Nike's Ethical Dilemma: A Business Ethics Report and Analysis

This report delves into the ethical considerations surrounding Nike's marketing practices, specifically focusing on the controversy surrounding the Nike x MMW balaclava. It analyzes the ethical dilemmas arising from the marketing strategy, including the potential for misrepresentation and negative impacts on brand image and stakeholders. The report examines the impact on customers, investors, and the community, comparing Nike's case to other brands like Puma and Fenty Beauty. Furthermore, it applies ethical theories, such as utilitarianism and deontology, to evaluate Nike's actions and provides recommendations for improving ethical decision-making in future marketing campaigns. The report emphasizes the importance of considering ethical dimensions and stakeholder sentiments when launching products or implementing strategies, to ensure the company's values and vision are upheld, and to prevent negative consequences.

ETHICS

Table of Contents
INTRODUCTION..............................................................................................................1
PART 1.............................................................................................................................1
(a) Report on Nike' x MMW Balaclava and related ethical issues................................1
(b) Application of ethical theories in Nike's case..........................................................4
PART 2.............................................................................................................................7
CONCLUSION................................................................................................................. 8
REFERENCE ................................................................................................................ 10

INTRODUCTION
Business Ethics is a field of professional ethics that emphasizes on evaluating
ethical principles, morals and norms that may affect an organization's work culture. This
report aims to provide a detailed understanding in regard to the importance of individual
as well as organisation's ethical thinking and practice that enhance decision-making.
Taking the case study of Nike into consideration, the report has been divided into two
parts viz. Part 1 and Part 2. Under Part 1, a further segregation has been done in the
form of a written report which talks about the issues faced by Nike, ethical dilemma
related and their underlying factors as well as the impact of such choices on the
stakeholders along with other companies (Acevedo, 2012). Also, the academic essay
which studies the application and impact of ethical theories on Nike. Under Part 2, a
reflection assessment has been undertaken to interpret how an ethical leader manages
business in an organization by outlining the conditions which lead to unethical practices
and organizations.
PART 1
(a) Report on Nike' x MMW Balaclava and related ethical issues
In regard to creative advertising case study of Nike it has observed that this
company launched Nike x MMW balaclava on July 12. The company introduced this
product in collaboration with Alyx Studio as a part of their Training collection that aimed
to serve multiple markets. The balaclava included a mask with small pockets that
corroborated a menacing look. Nike adopted a creative advertising approach to promote
this product-line by modelling a youngster of dark complexion that sparked outrage
among critiques all around the world. This report talks about the issues that were faced
by the organisation on the basis of ethical dimensions.
From the aforementioned case study, two main ethical issues have been
identified that have largely affected the business. One issue relates to the marketing
strategy used to advertise the product which mislead the audience in believing that the
Nike x MMW balaclava would be harmful rather than beneficial for the business. As this
company has a moral obligation towards the society, it is important for the business to
utilize those advertising tactics which do not come across as political or propagandist
1

and psychologically manipulative. Due to this, it is important to review the marketing
strategy used to advertise the product in a detailed manner. Another issue that is
associated with this relates to the effect of brand equity and image of the business in a
negative manner that could critically hamper the reputation of the company. Being one
of the most widely used sportswear firm the business is required to be socially
responsible in promoting positive culture among the minds of the youngsters. Therefore,
any association with the concept of gang-violence can lead to an increase in such
actions among the society as well as destroy the trust that the people have for the
company. The following ethical dimensions were derived from the above issues:
 Appearance of the product:
The company adopted a creative advertising methodology targeting youngsters for
activewear category. It displayed the product in a menacing way which resulted in
stereotyping of the black community. Also, Military-style accessories were used for
advertising the product which sparked the outrage among the audience accusing the
company for promoting gang inspired culture.
 Vulnerability of the people towards violence:
As Gang violence remains a sensitive issue, Balaclava has been seen in a negative
light by the customers due to popular drill music videos. Vulnerability among locals who
were victimized due to such violence criticized the product which was initially aimed to
be a part of the company's Training collection for multiple markets around the globe.
The issues related to Nike's creative advertising strategy are explored as an
ethical question because they are the matter of prevalent societal stereotyping norms
which has created an image about product like Nike x MMW Balaclava. It is assumed
that products like Balaclava are meant to be used by gang groups which raises an
ethical question. Additionally, the critiques received for the product pressurize the
company to take a step back and understand whether the strategies perceived as
morally acceptable to them are in coherence with their stakeholders too. Therefore, it is
required that this issue be reviewed from an ethics perspective to get better insight on
how to avoid such situations in future. This company wants to build an image of their
brand which should inspire youngster and sport people (Nike Balaclava, 2019).
2

