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Executive Summary This paper aims to critically analyze the operation of Nike in its home country (the US) and a host country (China). Regarding China as a host country of Nike, there are many differences in cultures between the US and China, leading to different advantages and disadvantages for Nike when operating in China. Some disadvantages are the collective culture of China and its long-term orientation while advantages are high power distance, uncertainty avoidance, similarity in masculinity, and restraint culture of China. The two main HRM issues at Nike are the diversity issue and low employee compensation. Regarding its international assignment, Nike follows a polycentric staffing policy, which allows it to save costs, integrate into local culture and increase responsiveness. Currently, Nike is following the transnational strategy, characterized by its low operation cost and high level of local responsiveness. In the future, there are signs that Nike will continue to follow this strategy. In that circumstance, there are three key success factors for Nike, which are the global supply chain and distribution system, diversity, and improvement in employee compensation. It is recommended that Nike improves its HRM and international HRM practices to solve these issues and improve its performance.
I. Introduction With the spread of globalization, businesses are increasingly going global to bring their products and services to international markets. Successful internationalization will bring more profits, benefits and growth opportunities for firms (Islam et al., 2019). However, internationalization goes along with various risks and challenges for firms from different aspects, such as human resource management (HRM), international strategies, etc (Aslami and Zulianti, 2022). In this context, this paper aims to critically analyzing the operation of Nike in its home country (the US) and a host country (China). In the first part, there will be a comparison between the US and China cultures, which leads to some advantages and disadvantages for Nike. The following part represents some HRM issues of Nike and its approach to international assignment. Finally, the third part will include Nike’s current and future international strategy and some of its key success factors. The paper will be concluded with some recommendations and a summary. Founded in 1964 in the US, Nike is currently the world-leading manufacturer and distributor of athletic apparel and equipment. The company’s product lines are diverse, including equipment, footwear, accessory products, apparel, etc. Nike’s products are known under the brand names Air Jordan, Nike+, Nike Golf, Nike Pro, etc (Deng, 2009). Now, Nike has become a multinational corporation, operating in more than 170 nations all over the globe (Nike, 2022). II. Cultural similarities and differences between the US and China To investigate the differences and similarities between the home country and the host country of Nike, Hofstede’s Cultural Dimension Model will be employed. This model examines the differences and similarities between nations based on six dimensions (Alqarni, 2022). These dimensions influence the attitudes and behaviors of people in different cultures, which eventually affects firms’ operations and HRM practices in these cultures (Jan, Alshare and Lane, 2022). Hence, understanding the differences and similarities between the US and China will allow Nike to explore its advantages and disadvantages in HRM when operating in China. The specific dimensions and comparison between China and the US are shown in Figure 1.
dimension (Figure 1), meaning that individuals are more embedded into their social groups (Jan, Alshare and Lane, 2022). This difference can be a disadvantage for Nike. In a collectivist society like China, the hiring process usually prioritizes in-group people, such as relatives, friends, acquaintances, etc., rather than hiring based on working abilities (Ahlawat, 2016). This can be damaging for Nike as this practice can reduce the quality of its employees in China. Moreover, employees in China also prefer working in groups and have a high preference for satisfactory benefits and working conditions (Al-Sarayrah et al., 2016). Operating in a collectivist culture also means that Nike can face higher chances of confronting collective power and bargaining from employee groups as well. ❖ Masculinity vs Femininity In terms of Masculinity vs Femininity, China and the US are quite similar as the two countries are more masculine (above average scores at 66 for China and 62 for the US). These two cultures show only 4 points difference in this dimension (Figure 1). This dimension concerns the role disparities between genders (Jan, Alshare and Lane, 2022). Because of the similarity in this dimension, it can be an advantage for Nike. In a masculine workplace, managers and employees care more about achievements, persistence, courage, and material success (Al-Sarayrah et al., 2016). Because this dimension of China is similar to that of the US, Nike can adopt some of its HRM practices in the US, regarding performance and achievement, to China. Moreover, employees in masculine culture, like China and the US, are usually competitive and assertive, they will prefer rewards, bonuses, and extra benefits as sources of motivation (Ahlawat, 2016). Hence, Nike can make use of that characteristic to better manage its employees when the company expands to China. ❖ Uncertainty Avoidance Uncertainty avoidance is another similarity in culture between the US and China. Uncertainty avoidance refers to the levels at that people feel uncomfortable and difficulty with insecurities and irregularities (Gerlach and Eriksson, 2021). As shown in Figure 1, both China and the US have a low level of uncertainty avoidance because their scores in this dimension are under average, at 30 and 48 scores, respectively. Because of the similarity in this dimension, it can be an advantage for Nike. First, similarity means that Nike can apply some of its HRM practices in the US to China because of its suitability in culture. Moreover,
