Objectives of firms data question – Model answer
1. Explain using examples from the data, who might be the stakeholders in Nike.
8 marks (6K + 2A)
The stakeholders of a firm are those groups which have an interest in its operation.
Nike has a number of stakeholders. The owners of the company the shareholders, are one
group of stakeholders (K). Another group is the directors and senior managers of the
company such as Mark Parker, the CEO appointed in January 2006. (K+A) The workers
employed by Nike form another group of stakeholders (K). They tend to be relatively well
paid, with many of the 24 300 being employed in the USA (A). Nike doesn't actually
manufacture any of its goods. These are made by suppliers who form another group of
stakeholders (K). The suppliers can also be distinguished from the workers of the suppliers
who are mainly very poorly paid and living in Third World countries (A). Nike's immediate
customers, the wholesalers and retailers who buy Nike products, are another group of
stakeholders (K). Then there are the consumers who buy from the retailers. Pressure groups
campaigning for better conditions for workers who manufacture Nike goods have been a
strong stakeholder group (K + A). Governments, including the US government also can be
seen as stakeholders. (K)
2. According to Bill Perez, what might be the goals of the company? 4 marks (1K
+ 3A)
Bill Perez, quoted in the 2005 Nike Annual Report and Accounts, concentrated on defining
the objectives of the company in terms of its growth (K). Success was about proving 'time
and time again that it (the company) can continue to grow' (A). He talked about the
importance of establishing two new brands, Starter and Converse, as' major players in the
market' (A). He also talked about 'hunger': the company needed to hunger for success in the
same way that the original founder of the company was 'hungry' when he was selling shoes
out of the back of his car. (A)
3. Discuss the extent to which the interests of stakeholders in Nike (a) conflict &
(b) Collide. 12 marks (4K + 8A)
The objectives of different stakeholders both conflict and coincide.
Take the objectives of the owners and of the workers manufacturing Nike goods in the Third
World (K). Nike's owners want the company to maximise profits. This can be achieved by
paying as Little as possible to Third World suppliers who in turn pay as Little as possible to
their workers. Those workers, however, want to maximise their pay. So the aspirations of
Third World workers are in direct conflict with the goals of Nike shareholders. (A)
Equally, the interests of pressure groups and management also conflict (K). Pressure
groups involved with l\like are concerned about the poor pay of workers manufacturing Nike
products and about human rights abuses. l\like management arguably see these groups as
a threat to their own goals of growing the market. (A) Through campaigns, pressure groups
can have a direct effect on sales. Therefore it could be argued that corporate responsibility
becomes an exercise in damage control rather than a genuine desire to value the
contribution of the stakeholders who are working for little pay to make Nike products. (A)
It could also be argued that the interests of consumers conflict with those of shareholders
and managers (K). The objectives of Nike the company relate to profit and sales. To sell
Nike products, the company uses sophisticated marketing techniques. This includes trying to
persuade consumers that by buying products they are somehow being turned into
athletes.(A)
Objectives of firms data question – Model answer
Some Nike products are indeed used for sporting activities. Equally, much of the
merchandise is used as a fashion statement and has nothing to do with sport at all. When
Nike says that 'we feel lucky to have a genuine, altruistic reason to be: the service of human
potential', this is marketing spin designed to alter consumer attitudes to their products (A).
Nike is no different in its marketing approach from other consumer product companies. But
arguably this conflicts with the interests of consumers who need to have correct information
about products in making rational decisions about how to allocate their scare resources
rather than distorted information supplied by marketing departments. (K + A)
It could be argued that the interests of shareholders and senior management and directors
coincide (K). Shareholders wish to maximise their returns, senior management wish to
maximise their benefits too and this can be done by being 'hungry' for the success of the
company through sales and profit growth (A). Mark Parker, in his press statement when he
took over as CEO, stated that his objective was to 'continue delivering profitable growth for
our shareholders' and 'delivering long-term value to shareholders'. (A) However, it could be
that senior management recognises that it has to make a satisfactory level of profit for
shareholders but once this has been achieved, it can then pursue its own objectives of
maximising returns to themselves (A)
Total for the question 24 marks