Stakeholder Management Nike Inc. (NYSE:

Stakeholder Management

Nike Inc. (NYSE: NKE) is a marketer of athletic footwear and apparel based in suburban Portland, Oregon. As a large and diversified company, Nike has a wide range of stakeholders, both internal and external. Key internal stakeholders include the shareholders, management, in-house employees, and endorsers. External stakeholders include suppliers, the employees of suppliers, customers, wholesale and retail channels, competitors, the community and governments. This paper will examine the degree to which Nike meets the needs of these stakeholders. Nike is a good example of a company that believes that success is equated with meeting the needs of its stakeholders.

Internal stakeholders

The most important internal stakeholder of Nike is the shareholders. Executives and managers are agents of the shareholders, and work to meet their needs. Nike's shareholders expect a strong return on their investment, in particular in relation to competitors in the industry. Nike's returns come in two forms -- the dividend and the appreciation of the company's share value. The dividend is $1.08, which delivers a yield of 1.32% on the current stock price. The stock price has experienced steady appreciation over the past several years. In November 2005, Nike traded at $42.65. Today, despite two years of economic recession and stagnation, Nike trades at $81.82. This performance comes as the direct result of steadily increasing sales. Even when sales slumped in 2009, profits continued to improve. The company's balance sheet shows a steady improvement in the value of the firm's equity, meaning that Nike is meeting the expectations of its shareholders (MSN Moneycentral, 2010).

Executives and management comprise another class of internal stakeholders at Nike. The company provides a stimulating work environment for managerial talent, brought about by the company's number one position in the market and a philosophy that emphasizes creativity and self-actualization. The company's executive compensation is considered low by the standards of a company its size, so the company focuses on attracting executive and managerial talent through opportunity and work environment (Back, 2002).

Non-managerial employees are another key internal stakeholder at Nike. The company, in an effort to improve outcomes for non-managerial employees, has initiated worker surveys to determine the needs of those workers and the degree to which the company meets them. In the most recent survey, the company scored well on a number of measures relating the supervisors, training and fringe benefits. The company scored more poorly with respect to compensation, worker-management communication and living conditions/food, a concern for Asian workers for whom the company provides such benefits (Nikebiz.com, 2010). That Nike is able to measure the needs of its workers and focus its efforts on meeting those needs is an important component of the company meeting its obligations to this critical internal stakeholder group.

Celebrity endorsers are another internal stakeholder. These athletes enter into lucrative contracts with Nike and this constitutes a mutual relationship. Both parties are expected to live up to the terms of the contract. The athletes expect support, payment and for Nike to continue to cultivate a positive image among consumers. That Nike is able to build a roster of the world's most popular elite athletes is indicative of the company's ability to meet the needs of this shareholder group, especially given the high level of competition in the athletic apparel endorsement market.

External Stakeholders

The first group of external stakeholders consists of the suppliers and their employees. Nike is a desirable client for suppliers, a function of the volume of business that the company does. A factory can exist solely to meet demand from Nike. Suppliers seem to regard Nike well. The employees of suppliers are a different group, and community pressure has resulted in this group becoming a key stakeholder for Nike, especially where public image is concerned. Nike has responded to the needs of this group and is proactive in investigating allegations of impropriety on the part of factory owners and managers. For example, Nike dropped a soccer ball maker in Pakistan after child labor abuses were revealed (Fazl-e-Haider, 2007). The company forced a supplier in Malaysia to improve treatment of its workers after receiving reports of poor conditions (Nikebiz.com, 2010).

Customers expect a high quality product from Nike, which generally positions itself at the upper end of its industry. Nike has a high degree of customer satisfaction, but ranks below rival Reebok (ACSI, 2006). Part of the issue may be price increases, but Nike customers pay a premium and therefore have a right to expect premium goods. That Reebok has a higher customer satisfaction score indicates that Nike, while good, has work to do with respect to meeting the needs of customers. More recent surveys have seen Nike continue to trail the industry average, indicating a long-term trend of only somewhat meeting customer expectations (ASCI, 2009).

Wholesale and retail channels are a critical external stakeholder because of the role that they play in the company's route to market. Without support of wholesalers and retailers, Nike could only rely on its own-branded stores to bring its shoes and apparel to consumers. Nike's distribution is strong, and the company's merchandise enjoys relative ubiquity. This implies a general degree of satisfaction on the part of retailers with the support that Nike provides them. By the same token, there is no evidence of superior rates of satisfaction among Nike's wholesalers or retailers relative to other firms in the industry.

Nike has few obligations to competitors. In general, the company has a high degree of rivalry with its competitors. While the competitors are impacted by the actions that Nike takes, Nike has no obligation to them. For its part, Nike does contribute to maintaining high margins in the industry and seldom engages in price wars that could destabilize other firms in the business. Nike utilizes a differentiated strategy and in doing so keeps its prices high. Margins are historically lower than those of competitors (MSN Moneycentral, 2010) but not to a degree that constitutes dangerous price warfare.

The community and governments also work with Nike. The company's obligation to the community rests on it being a good corporate citizen. Nike is more transparent than most firms in the industry with respect to its corporate citizenship. The company publishes as corporate social responsibility report that outlines its human resources policies in particular, as that is one of the footwear and apparel industry's biggest hot button issues for the community. Nike contributes to the promotion of healthy lifestyles, which is also a positive contribution. Governments expect Nike to pay taxes and to help improve standards of living for their citizens. Nike's tax expense last year amounted to 24.2% of its pre-tax income, an indication that the company is meeting its tax obligations (MSN Moneycentral, 2010). In Malaysia, the company has worked with the local government to improve working and living standards at its factories there (Nikebiz.com, 2010).