Answer the following questions: Discuss Friedman's position on CSR considering contemporary thinking on the subject. Do you
Question:
Answer the following questions:
- Discuss Friedman's position on CSR considering contemporary thinking on the subject. Do you agree or disagree with Friedman?
- What do you think Van Hameren should do with the Kaepernick advertisements and why?
Has Nike Gone too Far: The NFL's Colin Kaepernick Effect
When Dirk-Jan van Hameren assumed his role as Nike's Chief Marketing Officer in January 2018, he knew that Nike was no stranger to controversy. Having been with Nike for almost 25 years, van Hammeren was part of the company when Nike re-signed a convicted dog fighter promoter, Michael Vick, immediately after his release from prison in 2011 (Peralta, 2011). Van Hameren was with Nike when the company paid $25,000 in legal fees for United States Olympic ice skater Tonya Harding who had her teammate's leg broken in 1994 (McCall, 1994). However, as the 2018 National Football League (NFL) season began, just nine months into his new role, Nike's newest promotional campaign included controversy of a different and potentially damaging nature - one that left consumers split on whether Nike had finally made the right stance or had (once again) made a distasteful decision.
Two years earlier, Colin Kaepernick, a quarterback in his fourth season, had knelt - as opposed to standing to show reverence - during the US national anthem before his team's games. Kaepernick had used this platform to protest perceived police harassment against African Americans. A billboard image that accompanied Nike's 2018 video ad featuring Kaepernick is shown in Figure 1. This ad included the campaign slogan: "Believe in something. Even if it means sacrificing everything" (Morning Consult, 2018). Just as consumer support for Kaepernick's 2016 protests had been divided, consumer reactions to Nike became highly contentious with this 2018 campaign.
Figure 1
Nike 2018 Kaepernick Ad
(Ad was Part of 2018 Kaepernick Promtional Campaign)
(Morning Consult, 2018)
Given his new role, van Hameren had been hopeful of the Kaepernick promotion's success. Having joined Nike in 1992 at the company's European headquarters, he had held key roles in brand marketing, digital commerce, operations and general management. Van Hameren, for example, had previously served as Global VP/GM of Nike Sportswear.
During his time at Nike, van Hameren had also personally experienced sports competitions at the highest level after having competed on the Netherlands 1992 and 1996 Olympic cycling team (Adweek Staff, 2020). As Chief Marketing Officer, van Hameren now faced one of the most brand impacting situations that Nike had faced since its inception.
Mixed Reactions to Nike's Dream Crazy Campaign
The Kaepernick promotion was part of Nike's "Dream Crazy" campaign that marked the company's 30th anniversary of Just Do It (Kiefer, 2019). Some consumers indicted positve reactions to the Kaepernick promotion. Young males, Nike's primary target market, were particularly positively disposed to the promtion (Rovell, 2018).
Other consumers, however, responded so negatively that they called for boycotting Nike's products. Videos appeared on social media with angry consumers destroying Nike brand products (Martis, 2018).
As the social media outcry grew, such anger toward the brand had the potential to affect
Nike's target market. Conversely, the immediately positive views of young males could potentially stay positive - or possibly influence others to hold a positive view. With such disparate reactions, Nike faced a potential crisis - with its brand success and consumer connections suddenly in jeopardy.
Nike History and Socially Relevant Advertising
Building the Nike Brand
Phil Knight and Bill Bowerman founded Blue Ribbon Sports in 1964 to distribute Japanese shoe brand Onitsuka Tiger (later known as Asics) (O'Reilly, 2014). The company changed its name to Nike in 1973 - the same year it paid a college student $35 for creating the brand's swoosh logo (O'Reilly, 2014). Figure 2 provides the original image of the logo and its patent. By comparison, Figure 3 shows how the logo appeared in 2018.
Figure 2
Original Nike Logo with Patent
(O'Reilly, 2014)
Figure 3
Nike Logo in 2018
(Lawrence, 2020)
Nike launched its popular "Just Do It" campaign in 1988 by featuring an 80-year-old athlete who had run approximately 62,000 miles throughout his lifetime (Coffee, 2018). One year later Nike's ads featured a Paralympian to advocate for people with disabilities (Coffee, 2018). In 1995, Nike ads featured an HIV-positive runner (Coffee, 2018). In the same year, Nike also advocated for female athletes, which became a precursor to subsequent promotions supporting female athletes in 2012 (Coffee, 2018). Similarly, Nike had partnered with Girls, Inc as a way for advocating for female athletes (Collaborations, n.d.). Since 2010, Nike had provided millions of dollars in funds to support communities worldwide ("Nike community Impact Fund," n.d.). These promotions enhanced Nike's reputation as an agent of change through sports.
