Nike & Starbucks Globalization cases / Besten Mohamed El amine

Mohamed El Amine Besten ,818357

Dr. Wan Nurisma Ayu Binti Wan Ismail, A161 GFMA6043

Introduction

Globalization is a process of interaction and integration among

the people, companies, and governments of different nations,

a process driven by international trade and investment and

aided by information technology. This process has Promise and

Perils, and different effects on the environment, on culture, on

political systems, on economic development and prosperity,

and on human physical well-being in societies around the world.

Nike and Starbucks are a key examples of globalisation

because, although they began in the USA, They are now

worldwide, well known brands, in the analyze of both case

studies of Nike and Starbucks we will follow this table of

Contents.

Table of Contents

Overview

The most important facts surrounding the case.

The key issues.

The alternative courses of action and theirs evaluations.

The recommandations for the best course of action.

Summary

This current wave of globalization has been driven by policies that have opened

economies domestically and internationally. In the years since the Second World War,

and especially during the past two decades, although globalisation is probably helping

to create more wealth in developing countries - it is not helping to close the gap between

the world's poorest countries and the world's richest, citizens of all nations need to

understand how globalization works and the policy choices facing them and their

societies. In order to find the right balance between benefits and costs associated with

globalization.

Nike & Starbucks Globalisation ‘’ Case Study ’’

Besten Mohamed El Amine - 818357

International business - A161 GFMA6043

• Overview

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.In 2001, they spent over $13 billion and bought over 335 million

pair of shoes. Although the industry is highly segmented – by different sports,

models and price – the branded shoe segment is dominated by a few large

companies (e.g., Nike, Reebok, Adidas). In fact, the top 10 footwear companies

control over 70% of the global athletic footwear market.

According to company legend, Nike’s business model was developed by Knight

while attending Stanford Business School in the early 1960s. Knight realized that

while lower-cost, high-quality Japanese producers were beginning to take over

the US consumer appliance and electronic markets, most leading footwear

companies (e.g., Adidas) were still manufacturing their own shoes in higher-cost

countries like the United States and Germany. By outsourcing shoe production to

lower-cost Japanese producers, Knight believed that Blue Ribbon Sports could

undersell its competitors and break into this market. As a result, Blue Ribbon Sports

began to import high-tech sports shoes from Onitsuka Tiger of Japan. As sales

increased to almost $2 million in the early 1970s, BLS parted ways with Onitsuka

and began to design and subcontract its own line of shoes. The Nike brand was

launched in 1972, and the company officially changed its name to Nike, Inc. in

1978.

1. Nike Case



The same factors that permitted Nike to grow at an impressive rate over the last

several decades – taking advantage of global sourcing opportunities to produce

lower cost products and investing these savings into innovative designs and

marketing campaigns – have also created serious problems for the company in

recent years. Already in the 1980s, Nike had been criticized for sourcing its

products in factories/countries where low wages, poor working conditions, and

human rights problems were rampant. However, over the course of the 1990s, a

series of public relations nightmares – involving underpaid workers in Indonesia,

child labor in Cambodia and Pakistan, and poor working conditions in China and

Vietnam.

The most important facts surrounding the case.

1. Nike is the bestseller of The athletic footwear on the world.

2. Nike is the highest ranking famous inspiring brand, in associated with the

leading sport starts, teams, and sport events.

3. Nike spend every year $2.7 billion for Marketing, in 2012 Nike revenue was

$6.43 billion.

4. Nike employed over 38,000 people in sweatshop, producing for over 84

hours per week, with a miserable wage of 0.20 cent per hour. ( 84 * 0.20 =

16.40 $ ) 16.40 $ per week.

5. An investigation shows that 15 women get abused every hour by

supervisor.



• The key issues.

From further extra reading in Nike case we provide a review of the various

abuses of which Nike and its suppliers have been accused in recent years, but

merely three key issues of the kinds of problems the company has confronted.

1. Low Wages

In the early 1990s, Nike products were being manufactured in six Indonesian

factories, employing more than 25,000 workers, Reports by a variety of NGOs

and labor activists claimed that these plants were rife with exploitation, poor

working conditions, and a range of human rights and labor abuses, (at that

time, 2,100 rupiah or about US$1) was the daily wage of Nike labor, According

to official Indonesian government calculations, that wage only covered 70%

of the basic needs of one individual – let alone a family.

2. Child Labor

The city of Sialkot, Pakistan, is home to a cluster of small- and medium-sized

firms specializing in export-oriented goods, including handstitched soccer balls.

About 70% of the world’s high-quality soccer balls are produced in Sialkot –

many of them for leading brands like Reebok, Nike, Mitre and Adidas.

