Posted by: itm2011 | May 24, 2011

Adidas Group – Alberto Gomez

Passion, authenticity, innovation, inspiration, honesty and commitment – that is what Adidas means. Above all, it is the stories that made Adi Dassler’s idea and principle “no athlete left behind” come to life on the biggest sports stages around the world.”

Adidas part of the Adidas Group is a large German company that consists of apparel, footwear, accessories, shoes and sport goods store. The company met all goals financially for 2010 with a net income increase of 131% and $15.6 billion in revenues. Adolf “Adi” Dassler started the company in 1948, and it is now the largest sports goods and Apparel Company. Its headquarters are located in Herzogenaurach, Germany. 

EMPLOYEE CSR

In terms of their employees at Adidas “Creating an Attractive Work Environment “is an important aspect of the foundation of the company. Being involved with the employee’s wants, needs and concerns is something that Adidas takes pride in being concerned on.  They ensure to involve themselves with their employees lives by arranging an array of activities that appeal to the employee’s lives. Everything from kayaking, mountain bike riding and ski tours is covered as activities on behalf of the company. In addition to all of these activities a company gym is available to employees in their Germany, Portland and Canton headquarters.

Employee’s safety and health are also a concern for the Adidas group and taking initiatives such as having activities and gym’s is a part of the company’s action regarding this concern. Stating in the Adidas group 2010 IN THE REAL WORLDPERFORMANCE COUNTS Sustainability report Adidas states “Every employee must have a safe working environment. Nothing less is acceptable. This is valid for every kind of workplace, including machine workplaces in production areas, home office workplaces for administration functions and workplaces in our stores.” By stating this we can infer that Adidas performance is based on their employee’s happiness and safety and they are aware of that. An important part of CSR is making sure that your employees feel happy about the place that they work finding things in the company that make them feel proud to work for a specific company. When a company shows concern for their employee’s health and safety they are entering into an important aspect of CSR, one that would benefit both the company and the employee. Adidas formed a health and safety management team to ensure that these policies are adhered to the policies include “Workplace health and Safety at the sites, Travel Security, Major incident response including precautionary measures related to communicable diseases, HIV/AIDS Policy.

We strive to be a sustainable company, one that recognises its responsibilities towards the environment, our employees and the people who make our products. In our Sustainability Report 2010 – ‘PERFORMANCE COUNTS’ we set out our goals, strategies and actions we have taken in further shaping the adidas Group sustainability performance.“

In Germany, all employees are trained annually on workplace hazards and safety measures. That also includes a safety day dedicated to educating and training about safety. The day is organized in coalition with the Textile and Clothing Trade Association, Labour Safety Committee (which works with police and local health insurance companies) this in alliance with First aid training, checking workplace health and safety in retail stores displays the concern for employees that set the bar for employee concerns atAdidas.

The Adidas group CEO Herbert Hainer has a clear idea of where he wants the company to be including his employees in the company’s 2010 annual report a lot of Mr. Hainer’s leadership skills and concerns can be seen throughout the interview done with him concerning his employees and the company as a whole. Herbert Hainer’s leadership style is described by many as open and honest. He has been quoted to showcase confidence in his speeches and excellent leadership skills regarding his company and employees. He is also described as a practical realist and he has a vision he wants to carry out for Adidas and he is not the type of manager to sit around and wait for it to happen. He is very hands on and dedicated to the company that he works for. In various interviews like the ones that I watched Herbert believes in driving culture to the “top” and creating a diverse work place where everyone learns about each other. He can be described as a Theory Y participative  leader because he is involved in leading the company to a higher point and letting employees motivate each other and creates an environment where people are inspired to accomplish something themselves. But as being part of the AG he has adhered to a more paternalistic and autocratic leadership style that involves boards to over look each other and manages each other heavily. He has worked for companies such as Procter and Gamble as a Division Marketing and Sales Manager in Germany until 1987 where he joined Adidas as a sales director for Hardware and eventually moved on to become the company’s CEO in March 2001. In an interview with WWD he described the merger with Reebok in 2003 as a chance for the both companies to rejuvenate with speculated retention from the financial aspect Hainer stood behind his word to reinstate the brand. In excerpt from the interview below you can get a taste and glimpse of what his leadership style is as he uses the word “we” very often. The Labour Rights Principles are in accordance to the United Nations Declaration of Human Rights and this put Hanier and Adidas at the top of their list regarding employee CSR.

When looking for a company to work for an appealing aspect of the company that an employee seeks is that of company morale. How the company treats their employees and how do they treat everyone as a whole throughout. Also, an important driver is how the company handles situations in which they may be scrutinized and criticized. There is a dual board system where there is a Supervisory board and an Executive board. Both of these boards work independently. The Executive Board is in charge of managing the company “developing the Group’s strategic orientation” the Supervisory Board is in charge of making this happen. The Supervisory is made up of 6 shareholders and 6 employee members; the board also has two female members five of the members have international experience. They have a transparency policy in terms of reporting and remaining transparent, in terms of their annual and quarterly reports and functions throughout the company. – This according to the company’s FY2010 annual report.  Adi Dassler’s idea was carried out, but as the years have come and competition. The company has shifted in a more paternalistic style of leading as opposed to the participative outlook that Dassler had.

.Treating complaints and adhering code of conduct are all values that the Adidas group likes to think highly of themselves for doing so. “Employee empowerment and participation play an important role in managing employee relations within the AdidasGroup” at the Adidas group they encourage employees to join organizations that represent them that are consistent with laws.Adidas group established a supervisory board for employees and the members of this board (Works Councils) the members are selected by members of the workforce. They are in charge of dismissing members of the Executive Board and appointing individuals in the Executive board as well. This separation of power gives the employee a sense of importance within the company, the type of sense that keeps an employee happy and content with their place of employment.

The works council group is a important aspect of the social environmental outlook for the Group. When asked about the importance of a social environmental responsibility program, Sabine Bauer, Chairwoman of Central works and Councils Works of the work council group responded with the following “I would say it is essential to have this program. Employees are more and more aware about these issues all the time – they want to know what kind of social and environmental engagement the company has. They don’t want to work for a company where something fishy is going on” This I find to be an important aspect of how an employee views their employer’s standpoint of environmental issues. As employees become more and more aware of environmental issues, the more important it will be come in their lives and having an employer who takes these concerns into consideration is a value most employees look for.

In addition to Environmental issues the chairwoman was asked about Green Teams and what her standpoint on green teams was she responded “In my opinion, it is a good start. I think if people can focus on what matters to them then they have an emotional attachment to that issues, and they can be authentic ambassadors for tackling that issue and motivation others to take action “I find this statement to be true for example Adidas involvement with the victims of the Tsunami in Miramar or Earthquake victims in Peru there is a sense of responsibility as a corporation and as an employee.

COMMUNITY CORPORATE SOCIAL RESPONSIBILITY

As stated before giving the employees in the company a sense of involvement with their community and a sense of involvement with the aspects of the company. Adidas group is involved with the community to a diverse quantity of programs that include brand programs. These programs are built on what they call brand “pillars” and there are three of them they are as follows: Community Involvement, Employee Involvement and Corporate Giving.  These are determined by community based involvement and needs based on the employees.

The Adi Dassler Fund is an organization that involves children with sports and teaches them life skills and encourages them to involve themselves with sports. The organization is used to instill “self-confidence, respect and teamwork that will change people’s lives, this program” this program involves children from communities in and around the Adidas headquarters.

Involvement of the Reebok sense of CSR is also part of the Adidas group corporate responsibility vow. Being that CSR was an important part of the Reebok brand. They established a program called ‘Access to Fitness’ and ‘Taylor-Made Adidas Gold to create awareness and knock down barriers through coalitions with organizations that represent Adidas group.

Along with community involvement Adidas group has proven to be proactive in the involvement of assisting with help in the events of natural disasters, affecting the natural disasters that have occurred worldwide. Humanitarian acts in response to these natural disasters have been a way for Adidas to react in a responsible and visible way in response to the Tsunami in Myanmer,Tsunami is Bangladesh and Flooding in Pakistan.

ENVIROMENT –

The Adidas group’s website cites their concern for the Environment, Adidas has released a five year Environmental Strategy for the year of 2015. This also takes into consideration in regards to the Green Targets for the Company:

Environmental Policy regards the Groups day-to-day activities, and their management of environmental issues, having set a high goal to attain in regards to becoming a green company and achieving a specific goal that involves “brands, functions, and global supply-chain” by having an environmental policy to take care of issues that regard the Groups operations and supply command in regards to environmental issues concerning their products and the brand as a whole. In regards to Products innovating new product guidelines to be environmentally safe and doing this without tarnishing the products performance and upmost functionality. Using recycled materials to make products by working with local waste management corporations is a way to drive down cost and be environmentally safe and seeking upmost quality and performance. Reducing energy in the company’s Own Operations is also a goal that was set by the Adidas group and the goal to lower energy consumption by 20%, by using “green energy” and cutting carbon “emissions” they have outlined this in three steps “Lower Energy Consumption and Intensity, Energy Sources with lower carbon emissions, Consideration of offsetting mechanisms”. Lastly improving their Supply Chain is also a part of the goal to environmental responsibility targets for 2015 because it is here that according to the group most of the environmental impacts occur. The supply chain involves Risk Management, Building High, and increasing leverage through partnerships.