The involved stakeholders of Nike according to the above case study are their
customers, investors, community and shareholders. These key stakeholders have been
impacted due to this controversy largely. While implementation of the marketing
strategy, the business overlooked the fact that the product appearance showcased the
balaclava as a menacing one including a mask and small pockets which would be
interpreted as a gun holster. A company needs to be customer-centric, creating only
those products that are tailored to meet the needs or preferences of the buyers. The
Nike x MMW balaclava was unable to meet this criterion and adversely impacted the
youngsters and their parents by wounding their sentiments towards the product as well
as the organization. Apart from customers and community, investors and shareholders
are also impacted as they invest in company’s projects and equity and any harm on
Nike’s image can impact on their returns (Alyx and Stakeholders, 2019)
In the case of Puma, which was accused of idealizing 'drug culture' through its
'House of Hustle' event held in April 2018. The Soho event included 'hustlers' from
various industries ranging from photographers to tattoo artists. It was heavily criticized
for using references associated with drug deals such as handing out 'trap phones' for
promotional purposes. Choice of such promotional strategy led to the audience in
believing that the sports brand did not take their actions in a manner that portrayed
them to be socially responsible. Also, it portrayed them as one who only wanted to
capitalize profits on lifestyles based out of poverty which led to loss of sales and trust for
Puma. This company made a bad ethical choice of involving this kind of hyper creative
advertising which ultimately effected their brand equity (Puma Drug Culture, 2019).
If the business makes rightful and ethical business choices, it can build upon the
customer loyalty and enhance its rapport among its stakeholders. One such example
that can be cited for this is that of Fenty Beauty which has been revolutionizing the
beauty market. Unlike its competitors such as MAC, Fenty introduced a range of 40
different foundation shades with premium quality that would be globally accessible
involving people of different colours and preferences. The company gained a lot of
attention for its beauty range as most of the beauty brands focused on only 4 to 5 skin
shades. This connected with women all around the world especially those who faced a
dilemma in procuring the right product suitable for their skin at an affordable price. This
3

decision made by Fenty is considered to be a good ethical decision as it focused on
resolving the ethical dilemma of racism (Fenty beauty, 2019).
Recommendation:
After properly analysing the issue and its impact on the company as well as the
stakeholders, it can be concluded that the company should take into consideration the
ethical dimensions while implementing any strategy or launching any product such as
Nike x MMW Balaclava. It is important to ensure that any type of strategy undertaken for
an audience does not violate their sentiments or impact them negatively. Nike, as a
company, has been a socially responsible organisation in the past and it is important
that this tradition continues in the short-term as well as in the long-term. No such
actions must be endorsed by the company that are not in line with the values, beliefs or
vision of the company in any fashion. Critiques comment on social media such as twitter
also impacted negatively as in today's scenario, a negative word-of-mouth is highly
damaging to any business. Hence, to resolve this, the company must coordinate with its
Public Relations Team for preventing such incidents from occurring in future.
(b) Application of ethical theories in Nike's case
According to Holland and Albrecht (2013), an ethical practice to one person may
be perceived as unethical for another. Hence, there has been ambiguity in regard to
what forms the theoretical base for business ethics. However, Ma and et.al. (2012)
believes that ethical decisions are made when the net benefits outshine the costs
incurred in regard to the actions and their related outcomes resulting in providing
highest level satisfaction to maximum number of people in the least harmful fashion. As
observed by May, Luth and Schwoerer (2014), this approach views that those actions
that provide maximum satisfaction to company's stakeholders are taken into
consideration whether they are ethically commendable or not. Therefore, this approach
increases the brand equity and trust in the business from stakeholders' side as they are
provided with results which are desirable to them. However, this approach fails to
consider consequences as happiness is not the only thing that holds an intrinsic value.
In relation to the given case scenario, the company has been unable to conduct a
proper market research to understand the sentiments and needs of the customers while
planning and executing the advertising campaign for balaclava. This resulted in a large
4

