blooming shoes

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1Net Impact Case Competition October 29, 2005

Recommendations for

BloomingShoes Corporation

Aaron Cohen

Chris Cox

Eric Harris

Kanika Mittal




Agenda

• Introduction

• Problem Statement

• Comparison of Nike and Reebok

• Recommendations

• Summary and Conclusions




Introduction

• In 1993, Nike (32%) and Reebok (21%) are theindustry leaders

• Growth is slowing – peaked in 1990

• Consumers are becoming more price sensitive

• Manufacturing – subcontractors in Asia

• Worker exploitation and human rights arecontinuing issues




Problem Statement

• How can BloomingShoes address human

rights issues and still remain profitable?




Human Rights Statements for Nike and Reebok

Nike, Inc.Memorandum of Understanding (01/1993)

• “(Subcontractor/supplier) certifiescompliance with all applicable locallabor government regulations…”

•

“(Subcontractor/supplier) certifiescompliance with all applicable laws…”

• “(Subcontractor/supplier) certifiescompliance with all applicable localenvironmental regulations…”

Reebok International, Ltd.Human Rights Policy (11/1990)

• “Reebok encourages freeassociation…”

• “Reebok will seek to ensure thatopportunities for advancement…”

• “Reebok will seek to preventcompulsory political indoctrination…”

• “Reebok affirms that it deplores theuse of force against human rights.”

Nike‟s Memorandum of Understanding

relies on the laws, policies and regulationsof local governments, which, according toAAFLI‟s Jeffrey Ballinger, do not protectworkers. Nike‟s Memorandum fails tosuggest, emphasize or reinforce Articles 23through 25 of the United Nations UniversalDeclaration of Human Rights.

Reebok looked to the U.N. Universal

Declaration of Human Rights for guidance;however, the language used in the finalversion of its Human Rights Policy is onlysuggestive. While Reebok encourages,seeks and affirms to improve workingconditions, they impose no directrequirements or stipulations on suppliers.




Recommendations

1. Labor Practices

- Improve Practices

- HR Organizations

- Local Auditors

- Strengthen Human Rights Language

2. Marketing

- Branding “Fair Trade” shoes, upscale brand

- Industry Initiatives to raise awareness

- Public

- Industry

3. Financial Implications and Schedule


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Recommendations

1. Labor Practices

2. Marketing




Declaration of Human Rights

“…do or do not…

there is no try”

Yoda,The Empire Strikes Back



Suggested Human Rights Statement

BloomingShoes‟ Human Rights Declaration • Everyone has the right to employment, and BloomingShoes will only work with

business partners that provide just and favorable working conditions andprotection for its employees.

• Every worker has the right to equal, fair and favorable pay, and BloomingShoeswill only work with business partners that guarantee equal pay for equal work,which provides the worker and his/her family a dignified existence.

• Everyone has the right to rest and leisure and participation in organizations thatproject and protect their interests, and BloomingShoes will only work withbusiness partners that provide reasonable limitation of working hours and theformation of unions.

• Everyone has the right to an adequate standard of living, including the health andwell-being of the family, and BloomingShoes will only work with business partnerswho protect mothers and children and work with local governments to continuallyimprove the wage and social services available to workers.

BloomingShoes‟ Human Rights Declaration should enforce and extend the UnitedNations‟ Universal Declaration of Human Rights and should proactively encouragebusiness partners to work with local governments to improve the lives of its citizensthrough favorable working conditions, favorable and increasing wages, the bettermentof social services and improvements in human rights and environmental policies.



Recommendations

1. Labor Practices

2. Marketing




Marketing - Branding

Recommendations:

1. Launch “Liberty” brand Fair Trade shoes

2. Improve human rights standards for all brands



Marketing - Branding

• “Liberty” Fair Trade Shoes – name appeals to:

-Pro-American consumers

-International/global minded consumers

• Great quality, price control and great profits are not dependenton bad labor conditions.

• Upscale shoes to contribute towards the cause of Fair Tradeacross the globe.

• Feel good about your shoes:

“Every shoe bought helps bring a smile somewhere in theworld.”



Efforts Towards Our Branding

• Advertise the fact that we have full-time, local auditors reportingdirectly to us at each of our suppliers.

• Invite ILRERF, FIA & AALFI to participate in our addressing theissues of labor exploitation in many such situations.

• Offer exclusive, high-quality shoes for those who want to helpsuffering people the world over. A percentage of revenues willbe spent on workers.

• Have visibility in all government census surveys and tradereports.

• Target a „specialized niche‟ – the semi casual work place shoes,since statistics predict a rise in this category, as more and moreworkplaces are switching to casual dress codes.*

• Invite Human Rights Activists to visit factories annually.

Source: *www.infomat.com/information/ research/industry/Reports/USA_Footwear.html



Net Impact Case Competition October 29, 2005

Marketing - Industry Initiatives

• Raise Awareness

- Encourage public concern

- Force competitors to meet Human Rights standards

• Utilize Organizations

- Athletic Footwear Association

- Sporting Goods Manufacturers‟ Association

- Asian-American Free Labor Institut

- International Labor Rights Education and Research Fund

- United Nations




Marketing - Awareness





This is the type of publicity that we want to

avoid.




Recommendations

1. Labor Practices

2. Marketing





Financial Analysis

Nike & Reebok Cost of Sales Yearly Percentage of Revenue

50%

52%

54%

56%

58%

60%

62%

64%

1991 1992 1993 1994 1995 1996

Year

S e l l i n g & A d m i n % o

f R e v e n u e

Nike

Reebok




Financial Analysis

Nike & Reebok Selling Costs Yearly Percentage of Revenue

0%

5%

10%

15%

20%

25%

30%

35%

1991 1992 1993 1994 1995 1996

Year

S e l l i n g & A d m i n % o

f R e v e n u e

Nike

Reebok




Financial Analysis

Increase in Number of Chinese and Indonesian Workers Above Poverty Line

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1994 1995 1996

Year

N u m b e r o

f C h i n e s e a n d I n d o n e s i a n s A b o v e

P o v e r t y L i n e




Implementation Schedule

Quarter

Two

Testing & MarketResearch

Implementation Plan – QTR 1&2

Strategy

• Raising awareness onhuman rights issue.

• Establish importance of fair trade shoes.

• Emphasis on qualityand competitiveness.

• Draw attention towardsour specialized nicheproduct.

• TV commercial

• Consultative sales onmajor shoe stores.

• Print campaign in all

major business journals, women’smagazines andnewspaper dailies.

• Sponsorships of eventson radio and presencein trade shows

Strategy ImplementationPlan- QTR 3 & 4

• Aggressive pushinto the markets.

• Increasing thedealer network.

• Advertise aboutmargins to businessto business world.

• Establish whichmarkets are moreresponsive thanothers.

• Structure and trainsales force towardsconsultative sales.

• Incentive for dealersand sales force.

• Press conferences,towards humanrights.

• Human rightsactivists to visit our factories with mediacoverage.

• MR - 1st round to becompleted byMarch 15th 1993

• 1st review of strategy –

May 20th 1993

• TV ads –

August 1993.

• 2nd market survey -September 1993.

• 2nd review -

November 1993

Quarter

Four Quarter

One Quarter Three




Summary and Conclusions

1. Labor Practices

- Improve Practices

- HR Organizations

- Local Auditors

- Strengthen Human Rights Language

2. Marketing

- Branding “Fair Trade” shoes, upscale brand

- Industry Initiatives to raise awareness

- Public

- Industry


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