Background Information of Nike PDF

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Background Information of Nike Nike Incorporation is an American multinational corporation and its headquarter is in Beaverton, Oregon. Nike Incorporation includes famous brands such as Nike, Jordan, Hurley, and Converse that involved in design, development and selling of footwear, equipment, apparel and accessories for a wide range of sport activities. Nike is one of the world’s leading suppliers and major manufacturers of variety of sports accessories and equipment. Nike main objective is to enhance the ability of every athlete with their advanced products. The size of the company has been increased throughout the years. In 2017, the company has about 73,100 employees around the world. In 2018, the North American region of the Nike made most of the company revenue with approximately 14.9 billion U.S. dollars. Nike Incorporation has dominated throughout the world by expanding its markets with various kinds sports accessories especially footwear and apparel. The company main markets include North America, Western Europe, Central and Eastern Europe, Greater China, Japan and emerging markets while the United States is a core market as it is generating approximately 42 percent of the USA company overall revenue in 2018. Nike target customers are both males and females whose ages are around from 18 to 35 years old. Moreover, its target market is especially for the people who are in favor of higher quality sport equipment like footwear, apparel, and accessories. The main competitor of Nike Incorporation is Adidas and Nike also competes with Puma, ASIS, Under Armour and other popular athletic footwear and apparel brands.

Five Operation Performance Objectives of Nike To achieve a competitive advantage over rivals, Nike maintains its five operation performance objectives-quality, speed, dependability, flexibility and cost by implementing global business strategy. It is that distributing low cost high quality sportswear based on market trends to the customers with a high speed of shipping.

Quality As one of Nike’s main objectives is to gain customers satisfaction based on what they expect about Nike products and process, Nike focuses on products’ quality. According to current market preferences, Nike cooperated with Apple and uses advanced technology in its products by having sensors inside the shoes while connecting with Apple devices such as Iphone and Ipod to record time, distance, pace and calories burned. With so much dedication to the innovative and high quality products, Nike meets the market needs and demands globally. Nike was the innovator of shoe cushioning system in order to protect impact, shock and distribute pressure so that the users feel comfortable enough to wear. The objectives of total quality management, a management concept are diminishing the errors, eliminating waste while manufacturing and providing service to the customers. Moreover, attaining customer satisfaction, making supply chain management simple and provide employees receive high level training. Once organizations adopt total quality management, it encourages employees’ performance and teamwork. As a result, the organizations maximize productivity with minimum defects. Due to total quality management, the organizations increase customer satisfaction with high quality and low cost products. Nike applies total quality management in all production processes while acknowledging the quality characteristics of products or services can be described in terms of features, performance, reliability, durability, serviceability, design and functions. Reducing waste has been one of Nike’s principles since it’s founded. Through new approaches and new materials, Nike innovate its product s to reduce waste and chemical energy. By doing so, Nike maximizes the value of products and minimizes the impact of production. During manufacturing process, Nike reduces use of materials in its products to minimize cost and complexities in design and supply chain. Nike designers work together to gain improvement and solve problems and avoid rework and diminish the amount of defective work starting from the creation process. Nike produces sports goods by applying continuous improvement strategy. In such ways, Nike becomes world’s largest supplier and manufacturer by providing high quality products with constant innovation.

Speed Due to an efficient distribution system, Nike can fulfill each and every individual customer’s needs faster. Nike has quicker logistics and distribution network which allows shipments and response to demands faster. Nike has regional logistics centers globally that can reduce shipping time and increase service skills. Nike adds speed not only in shipping process but also in supply chain system. Moreover, Nike updates new shoe models in every six months, it can catch up customers’ wants and market trends with high speed. Therefore, Nike has a strong brand value and is way ahead of its competitors.

Dependability According to what Nike CEO Mark Parker said during an earnings call in 2015, whatever they do, they begin with the customers. By doing so, what they want to emphasize becomes clear and the organization becomes grow. Nike engages with customers by having Nike+ website where runners can interact with their friends, get healthy tips and receive or post information about new events by uploading about their running data and view their tracks on maps. In such way, Nike can get to know what customers’ needs and wants. Nike also reacts to all customers’ responses and innovate the products by inputting all customers’ needs in their new products. As a result, customers want to come back to the website every day and this leads to strong customer loyalty. With constant innovative products and design like having sensors inside the shoes by connecting with Apple devices, Nike not only retains regular customers but also attract new customers. Moreover, Nike attains customer trust by manufacturing sustainable and environmental friendly products. As Nike’s products are nonsubstitutable for customers, there is nothing to worry about duplicate product features and design. Nike receives customers’ commitment since it has brand reputation and is the world’s top supplier of sportswear. Nike is ranked higher than its competitors due to its dependability.

