Research Paper on "Examination of Nike"

Research Paper 7 pages (2763 words) Sources: 7

[EXCERPT] . . . .

4.

Further Management of Suppliers and Rivalry

The firm will need to continue dealing with the two forces discussed above. The question for the firm is what is the best way for these to be managed as the firm moves forward? The firm is a shell cooperation which means they rely entirely on external manufacturers. The firm places a great deal of emphasis on remaining the more powerful partner, ensuring they can terminate contracts quickly and have numerous suppliers. The current strategy appears top be working well. However, times are changing and to retain control the firm may need to increase the level of transparency with a higher level of integration. The use of technology is already seen in the supply chain management, but increased use may help to give Nike even ore control over what is ordered and when as well as tracking orders. The firm may also need to look for more suppliers in other developing areas, as the current suppliers, such as those in China, are seeing growth in their economies, which is increasing demand and increasing supplier power. Therefore poorer developing areas, such as Bangladesh and Africa may provide more opportunities for the firm to retain such a high level of power over the suppliers.

The management of the rivalry in the industry requires consideration of the position and strategies of the closet competitor; Adidas. It may be argued it would be more efficient to use a theoretical approach and create a higher level of cooperation between Nike and Adidas, as seen with Game Theory and the Prisoners Dilemma (Nellis & Parker, 2006). However, due to the market share and dominance of the two firms, such as agreement would be anti-competitive and illegal. To gain a stronger position Nike needs to focus in the markets where it is not as strong, which is outside of the U.S., with only 46% of revenues coming from outside the U.S., it is apparent that increased marketing for these areas may help to increase market share, and market power in these areas. Strategic alliances with sporting teams in the areas to be developed, and the use of effective PR may help to increase sales and market power. The continued pursuance of differentiation in order to support the firms' position should also continue.

5.

External Threats and Opportunities

The greatest threats facing the firm can be seen with slow economic recovery and rising energy prices. Nike goods are not essential, and as such the growth of the firm is likely to be constrained when there are limits in the level of disposable income available for the purchase of non-essential goods (Nellis & Parker, 2006). When the recovery starts, it is highly likely that in most developed countries central banks would increase interest rates, in order to prevent economy is overheating, which may hold back growth. Another external threat it is likely to impact on the organization is the increasing interest of consumers in corporate social responsibility (CSR), especially when Nike are well-known for outsourcing to developing countries, in order to gain lower prices. A number of companies have suffered in recent years as a result of negative publicity regarding their outsourced suppliers, for example Apple suffered as a result of their supplier Foxconn's HR practices and the high level of suicides at the factory, as well as poor working conditions. Nike may face a similar vulnerability, and as such, there should be increased attention paid to managing the relationships to ensure CSR standards are improved and maintained and reduce the vulnerability.

The main opportunity for Nike can be seen in many of the developing markets where their is increased consumerism and income to buy consumer goods, areas such as the BRIC nations, offer a great opportunity to increase sales, especially China which may become the largest consumer market in the world as the economy develops.

6.

Strengths and Weaknesses

There are several strengths for this firm. The first is in the structure as a shell corporation, without the need to invest or manage any manufacturing or distribution aspects of the business, as they are all outsourced. This creates a very lean and cost efficient organization. It also creates a firm where there is a clear focus on the development of products and innovation, and marketing. The firms branding and high level of market awareness as well as association with well-known successful sports people may also be seen as a major strength, as this appeals to emotions aspects of purchase decision making

The firm also has weaknesses. The reliance on the U.S. market may indicate the firm is strong in the U.S., but if there arte problem in this market then the firm may face significant difficulties, as it is the source of 54% of all revenues (Nike, 2014). An effective strategy is to increase sales in international market; this would also allow the firm to take advantages of opportunities especially with the developing markets. This would increase the sales, and it would reduce the reliance in a single market. The strategy is one that also draws on the firms strengths, so it is a very viable strategy.

7.

Company Resources, Capabilities and Core Competences

The company is a shell corporation, its main core competences are seen in the research and development of new products, managing the supply chain, and the marketing of the products, which the structure of the firm facilitates. The resources are mainly the knowledge of the employees which are put to work for the firm and the investments in research and development that are protected with patents.

8.

Value Chain

The value chain for Nike is very short, as the firm does not undertake any production. The research and develop new products, and then outsource the manufacture, the inputs and outputs are the innovation and the tasks associated with marketing only. With the majority of the supply chain outsources, the value chain is very slim, and Nike support the marketing and sales, and after sales service, with the inbound logistics, operations and outbound logistics managed by the outsource suppliers for the physical manufacture of the goods. Creating more value in this chain is difficult, however, the aspect of the research and development may be subject to improvements, with increase collaboration with external bodies, such as universities, where there could be increased expertise added to the process in a cost effective manner. The company is already very lean, so there are few other tasks that could result in increased efficiency.

References

Ashrad, S, (2014, Jan 14), Nike's Top 10 Highest Paid Endorsement Deals to Sports Players, accessed at http://www.tsmplug.com/richlist/nike-highest-paid-endorsement-deals/

Chaffey D, (2009), E-Business and E-Commerce Management (Second edition), London, FT Prentice hall

Christopher, Martin, (2012), Logistics and Supply Chain Management, Pearson

Dass, Brody; Mertins, Troy; Nurre, Jordan; Riordan, Sean, (2013), Nike Inc., Krause Fund Research, accessed at http://tippie.uiowa.edu/krause/spring2013/nke_s13.pdf

Kemp, N, (2014), Adidas on the new rules of content marketing, Marketing Magazine, accessed at http://www.tsmplug.com/richlist/nike-highest-paid-endorsement-deals/

Nellis JG, Parker D, (2006), Principles of the Business Economics, London, Prentice Hall

Nike, (2014), 10k, Nike, accessed at Christopher, Martin, (2012), Logistics and Supply Chain Management, Pearson

Powell, M, (2014, 28th April), Sneakernomics: Who Will Be The Next Nike?, Forbes, accessed at http://www.forbes.com/sites/mattpowell/2014/04/28/sneakernomics-who-will-be-the-next-nike/

Shank, Matthew D; Lyberger, Mark R, (2014), Sports Marketing: A Strategic Perspective, Routledge

Skenazy, Lenore, (2001, April 19), Labor costs 11 cents, the sweatshirt $22.99, New York Daily News, p7594

Statistic Brain, (2014), Nike Company Statistics, accessed at http://www.statisticbrain.com/nike-company-statistics/

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