Nike: It's Not A Shoe, It's A

Community
The footwear giant has set up a Web site where soccer fans can
network

Few companies define 20th century marketing better than Nike (NKE ). The athletic
shoemaker's famous swoosh emblem and a string of ad campaigns, starting with its
iconic "Just Do It" series, set the gold standard for getting a clear message to a mass
audience. But when Nike crafted its World Cup strategy, it decided to try something new:
online communities. The centerpiece is Joga.com, a social networking site for soccer
fans it quietly launched in February with Google. (GOOG )Members in 140 countries can
blog, create fan communities around their favorite teams or players, such as Brazilian
superstar Ronaldinho, organize pickup games, download videos, and rant against the
encroaching commercialism of the game. And though the program was launched during
the World Cup, it continues beyond the tournament
It's a huge U-turn for the mighty marketer -- and a recognition that it needs to get
consumers' attention in entirely new ways beyond blasting top-down mass messages.
Nike was forced to be innovative after rival Adidas Group (ADDDY ) got a World Cup
exclusive deal to broadcast ads in the U.S. But by monitoring conversations on social
networking sites and blogs, where people already are shaping Nike's brand, the sneaker
giant knew this was an opportunity to try something different. Says Trevor Edwards,
Nike's vice-president for global brand management: "Gone are the days of the one big
ad, the one big shoe, and the hope that when we put it all together it makes a big
impact."

JOGA BONITO
The Joga.com social networking site, one of the biggest by a large consumer company,
is just one piece of a $100 million multilayered campaign known as Joga Bonito
(Portuguese for "play beautiful"). Last fall, Nike started feeding video clips that spotlight
Nike-sponsored soccer players onto popular video sharing sites, including YouTube and
Google. It created JogaTV, a virtual soccer TV station, where it releases a new video clip
every few days and fans can upload their own clips.

Is it working? Nike officials say they reached their World Cup goal of signing up 1 million
members by mid-July, when the tournament ended. "By enrolling consumers in shaping
the marketing, Nike is figuring out what kind of microcontent audiences want and
nurturing deeper bonds of loyalty and advocacy," says Pete Blackshaw, chief marketing
officer at Nielsen BuzzMetrics, which tracks online conversations for companies.

Yet like a lot of companies trying to build online communities, Nike doesn't know if this
will filter down to the bottom line. The company says sales of its soccer gear are
booming but admits it's too early to credit that directly to its community bear hug. What's
more, this kind of marketing can be tricky. One of Nike's top soccer videos, for instance,
shows Ronaldinho slipping on a pair of new white Nike soccer cleats and booting a
soccer ball four times off the goal crossbar -- the equivalent of a baseball hitting off the
left field foul pole into foul territory. It has been viewed by 7.5 million people, making it
one of the most popular clips online, but also the most controversial because it was
digitally altered. Nike executives, who won't say whether they did the editing, are clearly
amused by the controversy. But the flap could hurt its credibility.

Still, Nike considers the results promising. Says CEO Mark G. Parker: "A strong
relationship is created when someone joins a Nike community or invites Nike into their
community." Which is the point of brand marketing, isn't it?

SWOT Analysis Nike, Inc.

Strengths.
• Nike is a very competitive organization. Phil Knight (Founder and CEO) is often
quoted as saying that 'Business is war without bullets.' Nike has a healthy dislike
of is competitors. At the Atlanta Olympics, Reebok went to the expense of
sponsoring the games. Nike did not. However Nike sponsored the top athletes and
gained valuable coverage.

• Nike has no factories. It does not tie up cash in buildings and manufacturing
workers. This makes a very lean organization. Nike is strong at research and
development, as is evidenced by its evolving and innovative product range. They
then manufacture wherever they can produce high quality product at the lowest
possible price. If prices rise, and products can be made more cheaply elsewhere
(to the same or better specification), Nike will move production.
• Nike is a global brand. It is the number one sports brand in the World. Its famous
'Swoosh' is instantly recognisable, and Phil Knight even has it tattooed on his
ankle.

Weaknesses.
• The organization does have a diversified range of sports products. However, the
income of the business is still heavily dependent upon its share of the footwear
market. This may leave it vulnerable if for any reason its market share erodes.
• The retail sector is very price sensitive. Nike does have its own retailer in Nike
Town. However, most of its income is derived from selling into retailers.
Retailers tend to offer a very similar experience to the consumer. Can you tell one
sports retailer from another? So margins tend to get squeezed as retailers try to
pass some of the low price competition pressure onto Nike.