About a dozen local firms dominate the local sports good cluster, in terms of

employment and production, In June 1996, Life magazine published an article

on child labor in Pakistan, which included a photo of a 12 year old boy stitching

a Nike soccer ball. This article and its accompanying photo unleashed another

wave of criticism against Nike and a call by various consumer groups, trade

unions, and NGOs to boycott Sialkot-produced soccer balls.



3. Health and Safety Problems

Tae Kwang Vina employed over 9000 workers and produced more than

400,000 pairs of Nike shoes per month. The Ernst and Young audit,

commissioned by Nike, reported serious health and safety problems at the Tae

Kwang Vina plant. Toulene concentrations were said to exceed between 6

and 177 times acceptable standards in certain sections of the plant. (Toulene

is a chemical solvent that is known to cause central nervous system depression,

damage to the liver and kidney, and various skin and eye irritations). The report

also claimed that chemical releases in the plant had caused numerous cases

of skin and heart disease, and that respiratory ailments, due to excess dust,

were rampant in other areas of the factory. According to the report, personal

protective equipment was not provided at the factory and working conditions

and work hours at the plant were in violation of Nike’s code of conduct.

The alternative courses of action and their evaluations

Earlier , at first, Nike managers refused to accept any responsibility for the various

labor and environmental/health problems found at their suppliers’ plants.

Workers at these factories were not Nike employees, and thus Nike had no

responsibility towards them.

But the Continuous Critics have forced that Nike make a Code of Conduct, By

1992, this hands-off approach changed as Nike formulated a Code of Conduct

for its suppliers that required them to observe some basic labor and

environmental/health standards. Potential suppliers for Nike were obligated to

sign this Code of Conduct and post it within their factories.

Later on more Critics have charged that Nike’s Code of Conduct is minimalist and

not fully enforced, claiming that posting the Code in factories where most

employees are functionally illiterate and/or do not possess the power to insist on

its implementation is simply window dressing. Nonetheless, the evolution of this

document indicates that Nike is seeking to address several of the most serious

problems found in its suppliers’ plants.

Since 1998, Nike has increased the minimum age of footwear factory workers



to 18 and all other workers (in apparel, equipment) to 16. It has also insisted that

all footwear suppliers adopt US Occupational Safety and Health Administration

(OSHA) standards for indoor air quality.

In fact, a quick review of some of Nike’s recent efforts in the area of labor and

environmental/health standards shows that the company is serious about doing

the right thing.

Toady, Nike turn from the villain amid child labor and sweatshop allegations to

the CSR hero, In 2005, Nike was the first company in its industry to demonstrate

transparency, when it published a complete list of its contract factories. In the

same year, it also published its first version of a CSR report — detailing pay scales

and working conditions in its factories and admitting continued problems.

As of the end of fiscal year 2013, the report counted over a million workers in 785

contract factories and a total of 2.5 million people across Nike’s value chain. The

company has implemented policies supporting workers, demanded their

contractors and suppliers meet them, and conducted third-party audits.

In addition, Nike has pledged that it will eliminate hazardous chemicals from its

global supply chain by 2020.

The recommandations for the best course of action.

Nowadays consumer is more sensitive and more aware, Nike understood this

ponit and during the last years it stated to Response and to learn to Become a

Global Corporate Citizen, Nike created several new departments (e.g., Labor

Practices (1996), Nike Environmental Action Team (NEAT) (1993)) which, by June

2000, were organized under the Corporate Responsibility and Compliance

Department.

In 2001,Nike had 85 people specifically dedicated to labor and environmental

compliance, all located in countries where Nike products are manufactured.

These employees visit suppliers’ footwear factories on a daily basis. In apparel,

given the much larger numbers of suppliers, Nike managers conduct on-site

inspections on a weekly or monthly basis, depending upon the size of the firm. In

addition to its corporate responsibility and compliance managers, Nike has

about 1000 production specialists working at/with its various global suppliers. All



Nike personnel responsible for either production or compliance receive training

in Nike’s Code of Conduct, Labor Practices, Cross Cultural Awareness, and in

the company’s Safety, Health, Attitudes of Management, People Investment

and Environment (SHAPE) program. The company is also developing a new

incentive system to evaluate and reward its managers for improvements in labor

and environmental standards among its supplier base.

If we look carefully at the course of action, and try to understand the causes

and consequences, we will understand that it’s all about building that

responsible culture in human capitale of any corporate and so on for Nike, let’s

summarize the main recommendations in some points.

1. Staff Training.

2. Increased Monitoring of Its Suppliers.

3. Relations with International and Non-Profit Organizations.



Established in 1971, starbucks opened operations in Seattle's Pike place markets

with the future aim of providing coffee to restaurants and surrounding bars. In

1982, Starbucks recruited Howard Schultz, who after visiting Italy tried to adapt

the same principles in order to a strong bar culture. Schultz who led the marketing

and retail efforts of Starbucks utilized companies ability to provide quality coffee

beans and opened up a new store called Il Giornale, which brewed coffee from

these beans.

