NIKE CASE STUDY

Nike Case Study



Executive Summary

Nike Inc. is the leading sports equipment manufacturing firm in the world today. Since its inception, it has enjoyed a formidable position in the sports apparel manufacturing sector. There are various factors that have contributed to Nike's unprecedented success, but two major factors stand out i.e. leadership and strategic management of the firm's operations. This paper is based on questions, which are related to strategic management, organisational environment and Nike's marketing strategy in the international market. In this paper, Nike's manufacturing strategy in Asia and Nike's strategic management options during the two distinctive periods - from 1990 to 2000 and 1996 to 2000 are discussed in detail.

Q1. Nike Manufacturing in Asia

(a): Porter's Model Strategy

There exists a fierce competition between the major players, engaged in sports manufacturing industry. Michael Porter's works on strategic management had had a profound impact on the firms' strategies. One of the models, proposed by him is called Porter's Generic Strategy Matrix. The theory of generic strategies was very popular in the early 80s. It describes the three main policy options available to companies wishing to gain a sustainable competitive advantage (De, 2004, 36).

Global Dominance by Costs

A leader by the costs in any market, (such as Nike in this case) has the competitive advantage to produce at lower costs. With a focus on costs, a company aims to be the lowest cost producer in a niche or a particular segment. Nike has built plants in Asian countries such as China; the workforce is hired and trained to provide production costs as low as possible. However, reduced production costs do not always lead to low prices. Producers can set their prices in tandem with the competition, exploiting the advantages of a wider margin than their competitors. Some companies, such as Nike, are equipped not only to manufacture high quality sports equipments and apparel at low prices, but have the marketing skills and workmanship for use the premium price policy (Hofstede, 1993, 203).

Differentiation

Multinational companies, (Nike in this case), has met customer needs by providing cost-effective goods and services, that has led Nike to enjoy a sustainable competitive advantage. With a focused differentiation strategy, it creates a competitive advantage through differentiation on a particular niche. This practice has allowed Nike to desensitise prices and focus on generating value for money and a higher margin compared. The advantages of differentiation require manufacturers to segment markets in order to target specific segments, generating a price higher than average. For example, Nike has differentiated its services in Asia, particularly in the East Asian countries. The company is differentiating incur additional costs to create this competitive advantage. These costs should be offset by higher sales revenues. The costs must be covered. There is also a risk for any differentiation to be copied by competitors. By following this strategy, Nike has dominated the global market for sports equipment and apparels (Hofstede, 1993,, 204).

(b): Porter's Five Forces Model

Bargaining power of suppliers

Suppliers of raw material for sports equipment manufacturing have ...