Opportunities.
• Product development offers Nike many opportunities. The brand is fiercely
defended by its owners whom truly believe that Nike is not a fashion brand.
However, like it or not, consumers that wear Nike product do not always buy it to
 participate in sport. Some would argue that in youth culture especially, Nike is a
fashion brand. This creates its own opportunities, since product could become
unfashionable before it wears out i.e. consumers need to replace shoes.
• There is also the opportunity to develop products such as sport wear, sunglasses
and jewellery. Such high value items do tend to have associated with them, high
profits.
• The business could also be developed internationally, building upon its strong
global brand recognition. There are many markets that have the disposable
income to spend on high value sports goods. For example, emerging markets such
as China and India have a new richer generation of consumers. There are also
global marketing events that can be utilised to support the brand such as the
World Cup (soccer) and The Olympics.

Threats.
• Nike is exposed to the international nature of trade. It buys and sells in different
currencies and so costs and margins are not stable over long periods of time. Such
an exposure could mean that Nike may be manufacturing and/or selling at a loss.
This is an issue that faces all global brands.
• The market for sports shoes and garments is very competitive. The model
developed by Phil Knight in his Stamford Business School days (high value
branded product manufactured at a low cost) is now commonly used and to an
extent is no longer a basis for sustainable competitive advantage. Competitors are
developing alternative brands to take away Nike's market share.
• As discussed above in weaknesses, the retail sector is becoming price
competitive. This ultimately means that consumers are shopping around for a
better deal. So if one store charges a price for a pair of sports shoes, the consumer
could go to the store along the street to compare prices for the exactly the same
item, and buy the cheaper of the two. Such consumer price sensitivity is a
potential external threat to Nike.

Brief History of Nike

Phill knight MBA student who grew up in Oregon. In 1962 knight started blue
ribbon sports based on his business plan in his MBA the precursor company to
Nike. At that time shoe industry was dominated by two germen companies’
adidas and Reebok. The idea behind BRS was simple, to provide high quality
running shoes designed especially for athletes by athletes. He visited many
places including Japan to fulfill his concept in designing the good shoe for the
athletes. He got partnership with Mr. Bowerman who was an expert for innovative
and new products they have started their partnership with 500$. In early days
knight worked part time but soon he realized that there is a need of full time
attention to grow the BRS. In 1965 he hired the Jeff Johnson who was also a
runner and with a degree of anthropology. Johnson opened the company first
retail outlet in 1966. In 1967 bowerman developed the marathon running shoes
with a light weight, durable, nylon upper.

By 1971 Nike decided to venture out on his own he struck a deal with nisho iwai,
6th largest Japanese trading company. Manufacturing his own line of athletics
shoes required choosing a new marketable brand name so Nike with a “fat check
mark” logo came into being. At the Olympic trial in 1972 Nike brand name
unveiled the moon shoes with new innovation. Nike also sponsored a runner john
Anderson who wins the first Boston marathon. They also sponsored a tennis star
marcorial by the end of 1974 Nike revenue has reached a $4.8 million and
company employed. Throughout the remaining decade, the Nike brand
experienced phenomenal growth, doubling sales and profit annually. American of
all ages has used these shoes. In 1978 the company officially changed its name
form blue ribbon to Nike because of its best reputation. By 1980 the company
had 2700 employees and sale of 270$ million defeating the adidas with 50 %
market share.

