The Reebok Challenge ~ A Corporate Charter for Social Responsibility

1. The Reebok Challenge~A Corporate Charter for Social Responsibility Julian Jacobson Adam Rees Hans Singh Iris Liang

2. Impact of Globalization on Long Run Average Cost

3. Pareto Optimality A movement from one alternative allocation to another that can make at least one individual better off, without making any other individual worse off is called a Pareto improvement or Pareto optimization. Shareholders Society

4. Pareto Optimality Short-Term Profits 1.Cost Structure Social Responsibility Consumer Awareness 2. A company’s commitment to it’s employees and host country does not end when it’s cost structure erodes. 3. Do consumer’s care about anything other than price? Long-Term Brand Equity

5. Pareto Optimality • What percentage of profits provides maximum benefit to shareholder’s and society? Societal development Shareholder’s Equity

6. Incentive to Relocate South Korea China (PRC) Persons Employed 500,000 500,000 Wages per hour $2.71 $0.25 No. of Hours per day 9 9 No. of days per year 312 306 Total labor cost $3,8 billion $344 million

7. Relocate Profits Investment in Welfare Total Labor Cost in South Korea $3.8 billion

8. Corporate Level Strategies • Relocate manufacturing operations to achieve lower costs • Createan industry-wide auditing systems by developing a common industry charter and enforcing all companies in the industry to comply • Invest in educational & training programs for employees in developing countries • Increase consumer awareness of social responsibilities through marketing efforts • Increase international sales by expanding geographical market and extending product line Profit Social responsibilities Social responsibilities/ Brand Equity Social responsibilities/ Consumer awareness Profit

9. Reebok’s Challenge… • To Industry (Nike et al) • To Consumers • To Shareholders • To Developing Nations

10. Marketing Strategy:Educate the Consumer • Launch the challenge via television advertising during 1996 - Spain Olympics • Budget = 50% (63 mm) of Reebok’s estimated (126 mil) current marketing budget • Sponsorship strategy: • International stars from the Seoul Olympics unfold story about how production in their countries has been positive, and negative, and the importance of social consciousness. American Olympiads drive home importance they have realized in Olympic experience.

11. The Athletic Shoe Industry • Reebok • Apartheid, Native Americans, Pro-Democracy • Responsible Business Citizens • Nike • Focus on manufacturing partners • Lack of Long-Term perspective

12. The Athletic Shoe Industry Phil KnightPaul Fireman • Broad Perspective • Consumer Awareness is increasing • Employee’s are vital in forming corporate identity • Denial of exploitation • Emphasis on Contribution • Memorandum demands partners comply with national standards Everyone is missing the POINT! • Become Pro-active • Start with the Man in the Mirror • Think Long Term!

13. Long-Term Profitability • Brand Equity World-wide • Development of Accountability Standards • Challenging Consumers and Shareholders Minimizing cost Structure INDUSTRY DOMINANCE Building Brand Equity

14. Conclusion Reebok must establish a global standard of: • Optimal Profits • Social Accountability