Nike China

Nike China

Introduction

Nike is famous for stomping into new foreign markets with ads that are irreverent and sometimes downright rude. Now, in a radical departure, it is tiptoeing into the world's largest potential sneaker market. With the Chinese economy now slowing, consumer demand has also decreased. This is posing to be a major cause of concern for sports manufacturers such as Nike. Analysts and investors have made clear of the downturn after witnessing decline in sales during the current fiscal year's earnings in China. The sneaker giant is becoming increasingly cautious with its approach to its China operations citing the prevalent trend of discounts on athletic and sports goods in the country. It is without a doubt that Nike continues to hang on to the strong market leader position in China; nevertheless the organization continues to face serious issues not only in sales but in its supply chain (Fowler, 2004).

In the previous fiscal year, Nike China was able to generate sales of $2.5 billion which is a mere 10 percent of the previous year's sales of $24.1 billion. Nike China also witnessed a severe drop in its share price since December of 2008. Growth of the company was also unexpectedly slow following the drop in demand for Nike products. The situation and concerns would only get serious for the sports giant in China with international manufacturers began to offer discounts to consumers in order to gain more sales. It was also a move adopted to clear out the high inventory levels. In some stores in Mainland China, some analysts found that Li Ning, the third biggest sports apparel brand in China after Nike and Adidas was also beginning to offer discounts to consumers to up to 30 percent on all its products. Another low-priced manufacturer Anta was also seen to offer discounts of 40 percent on footwear and 60 percent on its clothing lines (Fontevecchia, 2012).

Nike on the other had to resort to discounts of 25 percent to 30 percent on its sportswear offerings. However, this was a move adopted due to the company's move from casual wear to performance based clothing lines.

Nike Supply Chain Problems

Nike in China has been faced with a number of supply chain issues that it recently admitted. The supply of the shoe giant appears to be suffering from transparency, employee wage issues and the employment of underage workers (or child labor). Recently, Nike released its supply chain report specific to China discussed the aforementioned problems. The Asian superpower is Nike's biggest sourcing country with approximately 180 manufacturers in contract with the company to manufacture its line of products, which includes footwear. Following the company's audit of it supply chain network, Nike China came to find three major issues in management. These included poor compliance to the code of organizational conduct, lack of awareness and training regarding the code and ineffective communication of organizational standards to suppliers by the employees (Reuters, 2012).

As of today, Nike in China employs approximately 210,000 ...