In early 1980 the new category such as fitness and aerobic introduced. The new
trends were dominated by women, a market segment that had thus far remained
largely unaddressed by Nike. As a result the growth of Nike started to tail off as
competitors such as Reebok. Around this time Reebok made a batch of aerobic
shoes with soft garment lather they also introduced new attributes and benefits
consideration to athletics to industry. Nike literally missed out on the fastest
growing segment of the industry.
Nike first layoff occurs in 1984 followed by two money quarter loosing quarters in
1985. In 1987 Nike lost the market share lead to Reebok with 30 % Reebok and
18 % Nike.
This situation forced Nike to chart a new direction with a fresh approach to
market sot they put the spot light on the consumer-not just the product and
become more market oriented. Instead on copying Reebok decided to continue
the performance and devoted more attention to basketball here Nike set out a
new marketing formula related to shoes color, clothes, athletes logos and its first
ever wide spread mass market TV advertising. Marketing concept required both
new advertising and new technology so Nike has focused on both. New
technology was to be used first with the Air Max running shoes. Complimentary
print ads were run in mass market and narrowly targeted niche publications. Air
Max was a huge success for Nike. For other shoes Nike also use celebrity
endorsement. After that they have introduced Air Jordan shoes. Here Nike
choose to define each sport separately as a category and applied their marketing
formula in different ways for different category new categories range from cross
training and water sport to out door and walking. Within the category sub brands
were also developed.
The air Jordan line sparked a new wave of momentum for Nike. This time it was
Reebok who got lost in the midst of transition. Just like Nike Reebok also paid
too little attention to a consumer desire for performance related products in the
late 1980. Aerobic trend began to tail off in 1988. while Reebok tried to breath life
into the fashion segment, Nike continued pushing the performance of its shoes
and aired their first ad “just do it” the campaign marked the launch of a category,
cross training shoes, designed for athletes who played more than one sport. The
“just do it” campaign challenge a generation of athlete tic enthusiasts to chase
their goal no matter how difficult or exclusive they might seem. Nike wanted
consumer to believe that they have the perfect shoes. Most importantly Nike
advertising stayed true to its obsession with high performance. After that there is
second round of “just do it” advertising featured the highly acclaimed “be knows
commercial”. By 1990 sales had surpassed $2 billion and Nike had reel aimed
the market share from Reebok in the united state. Nike applied its marketing
formula. Blending performance and attitude towards consumer through strategic
product development endorsement and advertising. To other categories including
tennis and baseball Nike continued to launch product innovation with air huarche
technology in 1991. Nike inventory control system also helped Nike to better
gauge consumer response and plan production Nike sweetened its relationship
with retailers such as foot looker by also giving them early look at new lines as
well as the rights to exclusively sell certain models.

Nike European history started in 1980. At that time adidas was no 1 athletic shoe
company in united state. The most popular sport in Europe was soccer, track and
field and tennis. European market consist of five primary markets Germany,
France, Italy, Spain. Although Nike made a lot of efforts in the European market
but they were not as much popular even they purchased the distributors licensing
in Europe but nothing bring out the more fruits for the Nike. Nike spent 7 years of
struggle to build its presence in Europe during this period Nike focused on
aggressive and expensive shoes. In 1987 they have run expensive advertising
campaign to help assess Nike’s position and look for ways to take control of the
Nike brand. “The beastie boys” tour as the trip became known. In 1989 Nike
attempted to blend centralized and localized work. Form 1987 to 1991 kottkamp
tried to get control on distributors and finally by the end of 1991 he had
successfully regained control of 90% of Nike European distribution. Getting
European retailer who were used to ordering whatever they wanted, whenever
they wanted from the adidas warehouse, to adopt Nike's future program, so
successful in the united state was the harder sell n. nevertheless now they had
greater control over its marketing, Nike could concentrate on developing its brand
in the manner that they desire.

Although Nike faced a lot of successes and they did not spend the time and the
money “authenticating” the brand in the united state the problem was that the
Nike image was taken too fashion oriented and not performance oriented they
created the more credibility by involving in the sponsorship during the 1994world
cup individual contract with the players to wear the Nike shoes. Nike ad also
created the ad “the wall”. It was also the aim of the Nike to become seen as more
culturally, geographically and personally relevant to local consumers abroad.

To better consolidate its operation Nike built a $138 million, 750,000 square foot
centralized distribution center in lakdaal Belgium / lakdal Belgium. Throughout
the 1990 Nike marketing and advertising program was able in its own marketing
terms. To meet its corporate goal of “enhancing people lives through sports and
fitness “ and “keeping the magic of sport alive” Nike's unique approach creatively
blended footwear, apparel, advertising, sports marketing and retail while
maintaining relatively constant retail distribution and premium pricing strategies,
Nike's innovative product development, putting out more than one shoe style, on
average, every day and bold advertising demonstrated that the brand was as
much about attitude and imagery as shoes and clothing.

Finally in 1996 knight publicly set a corporate goal of growing the $6.5 billion
company to $12 billion by decade ends and to manage as one brand around the
world.