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Posted by: itm2011 | May 23, 2011

IN 342 Paper

IN342_Final_Paper

A diamond is perceived to be a rarity and extremely valuable. Not to mention a necessity, a symbol, for people in love. However, aside from their limited manufacturing applications, their only intrinsic value is that they are hard, and can cut hard things. These characteristics make a diamond’s worth $30 per carat. According to the World Diamond Council, the international diamond industry is a 72 billion dollar industry, the largest consumers being American.

As defined by the United Nations, “Conflict diamonds are diamonds that originate from areas controlled by forces or factions opposed to legitimate and internationally recognized governments, and are used to fund military action in opposition to those governments, or in contravention of the decisions of the Security Council.” Conflict diamonds are illegally traded to fund violence in war-torn areas, usually in central and western Africa. Blood diamonds mostly come from countries in western Africa, and some from Venezuela. By far, the worst cases of human rights violations have been in Sierra Leone and Zimbabwe. These human rights violations have been state sponsored, over control of diamond mines. The Sierra Leone Civil War (1991-2002), left nearly 80 percent of the country’s 5 million people dismembered, upwards of 50,000 people killed, and more than half its population displaced.

Ideally, the places where the diamonds are being mined from should be amongst the richest nations in the world, considering they are amongst the richest in natural resources. However Because of lack of legitimate regulation, most mines have been rebel-held, making western Africa a war torn wasteland of poverty, disease, and death. Diamonds from rebel-held mines have raised billions of dollars to finance insurgencies in Angola, Sierra Leone and the Democratic Republic of Congo. Not only do conflict diamonds finance insurgencies in Africa, but Hezbollah terrorism against Israel, and Al Qaeda attacks against the United States.

Despite enforcement of various monitoring programs such as the United Nations Security Council and the Kimberley Process Certification Scheme blood diamonds still have made their way into the consumer market.1 When a consumer buys a diamond from a legitimate diamond dealer, typically a certificate of origin is presented with each purchase. NGOs like the Diamond High Council and the Kimberly Process issue these certificates with each diamond. The idea being, if the diamond can be traced, then there is evidence as to whether it is clean or not. However, diamonds are often smuggled and after passing through many hands end up making their way into legitimate places, like the HRD Antwerp Diamond Centre. Diamonds pretty much have the same genetic makeup, so it is nearly impossible to determine whether a diamond came from Africa, Australia, Venezuela, or anywhere else in the world; let alone which exact mine it came from.

The Diamond High Council (Hoge Raad voor Diamant, HRD) is a non-profit organization located in Belgium, which represents the Antwerp diamond trade. The HRD Certificates Department was founded in 1976 to meet an increased demand for quality diamond certificates. These certificates confirm authenticity and describe its characteristics (color, cut, clarity, and carat). It is one of the largest certification labs in the world. The HRD received backlash in the 1990s because of its policies regarding how it figured the diamonds’ province and origin. An excerpt from Blood Diamonds describes this problem:

Its apparently no big deal to show up in Antwerp with a box of rough and proclaim that its from anywhere you can think of because it will be duly recorded as an import, even if it exceeds the known annual output of the originating country.

Such obvious anomalies are the result of the Diamond High Council’s lenient Import requirements that importers list only the diamonds’ country of “province”, that is, where they were last located before entering Belgium. That’s why the Swiss can claim that 97 percent of their imported stones are “British”, and the British can claim, if those same stones are shipped back to them, that 97 percent of theirs are “Swiss”. This brazenly dishonest shell game is simply a way to launder licit diamonds and render them acceptable to the industry.

At the end of the 1990s, the Diamond High Council took steps to correct this weakness and provide some transparency to the process by requiring that importers list both a diamond’s province as well as its origin, the place where it was mined. This turned out to be a laughable failure, however. When a UN panel of experts reviewed import licenses for one company shuttling goods between Liberia and Belgium, they discovered that “diamonds far in excess of the quality or quantity available in Liberia had been imported as Liberian in province and in origin” (original emphasis). (Campbell 124)

The Kimberly Process Certification Scheme, (KPCS) was established in January 2003. According to its website the KPCS “is an international cooperative monitoring system created by joint governments, industry and civil society to eliminate the flow of “conflict diamonds” which “imposes extensive requirements on its members to enable them to certify shipments of rough diamonds as ‘conflict-free’”. The way the KPCS aims to do this is by “imposing extensive requirements on its members to enable them to certify shipments of rough diamonds as ‘conflict-free’”. (KP) However the KPCS has had the same loopholes as the HRD. How can anyone certify a diamond as “conflict free”?

The only way for a diamond to be truly conflict free is if the mine from which it came from is owned by a legitimate government or company. After pressure from Global Witness, in 2000 De Beers stopped buying diamonds from outside dealers. Now, De Beers only sells diamonds from its own mines so the company can guarantee that its diamonds are 100% conflict free. De Beers’ diamonds account for around 35 – 40% of the world’s supply of rough diamonds.

In 1967, a year after Botswana gained its independence from Britain, a diamond mine was found by De Beers in Orapa. From the start, De Beers entered into a 50-50 joint venture with the government of Botswana, and about 10 years ago it sold the government a 15 percent stake in the company. At the time when the mine was discovered Botswana’s per capita income was about $80 a year. As of 2010, that number was $13,100. According to the World Factbook, two major investment services rank Botswana as the best credit risk in Africa.

A majority of the executives in the joint venture are black Africans, trained by De Beers. In March of 2008, the company opened the largest, most technologically advanced diamond sorting complex in the world in Botswana’s capital city Gaborone. It employs 600 local people. De Beers has built roads, hospitals, and schools in Botswana. The prevalence of HIV and AIDS is second highest in the world, so De Beers has launched HIV/AIDS treatment and awareness programs. The transformation of the social/economic/political culture in Botswana is nothing short of a miracle. However this transformation was possible because of the cooperation between the government of Botswana and De Beers.

Notes

1)    I have tried to find out exactly what percentage of diamonds in the consumer market are blood diamonds however my research proved inconclusive. Global Witness has reported that about 20% of the consumer market contains blood diamonds, and diamondfacts.org has reported that less than 1% of the consumer market contains blood diamonds. My only guess to why these numbers vary greatly is probably where (geographically) they are sampled from. China doesn’t regulate their diamond industry, while the US and members of the EU does. China is also the second largest diamond consumer after the US.

Posted by: itm2011 | May 19, 2011

“They say Global Warming…”

 Ilona Gorka, May 18th, 2011  

                                                                      “They say Global Warming…”

In this day and age, it seems inconceivable that there individuals and groups out there that don’t believe in global warming. In the past year, there have been more climatic caused disasters which have led to economic downturns like never seen before. There are many persuaders that climate change is natural and the human element has very little to do with it. So, what is global warming?

Global warming is defined at the rising of average temperature of the Earth’s atmosphere due to greenhouse gases. Greenhouse gases are gases that trap heat in the atmosphere. The greenhouse effect consists of gases such as carbon dioxide, methane, nitrous oxide, and water vapor insulating the Earth’s surface and helping it maintain warm temperatures. Since there is so much carbon dioxide filling the air the Earth atmosphere absorbs almost all of the suns emission. When the sun heats the earth the atmosphere is supposed to radiate most of the heat but instead it takes all the warmth and uses it to power the Earth causing a buildup of green house gases. This has been taught to everyone, but is it true or a hoax? The fact that there are some scientists that argue that global warming is nothing to worry about and that it is just a myth is a scary thought. Nevertheless there are other scientists who say the world will enter a vast drought because of the rising temperatures. However, the level of climatic change in the past century has never seen such a dramatic change and most scientists would accredit that effect to the industrial revolution and substantial increase in the global population. What are scientists doing about it?

With small conventions we are making the voices heard of scientists. Last year a convention was held in Cancun. “Global talks on climate change opened in Cancún, Mexico, in late 2010 with the toughest issues unresolved, and the conference produced modest agreements. But while the measures adopted in Cancún are likely to have scant near-term impact on the warming of the planet, the international process for dealing with the issue got a significant vote of confidence.” (NY Times) However I feel not much is being done for such a significant aspect of all our lives. When will we take climate change seriously?

Last year we were affected by a horrible Tsunami caused by increasing earthquakes. Throughout the world that have been mass floodings. Most notably in Australia, Pakistan, and here at home in the Midwest. There is direct proof that all of this is occurring due to ice caps melting and general climate change. If you see timeline chart on the bottom of the following website, http://topics.nytimes.com/top/news/science/topics/globalwarming/index.html#, it is very clear to see that in the past 5 years a significant portion of the Arctic has melted away. If the global leaders do not take initiative to sustain or stop the loss, there will be a cataclysmic event in the nearby future.

