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Nike Inc Case Study

Essay by   •  April 7, 2012  •  Case Study  •  1,269 Words (6 Pages)  •  1,705 Views

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Abstract

Nike Inc. is a dedicated to meeting customer needs by producing a quality product that people can be proud to ware. The strategy of Nike, Inc's is to create the world's most innovative products for customers across the globe. Not only does Nike Inc. take careful consideration in what the product line should be but also in the location of the product line.

Nike Inc.

Nike Inc., founded as Blue Ribbon Sports by Phillip Knight in 1964, became the official name of the world's leading supplier of athletic footwear and apparel in early 1978. Most commonly known for the "Swoosh' emblem on their running shoes, Nike gained public interest by 1980 with early track and field designs which acquired a large market share of the U.S. athletic shoe department ("Nike, Inc.," n.d., p. 1). Large-scale acquisitions, witty slogans, and professional athlete promotions have contributed to Nike Inc.'s transformation into a multi-billion dollar organization. An organizations management, as a problem in the supply chain, explains poor financial performance. Critical components of the Nike supply chain include product manufacturing, supply, inventory, location, distribution, and information.

Production is a necessary supply-chain component for an organization delivering goods or services globally. Operational managers must determine if their facilities are capable of supplying consumer demand. Facility maintenance, workforce compensation, and maintaining low cost levels are other contributing factors to product manufacturing. When analyzing product manufacturing, Nike has a favorable organization. With no controlling factories, Nike yields higher profit by contracting production to other companies. Outsourcing product manufacturing allows the company to produce high quality products at the lowest possible price by moving production when prices increase.

Selecting suppliers should be carefully considered in order to maintain low cost levels while keeping raw material quality high. The manufacturing of footwear is a vigorous procedure such as cutting, stitching, and shaping the shoe before the packing process. Raw materials like nylon, vinyl, rubber, and plastic compounds are used in the production of Nike footwear ("About Us: Nike IHM," n.d., p. 1). Providing excellent performance while manufacturing all materials is a task most companies are unable to carry out. Decisive planning should be initiated to determine if facility capabilities are proficient enough for material development or if outsourcing a partnership is needed. Nike has a tenacious research and development team in the United States but most footwear production is contracted overseas in Asia and South America. Many of the raw materials needed for production are located in the countries manufacturing Nikes' brand, permitting them to maximize profit with cheap labor and high quality material.

Understanding demand patterns is important when determining inventory and how much of a product should be in stock. Nike Inc. is a diverse organization with an expanding line of sports apparel however; most of the revenue comes from its share of the footwear market. Nike relies considerably on the selling of products to retailers. Retail sectors are becoming increasingly competitive therefore trying to supply the consumer with the lower price. This competition poses an outside threat to the organization by essentially forcing lower prices. Offering high quality at a low price is no longer an advertising advantage as most competitors are developing brands to take away Nikes' high footwear market share. In this ever-competing market, Nike gained an edge by advertising not only as a sports brand but also as a fashion brand. Becoming a popular fashion brand enables Nike Inc. to forecast fashion trend and capitalized inventory accordingly.

Nike Inc. takes careful consideration when determining organizational location. International trade is an issue facing Nike Inc. and all global organizations. Operating worldwide entails different countries with fluctuating prices, different currencies, and inconsistent costs and margins over extended periods of time. With branches all over the world this a considerable threat to the athletic footwear

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