SWOT ANALYSIS

v Strength
v Weaknesses
v Opportunities
v Threats

STRENGTHS

· Nike is enjoying strong brand equity among their customers

· Company have good relationship with suppliers and vendors
· Production system process, procedures, reflect the element of excellence
· Strong brand recognition
· Internet sales
· Growing international presence
· Superior research and development department
· Strong financial returns
· Strong sense of culture in the working environment
· Great celebrity spokespersons
· Automatic replenishment system
· Successful experience being competitive
· Nike doesn’t own any factories
· Successful marketing campaigns
· Nike is enjoying competitive advantage over their competitors by sheer
dominance
· Company is maintaining good company relationship with labor, collective
bargaining agents

WEAKNESSES
· Mission, vision and long term objectives need improvement
· It needs improvement in marketing management
· HRM needs improvement
· Lack of stores catering to the active females
· Poor employment practices at their international manufacturing sites giving a
bad reputation
· Heavy dependency on footwear sales
· Issues with Footlocker
· The retail sector is very price sensitive
· Most of Nike profit margin comes from the shoe sector, so in a sense they are
putting all their eggs in one basket which is risky
· Questionable factory working conditions

OPPORTUNITIES

· Economic component are good, economic condition in U.S.A. portray

reasonably good situation
· Opportunity for Nike is that Nike is equipped to internalize the social shift
· Nike is reasonably poised to take care of articles of legislation
· USA political stability apparently seems favorable
· Nike is reasonably implementing the contemporary technology related to
athletic shoe industry
· Customer use of company’s products change from athletic purpose to a fashion
item
· Development of international trade (GAAT and NAFTA)
· Generation Y children (born between 1979 and 1994) will reach 60 million
· General demand for clothing/footwear for leisure activities continues to increase
· Growing e-commerce’s positive effect since one of company’s competitive
advantages is Internet sales
· Women demand for athletic footwear and clothing is increasing significantly
· US market tied to domestic business cycle
· Contest for market share in Europe
· Importance of fashion experiment and core competencies
· Owners truly believe that Nike is NOT a “Fashion Brand” but some consumers
feel different
· Could develop sport wear, sunglasses, and jewelry
· Broaden locations of Nike Town and actual Nike stores

THREATS
· Social shift and USA experiencing social shift in terms of people are seeking out
convenience and value from their transaction
· Legislation are being passed frequently in USA
· Technological changes do bring about significant transition and that is being
experienced in athletic shoes industry as well European business environment
inclusive of reasonably favorable
· Competitors which copy company's business model (high value branded
product manufactured at a low cost)
· Reebok's strong presence with 204 factory direct stores
· Adidas-puma, top European competitor
· The impact of foreign currency fluctuation and interest rates, and political
instability
· Labor and political unrest in the suppliers countries
· Cost orientated customers vs. company’s higher-end market

Branding and Celebrity Endorsements

Nike is known around the world for being one of the most iconic brands. It was recently
ranked as the world’s 31st most valuable brand in terms of its brand value – USD10.8 billion
– by the annual Business Week’s global top 100 brand survey. In spite of many market
maneuvers (such as the recent merger between Adidas and Reebok), Nike has remained the
leader in its category. Nike is also very well known for another aspect and that is its
consistent use of celebrities to endorse the brand. In fact one of the most successful
collaborations between a brand and a celebrity is that of Nike and Michael Jordan. So
successful was the collaboration that Nike and Jordan launched a new brand variant called
the Air Jordan line of sport shoes. Nike pulled off a very similar coup in the sports industry
when it joined forces with the ace golfer Tiger Woods to enter the golf category with its
apparel, equipment and accessories. Nike had no experience in golf before. Moreover, golf
being a very elite game, it was generally considered that a brand like Nike would not be very
successful. This might have probably been true had Nike chosen the traditional path to
building its equity in the golfing arena. But Nike chose to associate with the best golfer in the
world and have him endorse the brand. As is known today, Nike has emerged highly
successful in golf.

This channel now being used by many brands around the world raises some crucial questions
about ways brands are built and also about the impact such collaborations have on branding.
Is associating with a leading celebrity the easiest way to build a brand? Should celebrity
endorsement be the principal channel of brand communications? How can brands decide on
potential brand endorsers? What are the advantages and disadvantages of such
endorsements? Is celebrity endorsement always beneficial to the brand? How does a celebrity
enhances a brand image? Answers to these and many other related questions are the content
of this article.
Celebrity Endorsements – A brief introduction
Endorsement is a channel of brand communication in which a celebrity acts as the brand’s
spokesperson and certifies the brand’s claim and position by extending his/her personality,
popularity, stature in the society or expertise in the field to the brand. In a market with a very
high proliferation of local, regional and international brands, celebrity endorsement was
thought to provide a distinct differentiation. But over the years, many aspiring brands in Asia
have jumped on to this celebrity endorsement bandwagon. Even though endorsements have
taken on a quasi-industry stature, there is hardly any hugely successful collaboration as those
of Nike’s. There are many reasons for such a happening. The next section addresses this
issue.