Not everyone, however, agreed that corporations should advance social issues. Milton Friedman argued that following ethical business practices, providing value for the customer, and generating profit for the shareholders were the legitimate roles of the corporation. He believed that embarking on a campaign to advance social issues with corporate funds was an abandonment of a corporation's mission and should occur only as a byproduct of the corporation's financial objectives. Accordingly, a corporation's employees could make the personal decision whether to support social causes with their personal funds or actions, just not with the corporation's funds (Friedman, 1970).
Financial Success and Social Responsibility
Traditionally, many consumer brands had avoided aligning themselves with controversial topics. Approximately two-thirds of consumers, however, had recently expressed desires for brands to take such social stances (Oster, 2018).
Consistently, Nike's willingness to lead social change appeared to be part of its success. By 2017, Nike enjoyed 34.7% market share of US athletic shoes (the highest share) and North American revenues over $10 billion (Roberts, 2017). At the close of Nike's 2018 fiscal year (which ended on May 31), Nike reported revenues of $36.4 billion - an increase of 4% over the previous year (Nike News, 2018). Headquartered near Beaverton, Oregon, Nike employed over 73,000 workers worldwide in 2018 (Nike News, 2018; Shahbandeh, 2020).
Through its impressive growth, Nike maintained its commitment to being a socially responsible company. Its mission statement, as published on its website, described a desire to "Bring inspiration and innovation to every athlete in the in the world" with the explanation that it defined "athlete" as anyone with a body (Nike.com, n.d.).
Athletic Apparel Marketplace
After Nike, Adidas was the second largest athletic apparel brand with 2018 revenues over $26 billion. Unlike Nike's sports-centric focus, Adidas complemented sports figures with other popular celebrity endorses such as Kanye West and Beyonce (Russell, 2019).
Adidas was aggressively pursuing growth in Nike's largest market, North America (Warner, 2019). Although second in sales and market share, Adidas' three-year corporate growth rate had significantly outpaced Nike's growth rate - raising Nike's concerns that Adidas was closing the gap between them (Trefis Team, 2019). As shown in Table 1, Nike and Adidas were for first place among athletic shoe brands in brand awareness. Athletic shoes were particularly important for Nike as its primary product within its sports apparel line - representing approximately twp-thirds of all Nike revenues (Sabanoglu, 2020).
Table 1
2018 U.S. Athletic Shoe
Top 10 Brands by Brand Awareness
Q: Which of these brands do you know, even if just by name?
Rank | Brand | Brand Awareness Score |
|
|
|
T1 | Adidas | 90% |
T1 | Nike | 90% |
3 | Reebok | 80% |
(Kunst, 2020)
Adidas had publicly tied its brand to maintaining environmental sustainability in its operations and production (Textile Focus, 2019). Each of Adidas' multiple logos included three stripes. Each stripe symbolized one of Adidas' key markets: The Americas, Europe and Africa, and Asia. Adidas' primary logo included its name placed below the three stripes arranged as a mountain as shown in Figure 4.
Figure 4
Adidas Logo
(Adidas Logo, 2020)
Additionally, Adidas owned Reebok, the third-place brand in brand awareness as shown in Table 1. In 2015, Reebok had initiated a socially minded marketing campaign to "Be More Human. At that time it introduced a delta-shaped logo in which the three sides represented the physical, mental, and social changes achieved through a fit lifestyle (NewsMarket, 2015). Reebok's logo is depicted in Figure 5.
Figure 5
Reebok Logo
(Gosling, 2014)
Reebok received additional attention for a 2017 social media campaign taglined "Nevertheless She Persisted" in reference to Senator Elizabeth Warren apparently being silenced from speaking on the Senate floor (Newswhip, 2018). Despite its ties to social causes, however, Reebok sales had been declining (Jahns, 2018). 2018 revenues were $1.8 billion (Bhattacharyya, 2019).