having low uncertainty avoidance means employees are more open-minded and accepting of changes in the workplace. Also, mistakes and wrong-doings are more likely to be tolerated in these cultures (Al-Sarayrah et al., 2016). It is also important for Nike to note that in a culture with low uncertainty avoidance, managers will have more discretion and autonomy in their decision-making processes or management practices (Baah, 2013). Therefore, informal rules and unwritten norms in the workplace can be more effective in these cultures (Ahlawat, 2016). ❖ Long-term Orientation vs Short-term Orientation As represented in Figure 1, China has a higher long-term orientation (at 87 scores), meaning that they focus more on future gains (Gerlach and Eriksson, 2021). At the same time, the US, with a short-term orientation (at 26 scores), concentrates more on short-term achievements (Gerlach and Eriksson, 2021). From that, it can be seen that China and the US are different in this dimension, which can be a disadvantage for Nike. Specifically, in China, because of the long-term orientation among employees, they will expect more in the long-term commitments of the company. They can ask for more career commitment or pursue promotion opportunities (Baah, 2013). Hence, Nike also has to show more commitment and long-term benefits for employees in China, which means more investment into this market, in terms of HRM. ❖ Indulgence vs Restraint Last but not least, the US has a higher level of Indulgence (68 scores), meaning that they are more likely to enjoy life and have fun (Alqarni, 2022). At the same time, China has 24 scores in this dimension, indicating that Chinese people are more likely to be regulated through firm and severe social norms and values (Alqarni, 2022). This difference in culture can be an advantage for Nike. Specifically, as Chinese is a restrained culture, people will have certain disciplines and rules for their behaviors and they also attempt to key themselves to follow these disciplines (Koc, Akdeniz and Aydin, 2017). These characteristics in employees are desirable, especially at Nike where employees are mainly responsible for manufacturing (Vallery, 2022). Therefore, it can be favourable for Nike when operating in China, in terms of restraint among employees. In fact, it is also proven that high restraint levels among employees are usually associated with higher performance of firms (Aleqedat et al., 2022).
hiring indirectly one million people through 446 contract manufacturers (Donado, 2021). However, the company has been accused of providing employees with poor working conditions and underpaying them for years (Donado, 2021). The first accusation of Nike was in 1997 when an audit report disclosed the poor working conditions of Nike’s workers in Vietnam, and they were only paid $10 a week while having to work more hours than legal standards (Donado, 2021). Until now, the working conditions and payment for employees in these factories of Nike have not been improved. For instance, it is still reported that Nike underpays its employees in Chinese factories. Employees of Nike in this country are paid 45- 65% less than the living wages, which must be necessarily adequate to fulfil their daily basic needs (Guilbert, 2018). This underpays issue reflects the failure of HRM activities at Nike to ensure adequate compensation for employees. Adequate and effective compensation policies and activities are one of the main responsibilities of HRM to ensure a high level of employee satisfaction, retention, etc (Babu and Kumar, 2022). As Nike outsources its production to factories that underpay employees, the company can save production costs and grow fast. This HRM strategy has led to the success of Nike, turning the company into the world’s leader in manufacturing and distributing athletic apparel and equipment (Donado, 2021). However, these HRM practices can influence the long-term development of the company. These unethical and illegal practices of Nike have received various criticism and investigation from non-government organizations and governments when it is operating, especially in China (Donado, 2021; Guilbert, 2018). Underpaying employees also leads to a bad brand image for Nike as well.
2. Nike’s approach to international assignment It can be seen that Nike follows the polycentric staffing policy. This policy is characterized by Nike filling management positions in host countries by local people and important positions at its headquarters by American people (Banai and Sama, 2000). The company’s staffing policy is clearly shown in its statement and hiring practices, such as opening working positions or assigning many global management positions to local people (Harvey et al., 2010). For example, important management positions of Nike in Vietnam, including General Director, Sourcing Director, Vietnam HR Manager, etc are all Vietnamese people (AmCham Vietnam, 2023). This staffing policy will influence the international assignment of Nike. Specifically, because of the polycentric staffing policy, the international assignment of Nike,
which involves moving employees internationally, is quite limited (Collings et al., 2011). Because management positions are mainly filled by local people, Nike doesn't have to transfer many expatriate managers from its home country. However, the company still sends its employees and managers from the US to other nations, such as Vietnam, China, etc (Harvey et al., 2010). Expatriate managers from the US to other host countries usually have high reluctance levels because Vietnam or China is developing countries with lower living standards and highly different cultures, compared to the US. Hence, Nike has offered a wide range of support for its expatriate managers, including consultancy, realistic previews of career chances and opportunities for expatriate managers, additional education and training opportunities, placement assistance, etc (Harvey et al., 2010). However, it is important to note that Nike focuses more on hiring local people for management positions and external staffing, rather than international assignments. Regarding the effectiveness and impacts of Nike’s staffing policies and international assignments, they are effective in enhancing business activities, operations, and the success of Nike in international markets. The global staffing director of Nike stated that the polycentric staffing policy and openness of Nike to local people applying for management positions allow the company to grow significantly in the international markets (Harvey et al., 2010). In fact, these practices are also suitable for Nike’s international businesses as well. As mentioned above, Nike has many important business activities, including manufacturing, in developing Asian nations, such as China and Vietnam (Donado, 2021). Meanwhile, as analyzed in the previous sector, the cultures of China and the US have many differences, which can cause difficulties for Nike when operating in this market. Hence, reducing expatriate managers and increasing management positions for local people will allow Nike to better integrate into the local culture of the host countries and become more responsive to employees there (Shahid, Siddiqui and Shafi, 2015). Moreover, international assignments can be cost-consuming and expensive for Nike because relocating expatriate employees and managers requires various HR practices and supports, such as consultancy, additional job opportunities, extra education and training, etc (Harvey et al., 2010). Hence, hiring local people can be more cost-effective for Nike, which contributes to its HR effectiveness and organizational performance.