Essentials of celebrity endorsements

Even though to an observer it may seem that Nike’s success is totally based on Tiger Wood’s
association with the brand, nothing can be far from the truth. As a brand, Nike has
established a very strong brand identity and a brand personality over the years. What Nike
did was to use celebrity endorsement as one of the main channels of communicating its
brand to a highly focused set of customers. So, Nike’s association with Tiger Woods was one
of the parts of an entire branding process that Nike has been practicing consistently.
Contrary to this, most of the brands in Asia that have used celebrity endorsements have used
it as the main brand building tool. Before any brand signs on a celebrity, they should
consider three main aspects.

• Attractiveness of the celebrity: This principle states that an attractive endorser

will have a positive impact on the endorsement. The endorser should be attractive to
the target audience in certain aspects like physical appearance, intellectual
capabilities, athletic competence, and lifestyle. It has been proved that an endorser
that appears attractive as defined above has a grater chance of enhancing the
memory of the brand that he/she endorses.

• Credibility of the celebrity: This principle states that for any brand-celebrity
collaboration to be successful, the personal credibility of the celebrity is crucial.
Credibility is defined here as the celebrities’ perceived expertise and trustworthiness.
As celebrity endorsements act as an external cue that enable consumers to sift
through the tremendous brand clutter in the market, the credibility factor of the
celebrity greatly influences the acceptance with consumers.

• Meaning transfer between the celebrity and the brand: This principle states
that the success of the brand-celebrity collaboration heavily depends on the
compatibility between the brand and the celebrity in terms of identity, personality,
positioning in the market vis-à-vis competitors, and lifestyle. When a brand signs on
a celebrity, these are some of the compatibility factors that have to exist for the brand
to leverage the maximum from that collaboration.
Even though these three major principles must be adhered to by companies, practically it
might be difficult to find celebrities that satisfy all these three conditions. Depending on the
nature of the brand and the kind of product being used, companies can selectively emphasize
one factor over the other.

Celebrity endorsements – Do’s and Dont’s

All brands must be aware of some of the important aspects of celebrity branding as discussed
below:

• Consistency and long-term commitment: As with branding, companies should

try to maintain consistency between the endorser and the brand to establish a strong
personality and identity. More importantly, companies should view celebrity
endorsements as long-term strategic decisions affecting the brand.

• Three prerequisites to selecting celebrities: Before signing on celebrities to

endorse their brands, companies need to ensure that they meet three basic
prerequisites, namely the endorser should be attractive, have a positive image in the
society, and be perceived as having the necessary knowledge (although it might be
difficult for a celebrity to meet all three prerequisites)

• Celebrity–brand match: Consistent with the principles discussed earlier,

companies should ensure a match between the brand being endorsed and the
endorser so that the endorsements are able to strongly influence the thought
processes of consumers and create a positive perception of the brand.

• Constant monitoring: Companies should monitor the behavior, conduct and

public image of the endorser continuously to minimize any potential negative
publicity. One of the most effective ways to do this is to ensure that celebrity
endorsement contracts are effectively drafted, keeping in mind any such negative
events.

• Selecting unique endorsers: Companies should try to bring on board those

celebrities who do not endorse competitors’ products or other quite different
products, so that there is a clear transfer of personality and identity between the
endorser and the brand.

• Timing: As celebrities command a high price tag, companies should be on the

constant lookout for emerging celebrities who show some promise and potential and
sign them on in their formative years if possible to ensure a win–win situation.

• Brand over endorser: When celebrities are used to endorse brands, one obvious
result could be the potential overshadowing of the brand by the celebrity. Companies
should ensure that this does not happen by formulating advertising collaterals and
other communications.
 • Celebrity endorsement is just a channel: Companies must realize that having a
celebrity endorsing a brand is not a goal in itself; rather it is one part of the
communication mix that falls under the broader category of sponsorship marketing.

• Celebrity ROI: Even though it is challenging to measure the effects of celebrity

endorsements on companies’ brands, companies should have a system combining
quantitative and qualitative measures to measure the overall effect of celebrity
endorsements on their brands.

