Nike's Corporate Social Responsibility, Cross-Cultural Management, and Cultural Dimension - Case Study Example

Cross Cultural Management Name Institution Course Date Table of Contents Table of Contents 2 Introduction 3 Corporate Social Responsibility 3 The Invisible Hand Theory 4 Profits and Shareholder Theory 4 Nike and Corporate Social Responsibility 5 Nike and Cultural Dimension 6 Conclusion 7 References 9 Introduction Globalization has brought about different changes over the last year. Different countries now do trade freely without the restrictions that existed in the past (Welch and Bjorkman, 2015). Currently, more and more firms are opting to internationalize more rapidly than ever before. With globalization and liberalization, it is not difficult for multinational companies to enter into new markets (Welch and Bjorkman, 2015). The entry of multinational companies into international markets can be found to be beneficial for the foreign company and to the domestic market. Although internationalization has brought about many benefits, companies operating overseas are faced with cultural issues. In order to be competitive and survive in the international market, organisations have incorporated corporate social responsibility and other ethically aware operations (Pompper, 2015). Corporate social responsibility is used by companies not only to increase profitability but also to reduce both the environmental and social effects of business processes (Smith, 2003). One company that has embraced CSR is Nike which has led to its growth in the international market. This paper will highlight, with the use of relevant theory and media article, how Nike has incorporated corporate social responsibility that has enabled it succeed in the international market. Corporate Social Responsibility Corporate Social Responsibility has a strategic significance in the business world for organisations and governments alike (Hagendorff and Clacher, 2012). It is a critical issue in today’s business world, thus many organisations set apart significant resources in carrying out Corporate Social Responsibility. Corporate social responsibility has been linked to enhanced profitability and value of an organisation (Kotler and Lee, 2011). Nike has embraced corporate social responsibility which has led to its success in the international market. It has enabled the company gain customers’ and society, trust and has enhanced its brand image and recognition. The Invisible Hand Theory The purpose of a corporate social responsibility is to do good not only for the company but also for people and the environment (Kaushik, 2010). According to invisible hand theory, under capitalism, companies that pursue good for their companies also pursue good for their communities (Kaushik, 2010). Therefore, multinational companies have benefited the world economy through offering employment, new technology and infrastructures among others. The economy is effective when people are left to trade freely among themselves (Thornton, 2009). Businesses that look for profit end up benefiting the community as well. The invisible hand theory may work for Nike. Nike has been among the market leaders in many countries. However, their operations were faced with criticism from the public. In order to ensure change, consumers protested outside their Nike stores in allegations to child labour and poor working conditions for employees (Newell, 2015). As a result of the reaction from the public, the company promised to change. Profits and Shareholder Theory According to the profit and shareholder theory, the main aim of the companies is to increase profits (Fontrodona and Sison, 2006). The theory illustrates that managers are hired as shareholder’s agents who are required to operate the business and serve the interest of the shareholders. Over the years, Nike has been considered to having a shareholder focus due to their interest in making a profit. However, their shareholder focus led to failure due to neglect of other stakeholders such as the customers and employees (Newell, 2015). The shareholder theory is considered a traditional way of doing business as it brings about disadvantages due to full concentration on the shareholders (Fontrodona and Sison, 2006). Nike has realised that in order to succeed, there is need to change their strategy and incorporate corporate social responsibility in their operations. It is not enough to only focus on making profit while ignoring the needs of the society around. Nike and Corporate Social Responsibility For many years, Nike focussed more on making profit and forgot the needs of the community and the employees. However, in 1998, the company announce that it would make some changes regarding the issue (Newell, 2015). In 2005, Nike published their first corporate social responsibility report that covered pay scales and working environment of the company. When the company acknowledged its issues with regard to poor working conditions, child labour and poor pay scale, it started working towards change. The company has established a business model that focuses not only on profits, but on the needs of the stakeholders (Newell, 2015). As of 2013, the company has more than one million employees in its factories and about 2.5 million employees working across the value chain (Newell, 2015). In order to ensure the needs of the employees are satisfied, the company has implemented a number of policies that supports all the employees. With the implemented of these policies, the number of excessive overtime reduced and violations of employees went down (Newell, 2015). In addition, Nike collaborated with the contract facilities in order to advance its human resource. In