backlash from the customers and investors of the business as it completely missed the
objective for which the product was designed. Here, the only 'winners' from this situation
are the critiques as they were able to pressurize Nike's management to an extent where
they had to withdraw their product from the market. On the other hand, it was beneficial
for the investors as this move attracted these stakeholders in noting that the company
still cared about their brand equity and existing relationships with the parties. This would
affect the profitability as well as the relationship of Nike with the collaborated website,
Alyx Studio owned by Matthew M. William (MMW), that listed the controversial
Balaclava for sale. As a global company, it is important for Nike to understand that its
operations and actions must be in synchronization with the beliefs and values of both
the stakeholders as well as itself. It must aim to produce goods or services that are
customer-centric and do not invite controversies of negative nature. In case of Nike,
they can select this ethical theory to provide benefit to their maximum stakeholders, but
the question that arises here is that is even ethical, and it is considered that this
technique is ethical as it makes a lot more sense to provide benefit to maximum
stakeholders. It is important to understand that the perception of goods and services
matches with that of the users of such goods or services. As Nike's was unable to
achieve this with the launch of this product-line instead causing its attempts to target
youngsters backfire, the company needs to adopt this approach and create product
offerings that favour greatest number of people, however, it also needs to consider the
consequences which is not given much emphasis under this theory(MMW, 2019).
Another ethical approach that can be applied in Nike's situation is the theory of
deontology. According to Nica (2013), Deontological concept of ethics talks about the
relationship between duty and morality of human actions. Under this approach, any
action is treated as morally acceptable if it includes of such features itself irrespective of
the results such actions may lead to. In other words, the morality of any action is based
on whether the action itself is considered to be right or wrong. To determine this, a
predefined set of rules and policies are set in place which are required to be complied
with during the course of execution of such tasks. As stated by Pearson (2017), a task
or action is considered to be meaningful if all the governing criteria are met with in
5

relation to them. This approach completely outlaws immoral practices and encourages
adoption of those values or strategies that are highly moral. However, this approach is
rather narrow, as it only stresses on the word 'action' instead of interests that encourage
promoting others' well-being.
In Nike's case, this approach can be observed to an extent where the actions of
the organisation were moral in the sense that it did not indulge in any kind of action that
was illegal or immoral. The company created a product that, it thought, would inspire
youngsters in a positive manner. It did not undertake any action or strategy that would
impact the business environment from ethical point of view. The only problem with the
company was that the method used to implement a creative advertising campaign was
neither properly formulated nor executed. Thus, creating problems for the company at a
global scale. Here, the 'winners' were again the company itself as they were able to
retain their brand equity by retracting their products from website. Also, their actions
were morally justified to them, the only problem with it was that their perception to the
purpose of product-line was not in line with the perception of the target customers. On
the other hand, Alyx Studio was at the losing end as it not only lost one of its product-
listings but also suffered in terms of profitability, damage to reputation for promoting
such offerings on its website. It is to be noted that both Nike and Alyx lost on long-term
relationships between the two in future. Therefore, it can be said that Nike has been
able to implement this approach properly (Alyx and Nike, 2019).
Reflection of Theory:
From the above two theories it has been observed by me that both of these theories
use different approaches but they do not contrast to each other as both of these are in
the favour of benefit of the company whether by providing advantage to the
stakeholders of Nike or by supporting ethical morals and values of the company and
society. As observed by me that a good word-of-mouth is always beneficial for the
business. Employing an approach that focuses on providing customer satisfaction to the
largest number of people seems adequate in the sense that the produced good or
service must not be something that is only usable or limited to certain sections of
society. On the similar note, Deontological theory can also be used by Nike as
6