The Mother Nature Network has compiled a list of 10 places to see before they disappear. Most of the reasons of the disappearance are due to climate change. There are national parks, cities, and even countries that are under a lot of stress because of rising sea levels. The beautiful country Maldives has most of its revenue come from tourism. It happens to be one of the most beautiful and serene places on earth. And do rising water levels, the President of the Maldives, has been forced to buy land in other countries because their country will not exist in the next 50 years. Carbon dioxide levels have increased causing the sea levels to rise up and countries like the Maldives and many other locations are in trouble.

The Carbon Dioxide levels have increased dramatically in the past few years. According to Koshland’s Science Museum, the level over the past 100 years has increased a much higher rate than in the past. “Recent Warming Exceeds Temperatures of the Last Several Hundred Years. Since the 1900s global average temperature and atmospheric CO2 concentration have increased dramatically, particularly compared to their levels in the 900 preceding years. The rapid rise in both surface temperature and CO2 is one of the indications that humans are responsible for some of this unusual warmth. This graph is based on data from tree rings, coral and ice cores, and historical records. It represents only the Northern Hemisphere. Other surface temperature data sets differ somewhat from those shown here, but in all of them the modern temperatures are generally greater than during the past several hundred years. (Koshland)

In 2006 Al gore, the former United States Vice President, debuted the movie “An Inconvenient Truth”. It featured many problems facing the globe and how drastic measures need to be taken. Since the movie, many realities of his plight to take further actions by government agencies have not came to fruition as much as needed. I personally don’t know what many leaders of the free world are thinking in not making this a priority.

There are other nay-sayers and people take away from the global fight to keep the human race and cease the mass extinction that will occur that will result in humans no caring about what’s happening in front of our faces. People such as Bjorn Lomborg should be taken out of this fight. Through misconstruing what is really happening and showing details as to the alternative science, he is leading people away from what really needs to be done. His movie “Cool It” describes these alternative theories and his personal opinion says we should focus on threats like HIV/AIDS. Not to say we shouldn’t focus and spend time, money, and energy on these horrible diseases. We should not stop thinking about something that will focus on a crisis that effects every human on earth. Every living species is being affected by global warming. And we need to do something to change it. Global Warming is an important ecological issue, but is usually overlooked for more pressing problems that aren’t long term, and with the less attention our situation can only get worse. By having these people inadvertently support the oil industries, they don’t realize what we are doing to the earth.

When the average person watches Fox news and their hard right views, it tends to change peoples views on global warming and climate change. When they have someone smart and savvy like Dennis Miller preaching and making fun of it, it takes away from the focus that every American and every person on this globe should have. However, for all the attention that this issue does not draw, that is how dire it is growing to be.

“Many human processes increase the amount of greenhouse gases discharged into the atmosphere, and many others remove the earth’s natural ability to absorb them.

This double process is further increased and accelerated by ‘positive feedbacks’ in nature, such as in the Arctic. Here, the loss of ice and snow also removes its ability to reflect heat. Absorbing heat means more melting, which means more heat is absorbed and so on. There are many more examples of this, from deforestation in the tropics especially, to the release of methane in peat bogs. All of these things are happening today, and accelerating.” (Our)

Another cause to this global epidemic is population growth. Philip Appleman has said “At the end of each day, the world has over 200,000 more mouths to feed than it had the day before; at the end of every week, 1.5 million more; at the close of each year, nearly 80 million more. Humans, who numbered 4.5 billion in the 1980’s, are now over 6 billion, and will probably exceed nine billion by 2050. Most of that increase will come in the poorer countries of the earth, exacerbating all of the consequent problems, among them shortages of food and water, depletion of energy supplies, deterioration of the environment, incitement to local and regional conflicts, and breakdown of the social order. Clearly, the continued increase in populations will produce a bleak future for all the earth’s inhabitants.

The need to reduce our rapid rate of growth, indeed to reduce the current and projected size of the human population, is urgent. Complicating the task of reducing populations are those who for various reasons advocate a continued increase and those who object to practical methods of population limitation, such as birth control and abortion, as well as those who simply turn their backs on the problem, refusing even to recognize the obvious. One legitimate function of education is the clearly enunciated recognition of social problems and the enlightened advocacy of social solutions.”

“The level of waste are producing is enormous. In the West, we lead incredibly carbon intensive lives. Food we eat, the products we consume, cars we drive, heating in our homes. Reducing this involves rethinking how we design, use and dispose of things, minimising wastage throughout production, useful life and after we’re finished with them. Closed loop systems may help us find this alternative path towards Zero Waste.

In theory, we can eliminate waste, by better understanding the life cycles of processes and systems. Cutting waste will mean massively increasing efficiency across our resource use from cradle to grave.

So is any of this really possible? “Zero Waste is about society as a whole, at local, regional, national and global levels.” explains Robbie Weir, Envirowise Programme Manager for Scotland. “For example, without fundamental change to how we consume crisps, it’s hard to fundamentally change the nature of a crisp packet. It has certain requirements in terms of functionality, and these are defined by how we consume the product inside.”

“There are three tiers of action to make this work,” he continues. “Legislation, cost drivers, and the moral component. If you combine laws, use technology to make sustainable packaging affordable, or differentiate it, finding a way to offset the extra costs, then the sustainable and recyclable packaging starts becoming the cheaper and the more effective packaging.”” (Our Waste)

We have to issue a dramatic change in the EPAs involvement and President Obama needs to give them more power. Unless we reduce Green house emissions and increase R&D on alternatives such as wind, solar, and hydro we will always be dependent on fossil fuels that will just increase the temperature and reduce the ozone layer. That will only solve part of the problem. If all global leaders don’t step up to the plate, all the countries will end up like the Maldives. Global warming is an environmental issue that affects all. If one country is eco-friendly but its neighboring country isn’t, that will only slightly curtail a very serious threat. Global warming is destroying our earth. We, as humans, are responsible for global warming. We must be the ones to change. And change immediately.

 

 

 

 

 

 

 

Reference:

(NY Times) – January 13th 2001 – http://topics.nytimes.com/top/news/science/topics/globalwarming/index.html#

(Koshland) – http://www.koshland-science-museum.org/exhibitgcc/historical03.jsp

(Our) http://www.ourfutureplanet.org/topic-climate-change

(Our Waste) http://www.ourfutureplanet.org/topic-waste

 

Posted by: itm2011 | May 18, 2011

Coca Cola Brand Fan or Brand Foe (Brief)

In Los Angeles, California 29-year old Dusty Sorg and his 28-year-old friend Michael Jedrzejewski both in the entertainment industry decided to create a brand page on Facebook. In August 2008 they created a page for Coco-Cola because they had one in their possessions. They burrowed the company’s name, logo, and imagery with the company’s knowledge. But to them this seemed common since there were already so many brand pages honoring Coca Cola. So when the page acquired 1.2 Million fans within the first three months, this was not expected, but quickly became a problem. Facebook executives informed the Coca Cola Company (TCCC) inform them the site violated their terms of service. They wanted to know how Coco Cola wanted to deal with the matter.

Coke already had people and a department to address advertising, integrated marketing communications, and changing communications landscape. Wendy Clark said, “creating effective marketing at a local level in the absence of global scale can lead to huge inefficiencies.”

Social media and the internet has brought many positive attributions but also ave caused problems. The problem in this case need to be solved by Coca Cola. Because even though a fan started it they have to finish it. They have to consider their brand image and customer reactions among other things. What should they do.

Posted by: itm2011 | May 18, 2011

Marquee: The business of Nightlife

Case Study Analysis
Marquee: The Business of Nightlife

INTRODUCTION

The Strategic Group, is a full service marketing, special events and promotions company founded by two, ex-club promoters, Jason Strauss and Noah Tepperberg.  The two first entered the industry in 1999, opening a club called ‘Conscience Point’ followed by another called ‘Studio 16’. After their short success, Strauss and Tepperberg sought to open another venue, which was opened-with the help of joint ventures and investors- in 2003. Strauss and Tepperberg had an advantage to plan and design their new venue from ‘raw’, previously a truck garage. Prior connection, knowledge from years of experience had helped them create such an atmosphere where they knew would have a phenomenal response from their clients. Soon after opening Marquee was instantaneously known as the ‘hottest’ club, an instant success. However, close to a decade since the opening, both Jason Strauss and Noah Tepperberg are deciding whether it is about time for them to move on to another venture. I have analyzed key factors that can help in the decision-making process of their future business for Marquee, researching their top competitors, environment and future outputs.

First, I will discuss some of the Company’s business strategy and how they lead to success. Second, I will examine the strength and weaknesses of the company. Lastly, I will provide recommendations for the decision-making of the company’s future endeavor.