marketing, etc to fit with the host countries’ cultures and customers (Hill, 2021). In the case of Nike, the company differentiates itself through marketing activities. For example, Nike uses celebrity marketing strategies in both China and the US. However, in the US, its advertisements star US celebrities, such as Kobe Bryant, LeBron James, Russell Wilson, etc. Meanwhile, in China, the company collaborates with Ailun Guo, Yi Jianlian, etc (Zhu, 2022). In addition, the company also increases its local responsiveness through its international HRM practices by hiring managers and employees in the host countries, as analyzed previously. Because of cultural differences, it can be better for Nike to hire local managers, who have better knowledge and understanding of the local employees, which will eventually lead to better management and localization. Besides, compensation levels of employees in each nation and region of Nike are also different, based on host countries’ laws and regulations (Martínez, 2018). From the above analysis, it can be seen that the strategic internal HRM practices of Nike are suitable and aligned with its international business strategies. By hiring local managers and employees, the company can both reduce costs and increase local responsiveness, helping it to pursue the transnational strategy. Regarding Nike’s future international strategy, it is highly likely that the company will continue to apply the transnational strategy. The company has shown efforts in applying technologies and digitalization to its operations and business activities to reduce costs and increase profits. For example, Nike has been enhancing its collaboration with online retailers and e-commercial sites, such as Amazon, Walmart, Target, etc to increase its presence and sales (Bavent, 2022). Similarly, in international markets, such as China, Nike also enhances the use of digitalization, digital-based approaches, etc. The company aims at increasing its localization to its international markets (Zhuoqiong, 2023). From its current business activities, it can be seen that Nike will continue to pursue the transnational strategy by increasing its local responsiveness and reducing costs.
2. Key success factors of Nike Key successful factors refer to elements, practices, distinguishing characteristics, policies, etc that can bring success or achievement of goals for organizations and firms (Ngwangwama, Ungerer and Morrison, 2013). The first key success factor of Nike is its global supply chain and distribution system. Nike is a multinational firm with
manufacturing and distribution activities all over the world. Therefore, enhancing a smooth, timely, and adequate supply and distribution system is vital for its business. At the same time, the world is suffering from the issues of global supply chain disruption and supply chain shortage, resulting from the Covid-19 pandemic in 2020 and the Russia-Ukraine war. Businesses and firms in various fields have been influenced by these global issues, including Nike (Milewska, 2022; Nike, 2022). In the future, it is anticipated that the negative impacts of these issues will continue, especially in the garment industry, which is featured by high integration into the global supply chain system (Tang, 2021). In this unstable and uncertain situation of the global supply chain, Nike needs to ensure its sources and supplies to keep its business activities and operations. As Nike applies the transnational strategy, keeping its costs low is important (Hill, 2021). Meanwhile, supply shortages can drive up the costs of raw materials, which will eventually increase the operating costs of Nike. If this situation happens, the company can face failure in its transnational strategy. Hence, Nike needs to take good control of its global supply chain and distribution system as a key success factor. Second, another key success factor for Nike, concerning its strategy, is diversity. As analyzed above, Nike is currently having issues with its diversity in the workplace. This issue also reflects an ineffective HRM system at Nike, in which diverse groups of employees are not included and valued within the organization. Meanwhile, the global labor workforce is increasingly diverse, in terms of genders, nationalities, etc., especially in some big markets of Nikes (Kharroubi, 2020). For example, in China, the number of women in the labor workforce is increasing, making them an important group in the workforce (Zhuoqiong, 2023). Hence, Nike should show more efforts to increase its diversity and inclusion in the workplace, through its international HRM practices. This will be a vital key successful factor for Nike for its long-term development and growth in the international markets. Third, improvement in employee compensation will be another key success factor for Nike. As analyzed above, underpaying employees, especially vulnerable groups, such as women, and low-skilled workers in developing countries, is a prolonged problem at Nike. This issue has lasted for decades. Although it is analyzed above that outsourcing employees with low compensation helps Nike to expand its operations and business activities, it is not sustainable. The company has also faced criticism and a bad image for years because of this
three key success factors for Nike, which are the global supply chain and distribution system, diversity, and improvement in employee compensation. It is recommended that Nike improves its HRM and international HRM practices to solve these issues and improve its performance.
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