• Trademark and legal contracts: Companies should ensure that the celebrities
they hire are on proper legal terms so that they don’t endorse competitors’ products
in the same product category, thereby creating confusion in the minds of the
consumers.

These guidelines are intended to provide companies a useful framework that they can use
while deciding on the celebrities to endorse their brand.

Conclusion
The important aspect that companies must note is that celebrity endorsements cannot
replace the comprehensive brand building processes. As branding evolves as a discipline
companies must be extra cautious to utilize every possible channel of communication rather
than just a celebrity endorsement. When all other steps in the branding process is followed
and implemented, then channels such as celebrity endorsements can provide the cutting
edge as it did for Nike.

Social Responsibility: The Nike Story

An odd couple was featured in the 1992 edition of Harpers Magazine. One was a sports
phenomenon called Michael Jordan. The other was a young Indonesian worker called
Sadisah.

Sadisah, the article revealed, earned 14 cents an hour making Nike running shoes. After
working six days a week, 10 hours a day for a month, he earned enough money to buy a single
Nike shoe at its US retail price. The article also claimed that Sadisah would have to work for
more than 44,000 years to earn as much as Jordan had recouped from his Nike endorsement
deal.

The darkest chapter in Nike's history and a new era in brand management had begun. Over
the next five years Nike experienced a remarkable public backlash. Critical reports appeared
in publications as diverse as The Economist and Rolling Stone and charities such as Oxfam
and Christian Aid joined in.

Around the world, the opening of NikeTown retail stores were turned into tense, often
violent, standoffs between local police and protesters. On US university campuses, students
protested against Nike's links with slave labour working conditions and forced their sports
teams to sever lucrative sponsorship deals with the now infamous sportswear brand. The
internet was ablaze with anti-Nike sites, many featuring cleverly altered versions of Nike's
identity such as the 'Swooshtika' and slogans such as 'Nike: Just Don't'. As then-chief
executive Phil Knight observed in 1998, the brand had become 'synonymous with slave
wages, forced overtime and arbitrary abuse'.

For decades, Nike had tendered almost all of its production to factories in developing
markets, but so had almost every other big clothing company. Why was Nike so heavily
criticised?

The answer was its brand. Nike was the clear market leader and the company with the
highest levels of global brand awareness. It also had an influential and well-known founder in
Phil Knight, the sixth-richest man in the US. Then there was Nike's remarkably focused
brand architecture and identity: everything it made was branded with the iconic Swoosh.
While these elements were strategic advantages in developing the brand, they were also the
reasons activists and journalists singled it out. In the new era of brand activism, former
strengths became vulnerabilities.

Initially, the Nike response was a textbook example of how not to handle corporate social
responsibility (CSR). In the 1997 documentary The Big One, Michael Moore raised the issue
of underage workers with a clearly uncomfortable Phil Knight. 'Tell it to the United Nations,'
was his response.

In 1998, Knight announced a radical six-point plan which would see Nike introduce in-
dependent monitoring, raise minimum working age requirements and set formal targets for
improving conditions for workers in contract factories overseas. A huge CSR department was
set up, reporting directly to Knight. Nike also began to work with many of its most vehement
critics.

2005 saw the publication of Nike's second Corporate Responsibility Report. It stands as a
remarkable document because for the first time a global clothing brand revealed all of its
production locations, the status of labour policies in those locations and the systematic
manner in which it intended to improve its suppliers' employment practices.

For UK companies that, by law, have to produce an Operating and Financial Review that
includes CSR material, it should be required reading. For those who believe brands can
acquit themselves with decency and transparency in the global economy, it is a work of great
importance.
30 SECONDS ON... NIKE'S CORPORATE RESPONSIBILITY REPORT.

- Nike's 108-page report for its fiscal year 2004 encompasses an audit of about 630,000
workers in more than 700 contract factories.

- The company has created the M-Audit system to give a clearer view of working conditions
in such factories, focusing on factory processes and policies and workers' views.

- Local Nike-trained auditors spend an average of 48 hours carrying out each M-Audit. Each
site is then awarded a grade from A to D depending on its overall performance.

- Of the factories audited during 2004, 15% were rated A, 44% B, 17% attained a C Grade and
8% were rated D, indicating serious failures, such as employing underage workers, paying
less than a legal wage or providing dangerous working conditions. The remaining 16% of
factories were ungraded because of insufficient information.