 

 

STRATEGIC GROUP’S MARQUEE BUSINESS STRATEGY

The Strategic Group has created a brand image of the club Marquee that attracted crowds such as models, celebrities and socialites. Strauss and Tepperberg’s main business strategy that lead them to success was not only because of their associations with the elite, but because of the image and the atmosphere they have created and maintained throughout the years. Managing customer relationship was one of the many important factors that made Marquee different from other clubs. Marquee, attracting a very diverse crowd, had different types of clients. From jet-setters, who are frequently traveling to a ‘regular’ who would come weekly- spending an average of $600 on a table. For those who are frequently traveling but are seeking to experience the same kind of nightlife Marquee provides, the Strategic Group would ensure that their clients would get the same experience in one of the sister property. The regulars are described to be the most welcomed, because of their loyalty. They are treated with special care such as placement of the tables and special services such as storing a leftover bottle of alcohol for their next visit. Another strategy that contributed to their success is the promotion of the club. With the help of promoters, the club is continuously filled with a diverse crowd, to help maintain the atmosphere. Another promotion that had helped maintain their success was the “Marquee Red Card”, which was given to top hotel guests-mainly to ease entrance. They had an advantage to deliberately design the space with three different rooms each with a different theme, music, and crowd. It is important for the club to ‘look’ crowded even on a slow night. So by closing up a room or two would help the club appear full.

STRENGTH & WEAKNESS ANALYSIS


STRENGTH

Life-span Compared to the average life span of a club in New York City, which averages 18 months, Marquee still remains opened for business
Location Located on 10th avenue, amongst the numerous nightlife venues such as restaurants, bars, clubs and lounges
Celebrated Guests Socialites, musicians, celebrities and models are just a few of the celebrated guest appearances that come to party
Crowd A very diverse mix of crowd that fills the entire club is carefully selected or sorted for admission to maintain a consistent image and atmosphere of the club
Services The type of services that is available for the clients.
Exposure Almost a decade old, Marquee has had its exposure to the market and is known to be one of the best clubs in New York City
Space Three different rooms are carefully designed into the space, where private or corporate parties can be held during the weekdays or earlier in the evening to increase revenue

WEAKNESS

Age Once known as the hottest club in town, after age, it is difficult to maintain on that level
Image As the club is becoming older, it is harder to maintain a consistent atmosphere and brand image. Controlling the amount of flow of the clients and being able to actually ‘sort’ the crowd may soon be a privilege
Maintenance Maintaining the facility throughout the years may be difficult because replacement of such equipments may be a costly investment
Management of Clients As the number of clients increase, it will be harder to manage and service the clients the treatment they once had in the beginning

OPPORTUNITIES & THREATS ANALYSIS

 

OPPORTUNITIES

Legendary It’s becoming close to a decade since the club has opened, which may become legendary, if it continues to remain open
Future Revenue Revenue may increase after the economy becomes more stable
Main Platform Marquee, Strategic Group’s main platform. The closing of the business may affect their other business ventures

 


THREATS

Increase Expenditures

As years pass, the amount of expenditures increase-including payroll, rent, legal accounting fees and etc.
Increase Rent Rent is raised annually, which soon can become too expensive to make any profit
Decrease Revenue The amount of revenue is projected to decrease and has already shown a significant drop from the previous years
Cost of Operation Operating cost has been rising-harder to maintain business profitable
Competition After Marquee’s success, more and more business were found to be placed in the area

COMPETITORS

After Marquee’s great success in the nightlife industry, multiple businesses have opened all around the area, hoping for the same level of success. Below shows the number of clubs and lounges in the area, more than half found to be closed as of date. The two top competitors of Marquee is the ‘Bungalow 8’ and ‘Cain’, both of which being closed. Bungalow 8 opened in 2001 by Amy Sacco and closed in 2009 for “renovation”. Cain opened in 2004 and closed in 2009. Both, in which had higher consumer ratings/ reviews.

RECOMMENDATION

After examining the SWOT analysis of the business, I thought the ultimate choice that may be made was to move on and peruses in other business ventures. An average life-span of a club in NYC is found to be 18 months. Marquee’s success may simply be out of luck or may continue to be a legend of its own. However, a significant decrease in revenue was mentioned as Tepperberg have pointed out that the cost of operating the club has significantly increased compared to the earlier days. The competitive analysis also shows that both the top competitors themselves have reached their peak and had a great downfall. Newer, hotter clubs are surrounded in the area. The increase in clients over the years is harder to maintain relations. Another key factor that lead me to this decision is because the Strategic Group has many ongoing business activities throughout the nation, which may have great potential growth. Focusing on those activities may progress into a great success of their own. Holding onto to Marquee may just become a burden that can interfere with their current, new business activities.

Another recommendation that I have deliberated was relocating and opening a new club. The life span of an average club in New York City explains the current generation of club goers. They enjoy going to the newest hottest clubs in town. Marquee now close to 10 years, is considered to ancient. Relocating and opening a new club gives both Strauss and Tepperberg the advantage to put their weaknesses that they have faced and mistakes they have learned with Marquee into considerations when building the new hot spot. Other advantages are the new space, new aura, new scene-all buzzes that will attract massive crowd which equals high revenue.

CONCLUSION

In conclusion, Strauss and Tepperberg’s business strategy, for Marquee, has shown to be a great success. Close to 10 years in business, the club has grown out of trend or to live up to their reputation-once known as the hottest club in town. Through the SWOT analysis and competitor analysis, I have deliberately strategized a solution or recommendation whether the club owners should continue spending their time and money in ‘saving’ Marquee from closing down. All of Marquee’s top competitors, also considered the hottest clubs, are currently closed. It was clear that Strauss and Tepperberg was doing something right according to the life span of Marquee. However, with the significant decrease in revenue and the increase in expenses, year on, may lead to an abrupt closing of the business. I have demonstrated two recommendations that the partners account into consideration on their decision-making, both solely to maximize profit. Selling the club, while it still ‘alive’-with whom they call clients- is an option. Another option recommended is to either completely renovating the club to promote a new aura, scene and marketing mix or to move to a new location for a new opening. Both recommendations were made to prevent from further loss and to focus on a new business venture, ultimately to profit from their investment in time and money. It is said that a club makes the highest profit margin in the earlier days and as years pass it will turn into a debt. With Strauss and Tepperberg’s years of expertise in the business along with their connects, I can assure that their future business ventures will continue to succeed. However, I have concluded that the best choice for Strauss and Tepperberg is to let go of Marquee.

BIBLIOGRAHPHY

Elberse, Anita, Ryan Barlow, and Sheldon Wong. Marquee: The Business of Nightlife. Cambridge: Harvard Business School, 25 Feb. 2009. Pdf.

Ogunnaike, Lola. “Club Stays Hot at Ripe Old Age of 2 – New York Times.” The New York Times. The New York Times, 03 Nov. 2005. Web. 17 May 2011. <http://www.nytimes.com/2005/11/03/nyregion/03marquee.html&gt;.

Nolan, Hamilton. “Is Amy Sacco Broke? – Gawker.” Gawker. Gawker.com, 23 June 2009. Web. 17 May 2011. <http://gawker.com/5301434/is-amy-sacco-broke&gt;.

Posted by: itm2011 | May 18, 2011

Old World Values Poured into the 21st Centruy

Chateau de Vallois:

 

“Old World Values

Poured into the 21st Centruy”

 

 

The wine industry is comprised of both old and new traditions. While the smell and tastes of an aged wine, made from the highest quality grapes are adored by some wine coinsures, others prefer newer, sweeter tastes. These preferences have shaped the 20th century wine consumers internationally. Both aged wines, and their high price point, and newer, yet lesser-priced wines, have felt the effect of globalization and sourcing of the product.  Countries such as china and India are producing lesser-priced wine to fulfill the demand of lesser, yet still high quality wines. This market is a younger consumer, who is looking for a much different product than those purchasing wines for decades.  A prestigious wine company, Chateau de Vallois demonstrates the dilemma of whether or not a company should remain only serving its high-class cliental, or also lesser luxury products. Going through some of the details within the case, I feel that the company would benefit creating a lower priced label, so long as it meticulously researches the market before entering. Furthermore Chateau de Vallois needs to clearly define the difference in products.

Claire de Valhubert has not been directly involved with her family business for several years. It is her brother-in-law and uncle has been in charge of running their family business. Claire however, still has a large share in the family business, and having completed her MBA, she is returning to the business in hopes of serving the un-ventured young wine consumer. She claims this market is being taped into by competitors and does not see how the business will last unless they also enter the specific market.

Conversely, Uncle Francois de Sauveterre and Jean-Paul Oudineaux do not agree with Claire. They argue that neither of them is familiar in working with lesser quality raw materials which are used to create a sweeter, and less expensive form of wine. Also, they claimed that neither have the time or monetary resources to create the necessary distribution channel.

Never the less both parties offer valuable business and product knowledge that could offer a great future profit; should the market entry be executed correctly.

Should the market be entered with proper research and planning, Chateau de Vallois could be the largest leading wine supplier internationally.