according to me it is noted that this theory is even better as it focuses on following
values and morals rather than stakeholder pressure and their benefits.
PART 2
Ethical Leadership is one which emphasizes on the beliefs or values and their
application in the context of business. This leadership model does not prioritize
profitability or wealth maximization unlike its other counterparts, instead, it looks at the
code of conduct followed in an organization. An ethical leader is one who is able to
carry out his/her roles and responsibilities as leader in an ethical manner (Strobel,
Tumasjan and Welpe, 2015). It analyses the way in which leaders of an enterprise
leverage their power to influence others in regard to actions as well as decisions. Even
though the role of an ethical leader may differ from organisation to organisation there
are few similarities which define such people. Enlisted below are the factors that are
critical for ethical leadership and creation of an ethical organisation: Fair: An ethical leader is fair and justified. They do not encourage favouritism or
biases towards a person or activity based on gender, colour, ethnicity, nationality
or any other factor. Hence, these leaders promote equality in the internal
environment of a business (Ethical Leadership, 2019) Respectful: Being a leader does not mean that one can treat others the way
they like. One of the most distinctive quality of an ethical leader is to be
respectful towards their colleagues as well as subordinates. They must
attentively listen to the members of team and recognize their contributions as and
when required (Steinbauer and Njoroge, 2014). Team-builder: A leader is only effective when they are able to achieve goals and
objectives by taking everyone together with them. This means that an ethical
leader must foster team spirit and a sense of belonging to achieve organizational
goals in a way that do not clash with personal growth of any member. They
should also ensure that benefit of the business is prioritized before the benefit of
self (Hassan, S. and et.al., 2013).
 Values: Organisational values must be taken into account while carrying out
important decision-making activities. An ethical leader must ensure that only
7

those decisions which are in accordance with business morals, vision or norms
are implemented (Bello, 2012).
There is a positive relationship between ethical manager and leader as they both
work for betterment of an organisation so that a company can achieve sustainable
development (Holland and Albrecht, 2013).
An ethical organization can only be made when the leaders of such enterprises
are efficient in managing its operations when it is customer-centric, result-oriented as
well as passionate towards serving its audiences. As an ethical manager, I have been
able to be an effective team-player as well as a value driven decision-maker looking
after the moral code followed across the organization. As a manager of Nike, it is
important to effectively manage the business by following the ethical standards such as
kindness, honesty and fairness. As Nike is a global company, it is important for me to
ensure that no practice or strategy violates the values embedded in the company's code
of conduct all around the world. However, there are certain factors that lead an
organization to be unethical in its practices. For instance, Coca Cola has been involved
in abusing worker's rights employed in its bottling plants. This is an unfair practice that
has led to Coca Cola being labelled as one of the least ethical organisations. Thus, it is
important that a company ensures that no unfair practice is carried out at any level no
matter the size of the business since such practices would hamper business relations
with stakeholders including employees and damage the brand equity of the company.
As an ethical manager it is my responsibility to create or mould leaders who are ethical
as well as promote a sense of community through intolerance towards immoral
activities.
For company like Nike, who is widely associated with sports, it is all the more
important that the company has an internal business environment which encourages
team spirit just like its product offerings. For this, the company needs to have a healthy,
committed as well as value driven team. In order to inculcate this practice in the
company, I need to ensure that predefined ethical standards such as fairness and
dignity are followed by each department as well as employee across all organisational
levels. Also, a highly recognized incentive system has been put into effect that
encourages positive behaviour in the business. All this will ensure that my organisation
8

is able to be highly ethical. All compliances and organisational values must be kept in
mind while making any ethical decision by me so that no conflict regarding the ethics
can be made and I can contribute towards the ethical and sustainable growth of
organisation (Trevino and Nelson, 2016).
CONCLUSION
From the above report, it can be concluded that it is important for an organisation
to be ethically aware in order to function properly in business environment. In case of
Nike, the company needs to review its strategies before implementing them on a larger
scale. Also, it is important that company focuses on increasing customer satisfaction on
a larger scale. As far as ethical leadership is concerned, a company needs to implement
practices that makes highly ethical.
9