In 1987, Giornale took over assets of Starbucks and changed its name to Starbuck

Corporation. By the end of year, Company increased the number of stored to 17

and furthered its location span by entering Chicago and Vancouver. After three

years in around 1990, Starbucks took further steps in expansions of the Seattle

headquarters and an increase in resurces ith the opening of new roasting plant.

Starbucks also developed relationships and other ventures during early nineties as

it looked for development organizations to further its progress. By 1995, starbucks

really established its name with opening of 676th store as well as increasing

products in store with the addition of compacts discs, books etc a result of

previously popular experiment with in - house music. In the later years, starbucks

kept stretching its span by intering into international markets in Japan, Singapore

and Hawaii.

In year 2000, Starbucks had progressed so far that 3300 stores were already

opened, the company had ventured into countries ranging from England to

China & Australia.

chultz, still the Chairman and CEO of Starbucks in 2016, began the rapid

expansion of the coffee chain. According to Forbes magazine, he was worth an

estimated 2.9 billion U.S. dollars in 2016.

2. Starbucks Case



In this year 2016 With a current stock market value of $51.6 billion Starbucks is the

largest coffeehouse company in the world with 151,000 employees and 20,519

stores located in 65 countries and territories throughout the world including more

than 13,000 in America, over 1,900 in China, and over 900 in Japan, into the 16th

year of operation in Malaysia with 190 stores, Starbucks with has grown not only

to become the favorite coffee place for Malaysians but also a productive

member of communities across .

From the video and other resources we could say that the most important facts

are :

1 - Great work environment where each employee is termed as partners and

been treated with respect and dignity.

2- Embrace diversity as an essential component.

3- Highest standards of purchasing to provide quality products.

4- Roasting and delivering of coffee at its best.

5- Develop relationship and satisfied customers all of the time -As a part of its

mission Starbucks presented their outlets as the third place between work and

home.

6- Contribute positively to our communities and our environment, and recognize

that profitability is essential to our future success.

7- Starbucks spends more on the healthcare insurance of its employees than on

its coffee beans.

1. Starbucks and Intellectual Property Protection

Intellectual property and Globalization walk hand in hand in international

business. Globalization helped Starbucks become the coffee-shop powerhouse

it is today, and intellectual property law has kept it steady. Through intellectual

property protection laws, Starbucks’ has been able to preserve the differentiation

that put itself above its competition.



2. International business model

once Starbucks first going internationally, it used the same aggressive business

model that it had developed in the US, but quickly discovered that the same

tactics that had worked to establish the market in the domestic market were not

favourable to international expansion. In addition to culture conflicts between

retail practices of the organization and various regions, many cities opposed the

establishment of Starbucks as a means to protest against the larger trend of

globalization. Due to this resistance in some areas, Starbucks has had to establish

ways to adapt to foreign nations and seek the support of the residents of those

countries. Starbucks does so, and does so well, by listening to its customers.

In 1987 Giornale acquires Starbucks assets with the backing of local investors and

changes its name to Starbucks Corporation. Opens in Chicago and Vancouver,

Canada, Starbucks started to be global, later in 1988 Offers full health benefits to

eligible full- and part-time employees, including coverage for domestic

partnerships, in 1991 Becomes the first privately owned U.S. company to offer a

stock option program that includes part-time employees and Opened the first

licensed airport store at Seattle’s Sea-Tac International Airport.

In 1998 Opened stores in: England, Malaysia, New Zealand, Taiwan and Thailand.

After two years in 2000 Australia, Bahrain, Hong Kong, Qatar, Saudi Arabia and

United Arab Emirates.

Since 1971 to this year 2016 Starbucks continue to expand its geographic

presence but they also continue to listen to its customers however; it also listens

to and appreciates its employees. Starbucks was the first company in America to

give comprehensive health benefits and stock options to every single employee,

including the over 65% that were part-time at the time. In addition to providing

employees with a great benefit plan, Starbucks also offers its employees

comprehensive training that enables the organization to promote its products

through its employees. Starbucks, by way of word-of-mouth recruiting, is able to

save substantial money on marketing costs and redistribute it to improve the

company elsewhere. “Starbucks spends just $30 million annual on advertising, or

roughly 1% of revenues. Most consumer companies its size shell out upwards of

$300 million per year.” This is a huge asset, not only in reduced spending, but also

for foreign countries where word-of-mouth recruiting effectively replaces

traditional marketing methods that are unavailable.

Nike & Starbucks Globalization cases / Besten Mohamed El amine

Business

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