 

Market Research

Proven in various studies, the demand for more affordable wines relates to the increase in wine drinkers in the current generation X. From 2005, with forty-one percent of wine drinkers generation x has risen to sixty-two percent in 2010. This in-comparison to those from the baby boomer generation, which rose from forty-one to fifty-seven percent in 2010. While the numerical differences in the generations are not extremely large, the difference seems to relay a trend that is only going to increase in the future.  In order to accurately serve this younger market, a comprehensive survey of taste preferences and actual price points should be immediately put into place.  This could be done through offering the product at local bars, which young people could sample. Also, the web research related to other popular types of alcohol being purchased by this demographic should be looked at in detail.

Since Claire is the greatest supporter of entering this market, she should lead the research projects. She is also familiar with other wine suppliers currently targeting the younger market. Francois and Jean-Paul need to focus on their higher customers who regularly purchase, as well as research the ways to produce a lesser quality wine, without losing any tastes. Maintaining both of these duties may be overwhelming; therefore, hiring a knowledgeable sales team to remain close relations with luxury consumers is vital.

http://www.winemarketcouncil.com/research_summary


 

Comparatives and Contrasts

 

            Italian bedding company Frette has evolved itself from an extremely high priced bed line, to various other faces of bedding, which more consumers can afford. Welcoming younger consumers, with less expensive prices and more contemporary styles, Frette has expanded itself into many other markets. While keeping its high priced, highest quality brand separated from the lower brand, Frette has incorporated these lines into its stores as well as several hotels.

Similarly, should Château de Vallois follow a similar path the outcome should be just as successful as Frette. Through keeping two lines, one, which is for older traditional wine drinkers (classic label), and one for a younger, contemporary consumer (Contemporary label), the brand can keep its prestigious name. Furthermore, putting only top shelf labels from the brand into high priced restaurants can also continue to keep the luxury side of the brand. While there will be a lesser quality wine, marketing the top shelf wine as made with better products and old traditions will clearly define the difference in the two lines.

Also being featured in Wine magazines or other online media can assure consumers of its highest top shelf labels not being made as the lesser labels. Videos such as the one that follows will clearly define the difference. http://www.youtube.com/watch?v=1RtakVXH-hA

 

Action Plan

In order to be successful, market research is key in finding out who and what clients want.  Claire, who will be head of marketing and business development, needs to evaluate other luxury brand companies who are making lower quality merchandise.

Although it is a fashion company, Dolce and Gabanna have done a great job in expanding their company from being runway looks to ready to wear. Their sunglasses specifically have two lines, Dolce and Gabanna and D&G. The price points of Dolce and Gabanna average $350.00 while D&G averages at $160.00. These lines are comparable in price but not quality. The difference is that the higher priced items are more trend, runway driven. They encompass the legacy and tone of the Dolce and Gabanna brand identity. The lower end brand is produced with cheaper products however; quality and fashion trends are not compromised.

Following this type of model, Chateau de Vallois should be able to use flavorful grapes at a lower cost. Jean-Pierre was afraid that he did not know how to produce such a wine; yet, he is familiar with several producers who are able and have been producing such wine products. Therefore, after setting up the market research team, a product development team needs to be hired by Jean-Pierre. This way he may over sea the production, yet would not be responsible for producing and executing productions costs. These teams should be hired and set up within 3-6 months of the product start date.

After the teams are hired, the research should be completed within 3 months, and continue to be updated every month. The production team should also have ideas of sourcing locations and costs within 3 months. At the 3-month point, both the marketing team should attend an overall meeting to inform each other of the market/product demands, and the options of sourcing the products. After the meeting within the 6 months, there will be a trial of products on the market. Within the 6 months, monthly meetings will be held to monitor the sale trend.

Visual Marketing Schemes

The looks of Marketing Copyright will be different for each line. The more traditional line will embrace a classic nostalgia while the contemporary line should play on bright, modern colors and art. Using Images of Vineyards and French countryside from past decades will decipher itself from the contemporary, lesser wine.  B

 

Conclusion

Bringing a company, enriched with heritage and nostalgia into a new and vastly different time era can be quite the challenge. However, when there is a mix of executives who can learn to appreciate the past and embrace the future, success can be the only outcome. Balance is most definitely key in transforming an older brand into a new phased industrial giant. Yet, with the right motives and direction, with well-researched leaders, this treacherous task can be completed with great ease and success.

References:

http://www.winemarketcouncil.com/research_summary.asp

http://www.frette.com

http://www.depts.ttu.edu/hs/TexasWine/

http://www.marketresearch.com/browse.asp?categoryid=477

Skinny Nutritional Corp Enters International Licensing Agreement for Its Brand Skinny Water(R) in the Countries of Brazil, Argentina and Costa Rica.


Reasons for Interest
When I began my coursework in International Trade and Marketing, I was unsure of what to expect. I was aware that the major covered a broad range of business within the fashion industry and suggested concentrations within the major. However, the required coursework seemed to be heavily concentrated in import and export dealings. Rightfully so, because import and export transactions are a vital component to international trade. At any rate, I wanted to discover my role in the international business arena where I could utilize my legal background and fuse it with fashion. With the help of electives, I stumbled upon the concept of licensing. I remembered covering licensing briefly in one of my law school electives, but I received a more in depth look into licensing and the logistics behind the business here at FIT. I realized that my background coupled with my deep rooted interest in fashion could lead to career in licensing.
Since my revelation, I have actively sought out business articles dealing with licensing on sites such as licensing.org or any other site that would provide me with valuable information about the industry. It is important to know the essential terminology and different aspects for one’s potential career. It has been this belief that led me to search for a licensing article for this paper. In addition, licensing is currently being used by both large and small companies to extend their brands and increase profits, which has contributed to the fast growing industry, especially within fashion. Even if I had not been interested in licensing, it is beneficial to stay abreast with current developments in fashion.
Because International Trade and Marketing (ITM) focuses on international business operations within the fashion industry, this article falls within the ITM scope.  Although this case does not particularly pertain to apparel or accessories, this particular product, Skinny Water, has caught the eye of style and beauty magazines. And the expansion of their business to foreign countries is exemplary of what some ITM students may witness once they enter international business in the fashion industry. International licensing contracts need to be well calculated and negotiated, which call for individuals who can identify pertinent business issues and conduct competent research for their company.  ITM trains its students to understand international business challenges and create solutions for those challenges, as well as how to assess international business opportunities, much like the company in this case.

Summary
On March 22, 2011, there was an announcement by Skinny Nutritional Corp. (SKNY Corp.) to enter into an international licensing agreement.  SKNY Corp. specializes in the development, distribution, and marketing of a line of nutritional beverages, that are all branded with the name “Skinny.” SKNY Corp. currently offers several nutritional beverages, such as Skinny Java, Skinny Tea, Skinny Smoothies and more distinct to this article, Skinny Water.  The company targets the health and weight conscious consumers of mainly the United States, but is now expanding internationally. Skinny products have been featured in numerous health conscious and style magazines, including Allure, Us Weekly, and Women’s Health. Presently, SKNY Corp. has established a license agreement with Peace Mountain Natural Beverages Corporation, who bottles and distributes the beverages worldwide. Skinny Water is now sold through 47 distributors in the U.S.
As a result of the company’s accomplishments, SKNY Corp. decided to take its success internationally and sign another licensing agreement. SKNY Corp. entered the agreement with G&K Enterprises to manufacture, distribute, and market their product, Skinny Water, in Brazil, Costa Rica, and Argentina. This license is the first international license of Skinny Water outside of the United States.  The company reasons that Brazil, Costa Rica, and Argentina have a desire and need for healthier beverages that is rising. SKNY Corp. saw the countries’ large combined population of about 230 million people as a promising business opportunity. Subsequently, the company hopes to increase brand awareness and availability amongst the consumers of these countries. Moreover, CEO, Michael Salaman, asserts that their goal will be achieved by using the upcoming and globally acknowledged 2014 FIFA World Cup and the 2016 Summer Olympics, hosted by Brazil, as leverage.  Salaman also hopes to gain other international consumers who will come to these immense events; creating more expansion opportunities for the company.
Under the licensing agreement, SKNY Corp. will be receiving royalties for every case sold. Salaman is quite confident in their declaration to go global and increase profits. His confidence comes from last year’s success, in which Skinny Water’s net revenues totaled $6.9 million, compared with 2009‘s total of $2.8 million. The company attributed the increase in sales to Skinny Water Sport and the influence of new distributors and new chain authorizations.
SKNY Corp.’s decision to go international is backed with confidence, success, and research. It is apparent that SKNY has worked diligently to improve their products, increase brand awareness, and expand their growth through their fast growing company. The company entered a market where healthy beverages are becoming more prevalent and where competition is stiff with larger companies who provide similar healthy drinks. Somehow SKNY Corp. has set their product apart from the more established drinks. It seems the company has been doing its homework through their successful penetration of the U.S. and global markets. If SKNY Corp. is successful with this licensing agreement, it will demonstrate effective leadership skills among its executive office and competent expansion skills. Skills that can be learned from by students in the ITM department.