REFERENCE
Books & Journal
Acevedo, A., 2012. Personalist business ethics and humanistic management: Insights
from Jacques Maritain. Journal of Business Ethics. 105(2). pp.197-219.
Audi, R., 2012. Virtue ethics as a resource in business. Business Ethics Quarterly.
22(2). pp.273-291.
Bardy, R., Drew, S. and Kennedy, T. F., 2012. Foreign investment and ethics: How to
contribute to social responsibility by doing business in less-developed countries.
Journal of Business Ethics.106(3). pp.267-282.
Bello, S.M., 2012. Impact of ethical leadership on employee job performance. International Journal of
Business and Social Science. 3(11).
Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and
sustainability in the age of globalization. Oxford University Press.
Floyd, L. A., and et.al., 2013. Ethical outcomes and business ethics: Toward improving
business ethics education. Journal of business ethics. 117(4). pp.753-776.
Hassan, S. and et.al., 2013. Ethical and empowering leadership and leader effectiveness. Journal of
Managerial Psychology. 28(2). pp.133-146.
Holland, D. and Albrecht, C., 2013. The worldwide academic field of business ethics:
Scholars’ perceptions of the most important issues. Journal of Business Ethics.
117(4). pp.777-788.
Ma, Z., and et.al., 2012. Most cited business ethics publications: Mapping the
intellectual structure of business ethics studies in 2001–2008. Business Ethics:
A European Review. 21(3). pp.286-297.
May, D. R., Luth, M. T. and Schwoerer, C. E., 2014. The influence of business ethics
education on moral efficacy, moral meaningfulness, and moral courage: A
quasi-experimental study. Journal of Business Ethics. 124(1). pp.67-80.
Nica, E., 2013. Social Responsibility, Corporate Welfare, and Business Ethics.
Psychosociological Issues in Human Resource Management. 1(1). pp.9-14.
Pearson, R., 2017. Business ethics as communication ethics: Public relations practice
and the idea of dialogue. In Public relations theory (pp. 111-131). Routledge.
Steinbauer, R. and Njoroge, P.K., 2014. Ethical leadership and followers’ moral judgment: The role of
followers’ perceived accountability and self-leadership. Journal of business ethics. 120(3).
pp.381-392.
10

Strobel, M., Tumasjan, A. and Welpe, I., 2015. Do business ethics pay off?. Zeitschrift
für Psychologie/Journal of Psychology.
Trevino, L. K. and Nelson, K. A., 2016. Managing business ethics: Straight talk about
how to do it right. John Wiley & Sons.
Online
Nike Balaclava. 2019. [Online]. Available Through:
<https://www.theguardian.com/business/2018/aug/20/nike-under-fire-for-
marketing-of-menacing-balaclava>
Alyx and Stakeholders. 2019. [Online]. Available Through:
<https://www.alyxstudio.com/products/nike-x-mmw-balaclava>
Puma Drug Culture. 2019. [Online]. Available Through:
<https://www.campaignlive.co.uk/article/puma-accused-glamorising-drug-
culture-following-house-hustle-event/1461553>
Fenty beauty. 2019. [Online]. Available Through:
<https://www.allure.com/story/fenty-beauty-rihanna-skin-care-trademark>
MMW. 2019. [Online]. Available Through:
<https://www.nike.com/gb/t/mmw-balaclava-zM1jlp>
Alyx and Nike. 2019. [Online]. Available Through:
<https://www.alyxstudio.com/collections/nike>
Ethical Leadership. 2019. [Online]. Available Through:
<http://www.ef.uni-lj.si/docs/osebnestrani/MIhelic_Lipicnik_Tekavcic_2010_clut
e.pdf>
11