Lecture 4 Case Study

The Bottom Of the Pyramid
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Nike’s Supply Chain Experience:
A Case Study
Few businesses have received as much attention in this regard as
Nike.
 Nike is the world’s largest athletic shoe and apparel maker.
 In 1999, Nike held over 30% of the world’s market share for
athletic footwear, and along with Adidas (15%) and Rebook
(11%) controls more than half of the world market.
 Nike began business in 1964 as Blue Ribbon Sports, an
importer and marketer of low-priced Japanese sport shoes.
 As sales increased, they began to design their own line of
shoes and subcontract the manufacturing of the shoes to
Japanese firms and eventually changed their name to Nike.
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Nike
 In the late 1990s, Nike was subjected to intense international
criticism for the working conditions in the factories where
their products were manufactured.
 Critics charged that Nike relied on child labor and sweatshops
in producing their shoes.
 They charged that workers in these factories were paid
pennies a day, were subjected to cruel, unhealthy, and
inhumane working conditions, were harassed and abused, and
were prohibited from any union or collective bargaining
activities.
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Nike
 Nike initially seemed to ignore the critics and deflect any
criticism by denying responsibility for the behavior of its
suppliers.
 If workers were poorly treated by local manufacturers, that
was beyond Nike’s responsibility.
 At one point, Nike’s vice president for Asia claimed that Nike
did not “know the first thing about manufacturing. We are
marketers and designers.”
 Nike soon learned that the public was not persuaded by this
response.
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Nike: Responsibility
 Ordinarily, we do not hold a person responsible for the
actions of someone else.
 Assuming that the other person is an autonomous agent, we
believe that each person is responsible for their own actions.
 But this is not always the case. There is a legal parallel to the
idea that a business should be held responsible for the actions
of its suppliers. The doctrine of respondent superior, Latin
for “let the master answer,” holds a principal (e.g., an
employer) responsible for the actions of an agent (e.g., an
employee) when that agent is acting in the ordinary course of
his/her duties to the principal.
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Nike: Original Concept
of Responsibility
 However, in the multinational apparel and footwear industry,
historically the corporate brands accepted responsibility only
for their own organizations and specifically did not regard
themselves as accountable for the labor abuses of their
contractors.
 Refer to figure 8-2 in text.
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Nike:
 This conception changed as awareness grew on the part of
multinationals and others regarding working conditions in
these factories and the lack of legal protections for workers.
 Today, multinationals customarily accept this responsibility
and use their leverage to encourage suppliers to have positive
working environments for workers.
Photo of a worker education program at a

Nike supplier factory in Vietnam
Source: Taken by the author
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Nike: Remaining Questions
 The new concept of responsibility travels far deeper throughout
the entire supply chain system (see figure 8-3 in text).
 How far down – or across - the supply chain should
responsibility travel?
 Should a firm like Nike truly be responsible for the entire
footwear and apparel system? If not, where would you draw
the line as a consumer, or where would you draw the line if you
were the corporate responsibility vice president for Nike?
 What response will most effectively protect the rights of those
involved while creating the most appropriate incentives to
achieve profitable, ethical results?
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Discussion of Opening Decision Point:
Marketing to the Base of the Pyramid

 Consider how a firm might market such household products
as laundry soap differently in India than in the United States.
 Marketing in the U.S. can involve large plastic containers,

sold at a low per-unit cost.
 Trucks transport cases from manufacturing plant to
wholesale warehouses to giant big-box retailers where they
can sit in inventory until purchase.
 Consumers wheel the heavy containers out to their cars in
shopping carts and store them at home in the laundry room.
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 The aggregate soap market in India could be greater than the
market in the U.S., but Indian consumers would require smaller
and more affordable sized containers.
 Prahalad therefore talks about the need for single-size servings
for many consumer products.
 Given longer and more erratic work hours and a lack of personal
transportation, the poor often lack access to markets.
 Creative marketing would need to find ways to provide easier
access to their products.
 Longer store hours, wider and more convenient distribution
channels can reach consumers otherwise left out of the market.
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 So, too, can imaginative financing, credit, and pricing
schemes. Micro-finance and micro-credit arrangements are
developing throughout less developed economies as creative
means to support the capacity of poor people to buy and sell
goods and services.
 Finally, innovative marketing can insure that products are
available where and when the world’s poor need them.
 Base of the pyramid consumers tend to be cash customers
with incomes that are unpredictable.
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 A distributional system that insure product availability at the
time and place when customers are ready and able to make
the purchase can help create the capacity to consume.
 Prahalad’s approach – tied to moral imagination discussed
previously – responds both to the consumers as well as to the
corporate investors and other for-profit multinational
stakeholders.
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The Bottom Of the Pyramid

Photo of a worker education program at a

Marketing to the Base of the Pyramid

 Marketing in the U.S. can involve large plastic containers,

Marketing to the Base of the Pyramid

Marketing to the Base of the Pyramid

Marketing to the Base of the Pyramid

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