Critique

      In going global, a company must devise a business plan and must address the pros and cons of taking their business internationally. It must be well researched and well timed. Additionally, the company should have the resources to make such a leap by establishing a strong foundation and presence in their market.  Not only must cultural differences be addressed, but the company must also know how to negotiate and interact with individuals from those cultures.
In this instance, SKNY Corp. made that leap with properly conducted research. However, there are two reservations I have about their decision and it is whether their brand is as nationally recognized as they perceive it to be and whether it is too ambitious to enter into an agreement for manufacturing, distribution, and marketing for three countries simultaneously. SKNY Corp. is a fairly new company, which could serve as a weakness in penetrating the international market.  Perhaps if the company was older with more years of market experience under their belt, there would be less risk involved. It is possible that SKNY Corp. could be too confident and optimistic about its future sales in the Latin American market. A premature choice to go global can be detrimental to a young company like SKNY Corp.
Despite my reservations, the article proved to be informative because it is often satisfying to read actual business cases that I can use towards my career. Being afforded the opportunity to delve into a company’s strategic plan to expand is always insightful. Furthermore, it is fascinating to see how a company assesses its strengths and opportunities when it comes to brand development. Although, it would have been beneficial if the article would have provided some of the company’s research of how SKNY Corp. chose Argentina, Brazil, and Costa Rica and why they chose to enter those countries simultaneously. In conjunction with providing some of the aspects of the company’s research, the article could have given more information about G&K Enterprises and their reputation in Latin America.
This article was informative and useful for not only the marketing classes that I am taking now,  but also for my upcoming internship with Continental Reliance Group (CRG), a license and brand management company.  Currently, I am taking Global Marketing and our current project is to market nasal strips to an international target market of our choosing. We have to assess the demographic of that country and their need of nasal strips. In doing so, we have to keep in mind a budget and how we plan to market our product. A SWOT analysis must be developed for our product, so we can adequately determine if it is appropriate to go global, and if so, if that particular country is the right choice. The article identifies SKNY Corp’s evaluation of their opportunities, which have sparked some thoughts for my own project.
Reading this article further familiarized me with international licensing deals and encouraged me to be inquisitive about various components about going global that did not know, which will assist me with my internship. My internship this summer, will grant me the opportunity to witness how CRG builds partnerships between brands and manufactures, distributors, and retailers, how the company increases their clients’ brand awareness, and how the licensing royalties will be handled. I will also be afforded the opportunity to work on trend forecasts, strategic plans, and revenue analysis. This newly gained knowledge will allow me to better understand licensing and how companies determine when and why they want to enter the international realm.
To conclude, SKNY Corp’s ambitious decision demonstrates the importance of conducting adequate and thorough research for your company. The quality of a company’s research will be a determining factor in their success overseas.

Sources Cited

  1. “Skinny Nutritional Corp Enters International Licensing Agreement for Its Brand Skinny Water(R) in the Countries of Brazil, Argentina and Costa Rica.” Internet Wire 22 Mar. 2011. General OneFile. Web. 27 Apr. 2011.
  2. http://www.drugstorenews.com/article/skinny-water-achieves-record-sales-looks-expand-distribution. Drug Store News. 19 April. 2011.
Posted by: itm2011 | May 17, 2011

The Perils of Imitation Age

I often encounter people who are waiting for to purchase iphone4 while they have existing cell phones. People who have broken cellphone wait for months in order to obtain iphone4. The worst of all is the owners of iphone3 who purchased them just several months ago and nervous about iphone4 being coming out. On the companies’ side, competitors of apple frantically make a new cell-phone which imitates the design and performance of iphone, and Apple has to create even better iphone series in order to get ahead of the industry. How many iphones should be come out to ever satisfy all these customers and companies? This phenomenon deeply underlies in humans desire to imitate.

I have paid attention to the fanatic reactions of people whenever every new iphones are coming out and the moment I saw the title ”The Perils of the Imitation Age” it was automatically translated into “The Perils of the (New) Iphone Age.” People want new iphone not because they need it but attempt to imitate other who has better cellphone than what they have. As long as new iphone continues to be made no one can be happy.

Imitation prevails all over the society even greater than we recognize from the counterfeit of Louis Vuitton purse to the mergers of corporation just because their competitors do the same. I wonder if imitating end up profit the entire society. Imitation, of course, has advantages such as learning from successful people or companies through imitating. However, indiscriminate imitation seems to confuse people’s self and companies’ originality and its directions.

We are obviously living in the age of the imitation than ever before. I have a curiosity how devastating effects the imitation behavior plays in our society and business; and what are the solutions to utilize the virtue of imitation without crossing the line. This is why I found interest in this article.

As I mentioned earlier, imitating is deeply rooted in human behaviors thus related to wide aspects of human activities. Our major, International trade and Marketing particularly related to fashion is highly interconnected with imitation as well. Fashion is the most obvious result of imitation. People imitate someone who they admire or want to be like them including their appearance. At the same time, people’s desire to be accepted by a certain group lead them to wear or behave like them. Understanding how imitation acts upon fashion helps us to predict customers’ behavior and further helps to set business strategic in fashion industries.

This article mentions that, in imitation networks, not everyone has same influence over others. Some people have much more influence over others and reaching them leads to reaching thousands. For example, Uggs which was originally meant to be in-door sleepers in Australia became huge trend all over the world as Kate Moss was seen in this pair of shoes.

Brand marketing is crucial in fashion industry and we have to understand how top brands such as Channel and Louis Vuitton keep their position in the highly volatile fashion industry. Both Channel and Louis Vuitton manufacture products that have quality and ageless that are rather being apart from imitation. While most of brands compete in their prices with markdown and promotions, those two companies maintain high-end brand image by never doing discounts on the products even during the harsh economy.

Imitation is one of fundamental natures human process. And imitation incredibly has influenced over society particularly in business and finance. With the enormously growing technology, almost everyone in the world can access to what others do, think, and predict with a single click. These knowledge we gain leads to even more outrageous fads and fashions, bubbles, and crashes.

There are four motivations why people imitate. Safety is the first reason. Going through the well-known path in the wood won’t make you a pioneer but you are less likely be lost. The second driver is conformity. People have desire to be surrounded by people who share similar thoughts, status, and appearance. This main factor drives fashion and fads. The third motivations is that people believes other people knows better. People want to avoid the responsibilities on their own decision, so relinquish their choices to other people. The final reason for imitation is greed. People imitate since they want what other people has.

Thanks to the technology, people know what other people buys, wear, think, or do ever more and faster than before. People also instantly respond to what they know. This creates proliferation of feedback loops, collecting, aggregating people’s thoughts or opinions and respond back to the public. Feedback loops is not a new concept. It has been around for more than hundred years influencing other people’s ideas through mass media, magazines, and newspapers. Best selling list is one of the examples.

In fact, the quality and quantity of feedback loops has been extraordinarily changed with the fast development of technology. The three greatest changes are its speed, customization, and individuation. SMS is one of the examples of drastically increased speed of feedback loop. Through exchanging SMS, people influence each other through exchanging their thoughts instantly. Customization is the concept of allowing people to imitate others who are mostly like them not the general public. Online websites suggest products that are purchased by customers who have similar purchasing history. The most significant characteristic of feedback loop is individuation that allows people to access individuals’ thoughts not anonymous public. Zagat restaurant survey is the most appropriate example of combination of customization and individuation. The ratings and reviews are not conducted by professional critics but ordinary diners who are like us.

The society possibly become homogenous and perfectly predictable if everyone imitates the lead of other, however, imprudent imitation creates even greater unpredictability and instability. Unpredictability is caused by different way people imitate. The problem is worsen as influence of traditional “beacons,” such as government leaders, the church, and celebrities, has faded by the loss of their credibility. People are getting more confused of whom to imitate and end up imitating wrong people.

What makes more destabilizing than imitation of wrong people is the self-referential nature of imitation it self. The self-reference leads to the infinite reproductions of reproductions of original sources thus the growing apart from fundamentals. For example, in the Democratic presidential primaries, people supported John Kerry not because changes in his position but people had seen others voting for him so they assumes that he was electable. People votes according to who could possible win the election.

Instability of system in which people predicts based on other’s action is often seen in our ordinary lives. People drive to a certain route without knowing traffic conditions. Even though their departing and arriving points are the same, they choose to drive certain time and direction based on what others do before. This attempt to imitate results in unpredictable outcomes while everyone’s goals are the same. Self-reference make the smallest difference possible to lead the dominance that is magnified by feedback mechanisms as word of mouth.

Imagine there are two exactly same cafés where carry the same quality, taste and price menu and one café has two customers while another one is empty. People who are passing by those two café likely to enter the one with two customers assuming it may have better taste. The increased customers inside of the café will induce more customers and it goes on and on. Another example is neighborhoods share similar racial and standard of living. Consider one wealthy person build a fancy house in a poor neighborhood. This will attracts other reaches to do the same in this neighbor and this random fluctuation would convert this poor neighborhoods into the wealthy neighborhood. People’s tendency to imitate what others do plays greater roll in finance markets.