addition, Nike is also focussed on addressing climate change by changing its material development to reduce its environmental impact. This company is doing this through water conservation (Newell, 2015). Nike has adopted a new carbon-based dyeing process so as to dye garments with less water. The company has also reduced the amount of chemicals they use during dying (Newell, 2015). The allegations of child labour, environmental pollution and poor working condition of employees during the 1990s are threatening to destroy its brand image today. Today, Nike is considered one of the leaders in corporate social responsibility (Newell, 2015). It has implemented more stringent corporate social responsibility policies in order to ensure that it gains the trusts of the customers across the globe. Nike and Cultural Dimension Nike is operating internationally and has expanded to new markets like China and Taiwan. Nike has exploited the cheap labour in these countries which has led to its accusations with regard to child labour, poor working conditions of employees and poor manufacturing processes that affects the environment (Newell, 2015). Due to this shady business Nike used in the 1990s, it is now faced with the challenge of gaining the trust of customers in these countries (Newell, 2015). China and Taiwan are considered high power distance cultures. They have cultures that believe that hierarchy should be respected since people are not equal (Powell, 2006). It is expected of people to show respect to elderly and people in higher positions. One boss takes responsibilities and the employees follow. People accept hierarchy structure and in business, managers make decisions and employees are required to listen (Powell, 2006). This is the reason why China was among the countries with poor working conditions of employees working for Nike. Employees in the country cannot complain about how the company is treating them due to the so called respect for hierarchy (Powell, 2006). However, shady business such as child labour and pollution of the environment is not taken well by people living in China and Taiwan or any other country with collectivistic culture. Therefore, it is very hard for Nike to earn back the trust of the customers in these countries. People in China and Taiwan and other collectivistic societies are integrated into strong unified groups (Powell, 2006). People in companies are expected to build trustworthy relationships. They are collectivistic societies as people value family and extended relationships. Employer and employees have a close relationship and are considered family (Powell, 2006). Poor treatment of employees and the community at large means that a person is breaking the trust that existed between family members. Gaining back the trust of such people is very hard. This is therefore the reason why Nike will have to work extra hard to gain back the trust of the customers as well as the employees. The real challenge for Nike is how it responds to the accusations of shady business. Regaining the trust of the customers may require honesty and transparency (Newell, 2015). Conclusion Globalization has brought about different changes and more and more firms are internationalizing more rapidly than ever before. Multinational companies has brought about many benefits but are also faced with cultural issues. For them to be competitive, they have to incorporate corporate social responsibility in their operations. Nike has been faced with allegations of child labour, environmental pollution and poor working conditions of employees. This has threatened to destroy its reputation. In order to avoid this, the company has come up with new strategies to ensure that they converse water and improve the working conditions of the employees. Due to different cultural dimensions, in some countries such as China and Taiwan, Nike needs to regain the trust of the customers and employees through transparency and honesty in order to avoid image destruction. The company has introduced more stringent corporate social responsibility policies and is now ranked among the top CSR leaders. References Basu, K 2010, Beyond the Invisible Hand: Groundwork for a New Economics, Princeton, NJ: Princeton University Press. Fontrodona, J & Sison, A 2006, ‘The Nature of the Firm, Agency Theory and Shareholder Theory: A Critique from Philosophical Anthropology’, Journal of Business Ethics, vol. 66, no. 1, pp. 33-42. Hagendorff, J & Clacher, I 2012, Do Announcements about Corporate Social Responsibility Create or Destroy Shareholder Wealth? Evidence from the UK. Journal of Business Ethics, 106(3), pp. 253-266 Kotler, P & Lee, N 2011, Corporate Social Responsibility Doing the Most Good for Your Company and Your Cause, New York, NY., John Wiley & Sons. Newell, A 2015, How Nike Embraced CSR and Went from Villain to Hero, MetroHero. Retrieved 15th Sept. from http://www.triplepundit.com/special/roi-of-sustainability/how-nike-embraced-csr-and-went-from-villain-to-hero/ Pompper, D 2015, Corporate social responsibility, sustainability and public relations: negotiating multiple complex challenges, London, Routledge Taylor & Francis Group. Powell, S 2006, Geert Hofstede: Challenges of cultural diversity. Human Resource Management International Digest, vol. 14, no. 3, pp. 12-15. Smith, N 2003, Corporate social responsibility: whether or how? California Management Review, vol. 45, pp. 52–76. Thornton, M 2009, "Cantillon and the Invisible Hand", Quarterly Journal of Austrian Economics, Vol. 12, No. 2, pp. 27–46. Welch, D & Bjorkman, I 2015, The place of international human resource management in international business. Management International Review, vol. 55, no. 3, pp. 303-322. Read More