Although significantly smaller than Nike or Adidas, Puma had also been experiencing significant growth in sportswear. With 2018 revenues just over $5 billion, Puma was much less a threat to Nike than was Adidas, however, it was expected to see continued growth in North American markets (Butler-Young, 2018). In driving its success, Puma had partnered with popular celebrity endorses such as Rihanna and Selena Gomez (Ofiaza, 2017). The Puma logo of a puma jumping majestically is shown in Figure 6.
Figure 6
Puma Logo
(Logos-World, 2020)
Nike Brand Loyalty
While competing in a fierce marketplace, Nike had gone to extreme lengths to develop deep and meaningful relationships with its consumers. Ultimately, Nike wanted its consumers to become brand loyal. As the premiere market leader in athletic shoe sales, Nike had established a formula to develop loyal customers.
According to Parker (2017), Nike did three things that fostered brand loyalty; (1) Nike sold its customers inspiration through carefully crafted and targeted advertising intended to motivate consumers to purse their lifestyle and fitness goals, (2) Nike built brand awareness by creating high profile partnerships and athlete endorsements such as their long standing relationship with Michael Jordan and Jordan Brand and (3) Nike constantly enhanced its image or the perception of its brand by supporting diversity and inclusion initiatives and social justice causes as well as developing revolutionary and innovative products that improved athlete performance.
Social Causes and Controversies
By 2016, the U.S. had experienced a series of high-profile incidents involving African-American citizens suffering from the direct actions (or inactions) of police officers. Such events had called some to question if universal systemic racism existed within U.S. police departments (Samuels, 2018). Those concerns had fueled the Black Lives Matter (BLM) movement, which had begun in 2013 as a social movement protesting police brutality against African Americans (Hartigan, 2020). BLM supporters advocated for social justice for African American people.
Many BLM critics accused BLM of going too far in opposing law enforcement as not all police officers were racist. Critics pointed to harmful effects of the BLM movement such as increased violent crimes against police officers. They argued that neither police brutality nor violence against cops should be tolerated (Kim and Wilson, 2020).
Although many BLM supporters might have agreed with that argument, they felt that message might have marginalized their cause for social justice. In August 2016, tensions were high as Kaepernick originally sat during the U.S. national anthem for the 49ers' first three preseason games. Doing so was his symbolic form of protesting perceived systemic racial biases within U.S. police departments and beyond (Willingham, 2017).
Colin Kaepernick and the National Anthem
Kaepernick had begun his NFL career as a second round pick with the 49ers in 2011 (Patmas, 2013). In his second season he was the starting quarterback for San Francisco's Super Bowl team. The 49ers lost that thrilling Super Bowl (the 2012-2013 season) 34-31 to the Baltimore Ravens (Beaton, 2020). Despite the loss, Kaepernick had gained millions of fans (Patmas, 2013).
Five seasons later, after he refused to stand for the US national anthem prior to a 2016 exhibition game, however, he was booed virtually every time the 49ers offense broke its huddle (Witz, 2016). Afterward, he said "I am not going to stand up to show pride in a flag for a country that oppresses black people and people of color" (Wyche, 2016).
Many consumers responded by burning Kaepernick jerseys. Many argued that Kaepernick had the right to protest perceived police harassment of people of color, but protesting the flag was not the appropriate way to create change. Others asked why he hated veterans - still others, why he hated America. Many felt he should have focused only on football (Oluo, 2016). Reactions were so explosive, that Kaepernick's actions were referenced in a presidential campaign speech when Donald Trump said, "Wouldn't you love to see one of these NFL owners, when somebody disrespects our flag to say, 'Get that son of a bitch off the field right now. He's fired!'" (Willingham, 2017). Consistently, a 2016 poll found that 29% of the U.S. general population disliked Kaepernick. By comparison, the second most disliked NFL player was disliked by 22% of the population (Rovell, 2016).
Conversely, other reactions to Kaepernick's kneeling were positive. Some NFL players, coaches, owners, and fans supported Kaepernick's right to kneel in protest to the perceived acts of injustice against African Americans. Dallas sportscaster Dale Hansen wrote, "The young, black athletes are not disrespecting America or the military by taking a knee during the anthem. They are respecting the best thing about America" (Willingham, 2017). Kaepernick's 49ers teammates indicated their support and appreciate for Kaepernick by awarding him the team's most prestigious award, the Len Eshmont award, in honor of Eshmont's inspirational and courageous play (Breech, 2016).