People’s interdependent decision making results is millions of loss in speculative bubbles. When one or two huge traders make huge transactions by error the entire market will respond on it. People buys stock not it is the most attractive to them but based on other’s expectations that are the expectations of others. It shows the market’s vulnerability to destabilizing self-reference.

Mastering self-reference doesn’t guarantee expected outcomes, however, business who understand the imitative behavior can avoid its worst effects. There are some strategies to predict the possible result of imitative behavior and even creates opportunities in it. The fist is targeting the hubs of the imitative society. Through targeting few influential leaders it can reach thousands more customers. This is why designers are eager to give away their pieces to the celebrities. The second is keeping the ideas simple. Simple ideas are easily understood, remembered, and retransmitted. It other words, its more likely to be imitated. The third one is giving away. Since feedback loops are started by first few people giving away you product at first is worthy in order to have as many customers as possible in a short time. For the last and the best strategy for business is “be the kind of fundamental people can’t ignore.” While competitors pay little attention to the fundamentals and follow what other companies do, having a original and quality products will make the customers return to these products when there is no more products to follow.

The article is interestingly explain how imitation system works from the psychological motivations to imitation of human nature to the influence of imitation on the society in general, culture, business and finance market. Various phenomenon occur in our society or business is deeply based on people’s desire to imitate and this can put our society or business in jeopardy, on the other side, it can lead to the opportunities.

The most interesting part of this article is that how fast development of technology boosts rampant imitation that causes unpredictability and instability in the society. As there are too much information it is easier for people to imitate what others do, but the problems are they follow wrong people and follows expectations of other people’s expectations that makes impossible to predict outcomes.

The authors suggestion on how to build strategies in order to avoid the worst effects of imitation or how to create opportunities by using the nature of imitation was valuable information that further helps me to realize why some companies operates the business the way I would never do. For example, I assumed that the internet or cable companies just give away several months of free trials to simply increase the number of customers by making them to continue the service. However, what the companies were aiming was feedback loops. People may decide to choose Verizon internet not because it is better than other products but many others use Verizon internet. The article is relevant and viable information to understand business activities around us and use them in the future.

With the emerging size and importance of international businesses international corporations have to endlessly compete each other. Companies closely tracks what other companies are producing or doing and often imitate them just to compete disregarding the company’s business condition. For example, Vivendi has lost billions value of shareholders as they imitate merger and acquisition strategies of their competitors. I found this could be related to the Data Clear case study we went over in the class. Data Clear’s concern about international expansions is caused by attempts to imitate their competitor’s global expansion. It can put the company into a serious danger if they abruptly going into global without careful examination of the company’s circumstances.

As I consider working in finance industry, this article is closely related to my future career. Finance market is highly unpredictable due to the instability of self-reference system. Surprisingly, while speculation is the main force to move finance market, imitation is another cause that can swing the entire market. Understanding the core fundamentals of feature of finance market allows me to have more clear idea about this career.

The author’s conclusion implies that being original and true of their own business is a key to the success in this imitative society. It makes sense when the method of business is evaluated based on morality and some businesses are successful and ageless with their originality. However, I question isn’t imitating is another core strategy for certain companies like Pepsi and H&M. Their products are imitation of other products and people appreciate the imitation. I wonder if imitation eventually halters a company’s success when profits are only concerned.

Nike: The Scrutinizing Outcome of Sub-Par Corporate Responsibility

(A Case Summary by Alexandra Walz)

After reading through many case study descriptions provided by the Harvard Business School, I came across this case study dealing with Nike and their continued struggle with the media relating to the manufacturing plants the company uses to produce its goods. From the description provided, I was instantly drawn to the amount of interesting and deep content that was given in this article. Although the publication was in 2002, the relevance of this article is still very important, since labor laws and corporate responsibility continue to be issues with many very large and successful apparel manufacturing companies, with Nike being under a microscope from the media for many years.

Having taken an interest a few years back in the cruel labor conditions people have to work in in developing countries just to make the shirt that is on my back, I have periodically researched companies whom have had issues with poor labor conditions. It is quite frightening that companies with as large brand recognition as Nike would continually lie to the public about what was happening in the factories they sourced from, thinking their secrets would never get out. The massively large brand recognition that Nike has on a global level also drew me to this article because there are not many other companies such as Nike who have had as great a success and are as well known. The publicity surrounding all of the allegations about the poor labor conditions at the factories in which Nike sources were very public and right in the center of the media, but that did not stop the population at large from buying Nike products. Although there were some decreases in sales and Nike lost contracts with different college’s, a large majority of the Nike customer was loyal to the brand, choosing to ignore the very public circumstances in which the shoes on their feet or the t-shirt on their back was made. Nike has a large affect on millions and millions of people, and it is because of this I was drawn to further understand the situation described in the case study. Lastly, this article shows how much the power of a voice and protestors can affect a company, specifically the students at different universities who refused to buy Nike products from their campus stores. As an affect of the power of protestors and the press scrutiny surrounding Nike and the labor conditions in the factories, the CEO was forced to budge and finally provide a solution to the problem that had been lasting for years.

Hitting the Wall: Nike and International Labor Practices offers insight directly into the world of corporate responsibility and global management. Poor labor conditions and low wages have been an issue for many years, and are still present today in 2011. Being able to study how a globally recognized brand such as Nike dealt with years of scrutiny surrounding their labor conditions and what solution they chose provides a very real look into running a globally massive company.

Article Summary:

In the 1980s and 1990s, Nike had been plagued by a series of labor incidents and public relations nightmares: underage workers in Indonesian plants, allegations of coerced overtime in China, dangerous working conditions in Vietnam. For a while, the stories had been largely confined to labor circles and activist publications, until a young female worker had died in a Nike contracting factory in 1997, the labor conditions at Nike had hit the mainstream.

Nike, Inc. 

Based in Beaverton, Oregon, Nike had been a corporate success story for more than three decades. It was a sneaker company, but one armed with an inimitable attitude, phenomenal growth, and the apparent ability to dictate fashion trends to some of the world’s most influential consumers. Selling a combination of basic footwear and street-smart athleticism, Nike pushed its revenues from a 1972 level of $62,000 to a startling $49 million in just ten years.

What differentiated Nike from its competitors was not so much its shoes as its strategy. First, the company would shave costs by outsourcing all manufacturing. There would be no in-house contracting factories, no dedicated manufacturing lines. Then, the money saved through outsourcing would be poured into marketing. In particular, Phil Knight, CEO of Nike, focussed from the start on celebrity endorsements, using high-profile athletes to establish an invincible brand identity around the Nike name.

While the marketing of Nike’s products was based on selling a high profile fashion item to affluent Americans, the manufacture of these sneakers was based as an arms-length and often uneasy relationship with low-paid, non-American workers. Indonesia became a critical location for Nike, with six factories that supplied Nike and a booming, enthusiastic footwear industry.

Situation

At first, Indonesia seemed an ideal location for Nike. Wages were low, the workforce was docile, and an authoritarian government was yearning for foreign direct investment. In 1991, the daily minimum wage in Indonesia’s capital city was barely $1, compared to a typical daily wage of $24.40 in South Korea and a U.S. hourly wage in athletic shoe manufacturing of about $8. For Nike, this was key: shoes coming out of China and Indonesia cost roughly 50% less than those sourced from Taiwan and South Korea.

A rare wave of labor unrest swept across Indonesia, with 112 strikes in 1991, a sharp increase from the 19 reported in 1989. Some claimed the source of these strikes was the government itself, trying to convince the international community of the country’s commitment to freedom of speech and labor rights. Jeff Ballinger was a labor activist and felt passionately that any company had a significant obligation towards even its lowliest workers, with his concern about the gap between wage rates in developed and developing worlds, and the opportunities this gap created for rich Western companies to exploit low-wage labor pools. Ballinger believed that Nike’s policy of competing on the basis of cost fostered and even encouraged contractors to mistreat their workers in pursuit of unrealistic production quotas. Nike contractors, he believed, were regularly flouting Indonesian labor laws and paying below-subsistence wages that did not enable workers to meet their daily requirements for food and other necessities. Ballinger focused his research on Nike, thinking that the same marketing and branding power that drove Nike’s bottom line could also be used to drive moral outrage against the exploitation of Asian workers.

The first party to respond to criticism from Ballinger and other activist was the government, whom raised the official minimum daily wage from 2100 rupiah to 2500 rupiah in Indonesia in 1992. This new wage only provided 70% of a worker’s required minimal physical need. Nike insisted that labor conditions in its contractors’ factories were not- could not- be Nike’s concern or its responsibility. In 1992, a member of the public relations team at Nike composed a Code of Conduct and Memorandum of Understanding, which was sent to all contractors. It required its suppliers to certify they were following all rules and regulations.

