Nike's Rise: From US Company to Global Phenomenon - Essay Sample

Introduction

The rapidly evolving business world has become highly evident. Fundamentally, many companies that would want to succeed and grow have been forced to brace for continuous adjustment of their operational strategies. One company that has managed to achieve through expansion to international markets is Nike athletic foot Ware Company. It was established in the 1970s by Phil Knight when both the Puma and Adidas were the only show manufacturing companies across the globe. The emergence of Reebok further stiffens the competition, which was already brewing over many years. However, Nike emerged to become the leading athletic shoe manufacturer across the world, surpassing the likes of Adidas, Puma and Reebok. Such success was significantly attributable to the sourcing and marketing strategies of the company. This paper therefore briefly looks at the sourcing and strategy of the Nike Company.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

Nike Sources of Competitive Advantages

The case study offers an excellent exposition of the sources of competitive advantages that made it overtake Adidas, thereby emerging the global giant as an athletic shoe manufacturer. Notably, Adidas thought that it was a good idea to manufacture to higher factories around Europe. On the other hand, Nike's strategy involved manufacturing shows through independent contracts in addition to the exerting specification from the lower costs producers from the Asian countries. In this case, Nike was able to benefit from the cheap and readily available labour. This allowed the company to maintain relatively lower costs while maximizing the profit. It is further evident that Nike engaged in the signing of high-profile clients such as Michael Jordan, John McEnroe and Tiger Woods, who played a crucial role in sending the company's image into the global's limelight. Interestingly, such focus permitted Nike to Segway, thus becoming a leader in the athletic footwear.

Another source of the competitive advantage for Nike was based on its cutting-edge designs. Other than being a low-cost producer, Nike focused on investing its competitive advantages on the design of products that met the demand of the clients. Fundamentally, Nike began this process by focusing on developing nations such as China and Indonesia, where the government incentives supported a fast growth of the footwear. To increase its competitive strength, Nike created a bidding battle between six factories to subject them into a competition to see who among them was able to produce its desired shoes. The employment of various factories from nations such as China and Indonesia to do their manufacturing process as opposed to one nation emerged as another source of competitive advantage for Nike. Contrary, Adidas employed mainly its home factories. In the case of Nike, this strategy was tremendously genius considering the labour rates, currency exchanges as well as other political factors. This further implied that any changes in these factors created a higher cost for their shoes.

Further, the company would not merely respond by lowering its production in one country by a certain proportion and increase it in another nation through a complementary factor. In the case study, it is evident that Nike bought 66 per cent of its shows from South Korea. Following the rise in the wages from $1 per hour to $3.66 per hour, the company responded by changing its initial production to 42 per cent. The nation accounted for only 10 per cent of its creation by the end of the 1990s. This shift was attributable to the wage increases.

Finally, the complete supplier network allowed Nike to adopt the lowest cost of production as well as the ability to adapt to the changes in the exchange rates and production rates. While it is evident that the company was able to do this, it stayed within the confines of the ethical behaviour of procurement along the value chain, taking into considerations the working conditions and fairness.

Core Resources & Capabilities

Core competencies refers to the capabilities that act as the source of a competitive advantage for a company over its competitors. Fundamentally, the core competencies emanate over a while through a company process that involves learning how to position a variety of resources and capabilities to its advantage. Nike's core competencies include its effective marketing strategies and innovative product design. Notably, these two elements offer a tremendous value and benefits for its consumers and make it difficult for its competitors such as Puma, Adidas and Reebok to imitate. Regarding its corporate value, the company has established four shoe-cushioning systems that are aimed at reducing the shock, distribute pressure and protect the impact. These innovations have tremendously improved the performance and comfort to the Nike consumers.

Nike resources exist in the form of its numerous stores comprising of over 22,000 retail stores across 160 countries. Additionally, the company's wide range of core athletic shoes and apparel marketed under its brand have significantly meant that the company can serve a large number of consumers from anywhere across the world.

Advantages and Disadvantages of Outsourcing

It is undeniable that the Nike brand is one of the most recognizable within the billion-dollar athletic footwear industry. Notably, this company is known for its outsourcing practices. The company is known for its shoes. However, it has also branched in both the sports and clothing industries. From the case study, it is evident that Nike has numerous factories from various nations across the world in addition to the subcontractors which it uses to design and manufacture its products. The outsourcing presents several advantages for Nike Corporation.

Advantages

Outsourcing is crucial in helping the company decrease overhead costs. The cutting of the expenses by employing workers at a reduced rate and paying less for the plant operations allows Nike to invest the additional revenue into various. These include advertisement, marketing, and potential growth.

Outsourcing was crucial in increasing the company's competitiveness in the global market within the footwear industry. Based on the fact that Nike could efficiently produce its products and reduce the costs that emanate from outsourcing. The decrease in the competition was critical in helping Nike take advantage of the market for its product.

Outsourcing allowed Nike to avoid some of the financial obligations and risks that it may face within the confines of U.S taxations. The use of the factories and the sub-contractors made Nike assume less risk associated with the production of its product, such as insurance liability.

Disadvantages of Outsourcing

The social discords experienced by the factories and sub-contractors have negatively impacted Nike's market performance, market confidence and sustainability. For example, its partnership with the Bangladeshi manufacturer Lyric Industries was terminated because of the poor and unsafe labour practices. Additionally, global events such as the economic troubles that range from weather to political instabilities greatly determine whether or not the company's international business can achieve its projections. Broadly, the global economy influences the rising costs and exchange rates, which in turn impacts the inflationary and margin pressures.

Recommendations

Nike faced competition in various ways. These included:

The acquisition of Reebok by Adidas played a critical role in bringing the Adidas Group total revenue to $13.3 billion. This was a figure slightly below that of Nike.

The new competitor UnderArmor stiffened the competition within the market.

As a new entrant, UnderArmor employed a manufacturing technique that prevented subcontractors from selling knockoffs based on the fact that their entire manufacturing process was automated. Such automation posed a significant challenge to Nike

Nike was still struggling with the Asian knockoff markets, which were flooded with numerous knockouts.

Becoming a global leader requires the adoption of extraordinary strategies that bring about tremendous competitive advantages. To remain at the forefront of the manufacturing industry, Nike must adopt a similar kind of automation processes that were employed by UnderArmor. Notably, the initial capital investment to implement such strategies may be high, but the overall benefits from such ventures might be beneficial to its products and brands.

This opportunity will imply Nike will not only be able to manufacture its brands in a more automated way but also prevent the destabilization from the contractors who may cause knockoffs and thus leak out into the market thereby infringing the company's profit margin. To remain at the top as a major competitive giant, Nike will need to emulate their competitors, such as acquiring other companies to help them maintain their position as the global athletic footwear leader.