Consumer Research on the Effect of the Kaepernick Advertisement
Nike kept its promotional campaign with Kaepernick with such secrecy that even its top business partners and retailers did not know of the promotion before it was publicly announced in September 2018 (Dator, 2018). The promotion paired Kaepernick's voice with young people in a variety of settings. The message was to dream big - and to fulfill those dreams despite what others thought of your chances of success. The promotion did not focus on Kaepernick until the end when he employed the viewer to "believe in something, even if it means sacrificing everything" (Madu, 2018). The implication of Kaepernick's statement was that his stance for social justice had played a role in his inability to maintain a spot on an NFL roster after the 2016 season. Nike's promotion did not directly discuss Kaepernick's social justice concerns.
Substantial research was devoted to the ad's initial effects on Nike's reputation. Much of this research indicated both positive and negative results:
- Quinnipiac Poll: American voters 18-34 years old approved of Nike's decision to run the ad 67% to 21% while voters over 65 disapproved 46%-39% (Quinnipiac, 2018).
- Harris Poll: 21% of the public said they would stop buying Nike products; however, 19% said they would buy more Nike products - including 29% of Nike's young male target market (Rovell, 2018).
- Morning Consult: About 24% of consumers viewed the brand unfavorably, up from 7%. After the ad aired, the percentage of Americans likely to purchase Nike products dropped 11% (Morning Consult, 2018).
- Morning Consult: Approximately 37% of Millennial consumers (defined by Morning Consult as aged 22-37 in 2018) would increase favorability of a brand that supported an athlete's right to kneel during the national anthem. Approximately 34% of Millennial consumers would decrease favorability of such a brand (Morning Consult, 2018).
- Reuters: 72% of Americans viewed Kaepernick's behavior as unpatriotic. 61% didn't support Kaepernick decision not to stand during the national anthem (Martis, 2018).
Despite such mixed opinions, financial results appeared to be increasing initially:
- Nike's online sales initially jumped 31% (Martinez, 2018)
- The number of Nike products sold out in the 10 days before the ad came out compared to the ten days after (September 3-13) increased by 61%
- The number of items sold out went from 703 for the 10 days prior to the ad to 1131 for the 10 days after the ad (Martis, 2018)
- Initially, Nike's stock price dropped after the promotion was released. The stock price rebounded quickly in rising above pre-promotion levels (Boren, 2018; Dator, 2018).
Decision
Despite the mixed reactions - including significant backlash - from Nike's decision to air the Kaepernick promotion, Nike did retain an industry leading 24.7% athletic apparel market share (O'Connell, 2020). Nike's increased sales numbers, furthermore, spoke to its popularity and consumer loyalty. Nike's positive results, however, were endangered by significant risks.
Nike's brand perceptions, for example, faced considerable uncertainty. Negative outcries on social media were questioning the extent of Kaepernick's sacrifice. Some, for example, questioned if he were no longer playing in the NFL based on his talent level as opposed to protesting. Others compared Kaepernick and his alleged sacrifice to people who had sacrificed themselves for a larger cause such as Pat Tillman. Tillman was a former NFL player who left the NFL to join the U.S. Army Rangers and subsequently died in the line of duty (McCrory, 2018; Twitter, 2018).
In assessing Nike's situation, Neil Saunders, managing director at Global Data Retail said, "While Nike has been doing relatively well in a sports market that is under pressure, it cannot afford to make bad decisions. Anything which has the potential to damage market share, such as overtly political campaigns, should be avoided" (Thomas, 2018).
Van Hameren was facing a difficult decision laden with uncertainty: pull the promotion quietly; make an apology; or continue to use the promotion? Nike (like most corporations) answered to multiple stakeholders who had different expectations. Shareholders wanted to see increased profits; consumers wanted quality products and reasonable prices; environmentalist wanted sustainable products; government regulators wanted assurances of fair business practices; and other stakeholders were concerned about corporate social responsibility. What responsibility (if any) did Nike have in advancing the social justice causes?
Did consumer brand loyalty make a brand such as Nike impervious to negative or perceived negative publicity? Or did the positive reactions to a well-known brand simply outweigh the negative? For van Hameren, such questions were part of the bigger questions of how (or if) to proceed with its controversial promotion - with Nike's brand success apparently at stake.
Expert Answer:
