economic pressure.The expressive boycott, on the other hand,is usually more concerned with “discourse” or simply, political discussion in interesting ways on what is right or wrong. Boycotts may be effective in reducing the sales of a company but not successful in changing behavior or policy adopted by the firm.On the flipside, boycotts can, however, be successful in changing policy without being effective in causing a reduction in the sales of a company as with the case of the PETA campaign that was pitched against Unilever. Nike has for a long time faced criticism from the market due to allegations of maintaining sweatshops.The company is accused of having suppliers in China, Indonesia and other third world countries who work under poor conditions and are lowly paid. The allegations which started in the 70s accused Nike of taking advantage of workers in the developing nations. Nike reacted by conducting extensive training programs for the managers and other key personnel in the overseas factories. Employees in these factories were trained in cultural sensitivity as well as language and communication so that they would have deeper and meaningful interactions with other colleagues in the factories. In the end, the environmental pressure and issues that faced Nike during the periods of the boycott resulted to the creation of a better company that has an objective of going green. Bibliography Carbasho, Tracy. Nike. Santa Barbara, Calif: Greenwood, 2010. Farah, Maya F. 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