NIKE – EMERGENT AND PLANNED CHANGE

Analysis

Since its formation, Nike’s history is full of changes. However, the changes are related to organizational or operational changes that the founders thought were of benefits to the company. For example, the idea of outsourcing production from other countries was aimed at reducing costs for a bigger profit margin. However, because of poor strategies, the labor cost in those countries also increased. The company was forced to further outsource from other countries with lower production cost, but the idea later suffered setback as the company was accused of workers’ mistreatment.  The changes also included exit of some of the company’s founders. Although the company’s financial performance improved during that period, the changes, to a great extent, could be termed as negative due to lack of efficient management team to manage the changes.  

  1. Can you identify the key points of change in Nike’s history?

 First, the company moved from initial activity of improving the performance of running shoes for track competition to developing products for other sports.

 Secondly, after establishing itself, Nike decided to outsource shoe production from the Japanese producers with the intent of lowering costs.

Thirdly, when production costs started to rise in the outsourced countries, Nike advised its suppliers to relocate their operations to other lower-cost countries. However, this move later resulted in problems because of lack of efficient management control. Nike was enmeshed in labor law violation controversy as they were accused of mistreating its workers and using child labor, a practice that is widely condemned around the world. This incident t negatively affected the company’s reputation

 

 Finally, another key point of the changes in Nike’s history was the re-organization of its top management body.  Although the company had started increasing its profit margin because of the approach of outsourcing its productions from other countries, some of its founding members left because of the unprofessional practices they perceived in the company.

  1. Specifically, what changed and what do you think was the scale of that change? Using Nadler and Tushman’s (1995) dimensions?
  2. Things that changed:

The critical change at Nike involved the change of its operations that outsourced its production from other countries. The change was, however, overshadowed by controversies brought about by issues of bad labor practices. This is discontinuous change as described by Nadler and Tushman, (1995). The company was accused of mistreatment of its workers, poor working conditions, poor wages in Indonesia, as well as the use of child labor in Pakistan. This had a negative effect on the company’s brand name.

However, these changes instigated other changes that made the company improve on areas highlighted to have been under-performing. This is an incremental change which happened step by step and which was instigated by other events. For instance, the company was able to formulate a code of conduct, which mandated the observance of basic labor and environmental/health standards.  The decision to reward managers for improved labor and environmental standards was another great move that, to a great extent, motivated them in carrying out their duties.   External force, in this case, played a great role in changing the company’s operations for its own good because it helped in improving its brand name.

According to Nadler and Tushman, change can take place in two ways:

Incremental change. Although the company experienced some negative impacts as a result of the change to cut its costs of operations, the company’s financial performance improved during that period. Step by step of its operations led to this change.

Discontinuous change. The company was forced to discontinue its bad labor practices which were marked by accusations of mistreatment of its workers, poor working conditions, poor wages in Indonesia, as well as the use of child labor in Pakistan. The change can be argued to be discontinuous because of the practices that tarnished its brand name.

  1. Using Nadler and Tushman’s (1995) dimensions:
  2. The change is considered as adverse because it brought about issues of bad labor practices that were marked by accusations of mistreatment of its workers, poor working conditions, and poor wages.
  3. However, these changes instigated other changes that made the company improve on areas highlighted to have been underperforming. For instance, the company was able to develop a code of conduct which mandated observance of basic labor and environmental/health standards.

iii. Scale of change

The decisions made by organizations regarding their operations tend to have either positive or negative effects on their competitive advantage.  Internal changes can also instigate external changes. This is evident in the case when Nike decided to embark on a major change in its operation by outsourcing its productions from other countries.  However, it later brought about an adverse effect   on the company’s brand name via the labor controversies.

  1. Read the case and applying first a planned view of change .Re- read it, applying an emergent view of change. What do you notice about the application of those different view?
  2. Planned change at Nike

As organizations try to develop and maintain competitive advantage, some contrary forces can compel them to introduce operational changes. This is arguably what Nike did by outsourcing its productions in order to cut cost and maximize profit

  1. Emergent change at Nike

Due to lack of efficient control, the change degenerated into negative effects on the company’s reputation when the labor controversies arose.  After allegations of labor rights violation, a new change occurred as the company decided to introduce a code of conduct for its suppliers with the aim of improving its brand name. Such a change is important not only for the company’s operations, but also for the maintenance of its competitive advantage. Therefore, the decision to observe environmental and labor issues could be argued to have been a good idea by the company.

 

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