Ballinger published an annotated pay-stub from an Indonesian factory in the 1992 August issue of Harper’s, making a comparison between workers’ wages and Michael Jordan’s endorsement contract, showing that it would take an Indonesian worker 44,492 years to make the equivalent of Jordan’s endorsement contract. Soon enough, the spotlight on the labor issue extended all the way to Washington. Representative George Miller launched a campaign aimed at retailers that would mandate the use of “No Sweat” labels to guarantee that no exploited or child labor had been employed in the production of a garment. In 1996, President Bill Clinton began that Apparel Industry Partnership (AIP), included members of the activist, labor, and religious communities, was meant to be a model collaboration between industry and its most outspoken critics. Nike was the first company to join.

As far as public relations were concerned, 1997 was even worse for Nike than 1996. In 1997 the company began expanding its chain of giant retail stores, only to find that each newly opened Niketown came with an instant protest rally. One of the clearest indicators that Nike was in trouble came in May 1997, when Doonesbury, the popular comic strip, devoted a full week to Nike’s labor issues. Even more trouble loomed ahead with the anticipated release of The Big One, a documentary film by Michael Moore that was widely expected to be highly critical of Nike’s labor practices.

In the public debate, the question of labor conditions was largely couched in the language of human rights. Buried beneath contentious issues, though, was an even more contentious one: wages. According to many labor activists, workers in the developing world were simply being paid too little – too little to compensate for their efforts, too little compared to the final price of the good they produced, and too little to live on. Initially, Nike sought to defuse the wage issues simply by ignoring it, or by reiterating the argument that this piece of labor situation was too far beyond their control.

The issue of wages emerged again in spring of 1997, when Nike arranged for students at Dartmouth’s Amos Tuck School of Business to conduct a detailed survey on “the suitability of wages and benefits paid to its Vietnamese and Indonesian contract factory workers”, which was completed in November 1997.  In one Indonesian household the students visited, a family of six had used one daughter’s minimum wage from a Nike factory to purchase luxury items such as leather couches and a king sized bed. The authors found that Indonesians typically put their wages in a bank. Economically, data such as these supported the view that companies such as Nike were actually progress in the developing countries, providing jobs and wages to people who formerly had neither. In the public view, the average worker in a Vietnamese Nike factory made about $1.67 per day. A pair of Nike basketball sneakers retailed for $150. The criticism continued to mount.

Until the spring of 1997, Nike sneakers were still selling like hotcakes, despite the storm of criticism lobbied against it, Nike seemed invincible. A year later, Nike’s fiscal year 1998 produced considerable pain. Earnings fell 69%, the company’s first loss in 13 years. In response, Phil Knight, CEO of Nike, announced significant restructuring changes and the layoff of 1,600 workers. Along with a decrease in revenue, anti-Nike headlines had trickled down to the nation’s campuses, where a newly invigorated activist movement cast Nike as a symbol of corporate greed and exploitation. Campus activists rejected Nike’s contracts with their schools and demanded all contracts cease until labor practices were rectified. In 1999, activists took over buildings at Duke, Georgetown, the University of Michigan, and the University of Wisconsin, and staged sit-ins at countless other colleges. University administrators heeded the student protests, and many began to consider codes of conduct for contract manufacturers.

Saving Nike

In a May 1998 speech to the National Press Club, CEO Phil Knight announced a series of sweeping reforms, including raising the minimum age of all sneaker workers to 18 and apparel workers to 16; adopting the U.S. OSHA clean air standards in all its factories, expanding its monitoring program; expanding educational programs for workers; and making micro loans available to workers. Knight’s confession marked a turning point in Nike’s stance towards its critics. For the first time, he and his company appeared ready to shed their defensive stance, admit labor violations did occur in Nike factories, and refashion themselves in the effort to reform third world working conditions.
Nike’s second step was to get more involved with Washington-based reform efforts. The Fair Labor Association (FLA) was to be a private entity controlled evenly by corporate members and human rights or labor representatives. It would support a code of conduct that required its members to pay workers the legal minimum wage or the prevailing local standard, whichever was higher. The minimum age of workers was set at 15, and employees could not be required to work more than 60 hours per week. Nike worked tirelessly to bring other manufacturers into the FLA, but the going was though. Nike’s efforts to foster the FLA hit pay dirt with U.S. colleges and universities, with over 100 colleges and universities signing on.

By 1999, Nike was running extensive training programs for its contractors’ factory managers. Although Nike’s various concessions and new programs were welcomed as a victory by several human rights groups, others argued that Nike still failed to deal with the biggest problem, namely wages. A main objection of critics was that FLA standards included notification of factories that were to be inspected, a move criticized by some as equivalent to notifying a restaurant when a critic is coming to dine. Ballinger was confident that Nike had at least removed dangerous chemicals from factories, but otherwise he remained skeptical: “ If you present yourself as a fitness company you can’t very well go around the globe poisoning people. But on wages, they’re still lying through their teeth.”

Nike Post 2002:

Since the continual downfalls Nike has experienced with the media involving the factories they source from, Nike has constructed a program to deal with the labor issues that have been reoccurring in the more than 900 supplier factories they use. These factories span across some 50 countries, all sourcing Nike goods. A staff of 97 employees inspects several hundred factories a year, giving each factory a grade on labor standards and works closely with the factory manager to improve problems. Along with having their own inspectors, Nike now allows random factory inspections by the Fair Labor Association (FLA), a monitoring outfit founded by human rights groups and companies such as Nike, Reebok, and Liza Claiborne.

Because Nike is now far more public with their sourcing issues, when human rights groups or student protestors find a problem with the company factory being used, they now deal with Nike directly, rather than going straight to public demonstrations and calls of help. Since building up its in-house monitoring staff in 2002, Nike has performed more than 600 factory audits by September 2004, including repeat visits to those factories with the most problems.

Although Nike has been working hard to fix the issue of poor labor conditions in the factories they source from, the difficult issue of low wages and unionization has be little addressed. Nike and other companies have made progress improving factory conditions and closely inspecting factories, but things like underpayment of wages and freedom of association are being looked past.

Stated in the Nike’s 2010 Corporate Responsibility Report, labor and human rights continue to be a top priority and corporate worry. Nike expresses that monitoring the contracts of some 600 factories for working conditions, wages and overtime- and a host of other issues, is not easy. Challenging issues remain ahead for the company and even the industry. Nike has realized if they want to make sustainable improvements for workers, they need to significantly chance the way engagement and interaction among the supply chain is had as a whole.

Nike is collaborating with other brands on factory audits and working with competitors on developing remedies for labor problems as well as standardized codes. Also, Nike has the opportunity to reduce the pressure of asking factories to manufacture too many styles, by reducing the number of apparel styles and partnering with the factories to improve efficiencies through lean production methods.

Critique:

“Hitting the Wall: Nike and International Labor Practices” by Debora L. Spar provided a very interesting and rather controversial look into the media buzz that has been surrounding Nike and the labor conditions/wages being received in the many factories the company sources from.  Although I have previously heard about the poor conditions in factories that Nikes uses, I did not know how long these issues have been going on for and how many different activists have continually targeted Nike, whether it be activist in Washington, D.C. or students on a college campus who refuse to buy products manufactured in poor conditions for the laborers. The content of this article was continually interesting throughout, with an easily understandable and intriguing flow of information that covered more than seven years.

Because Nike is one of the largest globally recognized retail/athletic based product companies in the world, with a brand recognition by multiple different icons ( the Nike swoosh, “Just Do It”, Air Jordan), this article provided me with a better understanding of what goes on in such a large corporate company. The importance of corporate responsibility is far greater than I had previously known, and it was interesting to see Nike’s shift from saying it was not their place to be involved in the factory conditions in the early 1990s to taking responsibility for their actions and doing something about the conditions in the late 1990s. Studying Nike was very enjoyable and familiar because I have been a loyal Nike customer since I was a child, not knowing then that the shoes on my feet could have been made by an underage teenage girl working for far less than minimum wage.

In today’s society, I believe is a much larger microscope on corporate companies and the factories they source from, especially Nike due to their previous track record. Although there are many more tools to make sure labor laws are met and organizations to prevent workers from being paid less than minimum wage, one never knows who is lying and who is being truthful. Overall, studying this article was very informative and enjoyable, and encouraged me to continue researching labor laws in factories around the world, especially Nike.

Works Cited:

Bernstein, Aaron. “Nike’s New Game Plan for Sweatshops.” Bloomberg Businessweek 04 09 2004: n. pag. Web. 16 May 2011. <http://www.businessweek.com/magazine/content/04_38/b3900011_mz001.htm>.

Connor, Michael. “Nike: Corporate Responsibility at a “Tipping Point”.” Business Ethics 01 24 2010: n. pag. Web. 16 May 2011. <http://business-ethics.com/2010/01/24/2154-nike-corporate-responsibility-at-a-tipping-point/>.

Spar, Debora. “Hitting the Wall: Nike and International Labor Practices.” Harvard Business School: Case Study (2002): n. pag. Web. 16 May 2011.


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