Flexibility As flexibility with customers is central to all famous brands, Nike also sets flexibility as a priority so that it can retain strong customer loyalty. By using Nike Photo ID service, the users can customize the products by sending pictures to Nike. Nike analyzes the images, innovate new designs by focusing on the pictures and then the customers can purchase their own design of the shoes via online. According to the market trends and customers preferences, Nike constantly innovates and update the products to achieve flexibility as well as competitive advantage.

Cost As one of Nike main strategies is best cost provider strategy, Nike distributes low cost and high quality products. Nike uses low cost contract manufacturers and outsources lower value-added activities. While Adidas is outsourcing in the United States, most of Nike’s products are outsourced by manufacturing outside the United States, mainly in Asia and the factories are close to raw materials. Although Nike constantly innovates new products within a little amount of time, its products are manufactured with massive economic of scale to maintain low cost strategy. By utilizing total quality management in manufacturing process, Nike minimizes the management costs such as internal failure costs, external failure costs, prevention costs and appraisal costs. Nike constantly examines the raw materials before it gets to production stage and the designers work together to reduce defects are ways to reduce internal failure cost. Nike also solves the problem as soon as it arises by diminishing external failure costs. With low cost strategy, Nike achieves competitive advantage and stands ahead of its competitors.

Trade-off Trade-off also known as the opportunity cost is a technique of reducing one or more desirable outcomes in exchange for obtaining other desirable outcome. To achieve the competitive advantages, Nike set flexibility as a priority strategy. Because of Nike trying to flexible with customers new need and want, Nike need to make continuous market research it may cost a lot for the company but company was also lead to cost provider strategy there may be one trade of between this two strategy. And also because of its cost providing strategy, when Nike selecting outsources supplier, Nike selecting from Asia (or other countries who can give the low cost raw material or resources).Today, people were more emphasizing on the CSR program or what kinds of activities does the company do for the country. So, outsourcing to other country was cannot provide the employment opportunities for the US employees. Therefore, this can reduce the reputation of Nike in the US. This may be also one of its opportunity cost because of its choosing strategy.

Supply Chain

According to Harrison and van Hoek (2005), a supply chain is a group of partners who collectively convert a basic commodity (upstream) into a finished product (downstream) that is valued by endcustomers, and who manage returns at each stage. Supply chain performance plays an important part to achieve customer satisfaction and profit gains. For any business, supply chain management should be as effective as to gain customer value and business growth. As the customer buy products and services with money, they all expect a great service from the organization. But there is one condition. Although the organization has effective supply chain management, if there is any problem in supply chain process such as the company delivers the products to the customers later than the promised date, the customers not only feel dissatisfied with the company but also they can spread negative word of mouth to the public. As a result, the company can lose its customer value as well as the brand reputation within a day or an hour or a minute. That’s why supply chain can be the strongest or the weakest tool for any organization. Due to the effective supply chain management, the company can provide the best customer service while maintaining long term relationship with customers and can gain competitive advantage with affordable price. Therefore, a good supply chain management can make the organization gain customer value and satisfaction. Moreover, in this 21 st century, to have high quality products and to be a successful organization, it is important for any business industry to adopt innovative supply chain practices and to manage the process carefully. If the customer perceived value excess the supply chain cost, it can lead to customer satisfaction. Nike becomes one of the successful organizations of sportswear around the world based on its successful and innovative supply chain process. Nike’s supply chain system is great enough to become a primary support of the organization in order to have high quality products with innovative methods, design and technology and good marketing channels. Due to its supply chain model, Nike has developed product quality, customer service and environmental impact. Nike depends completely on external sources for all manufacturing process starting from raw materials to complete products except designing. That large number of suppliers supports the business to grow and grow. Since good quality is a must in Nike, raw materials and its suppliers are selected with a lot of caution by a global procurement team. Nike had several controversies that relates to labor welfare for supply chain practices in the past. After that, Nike strongly emphasizes on ethical supply chain practices. Nike maintains long term relationship with its suppliers by making them to have a leadership in CSR and sustainability and become the ones who supply products with more than minimum quality standards.

Nike judges its suppliers based on fair labor standards. There was a problem concerning with conduct issues in China, Nike’s largest sourcing area with 180 manufacturers. Three top problems were found out after auditing its supply chain management: inefficient compliance with company code of conduct, a lack of training and awareness of the code, and poor communication with factory workers. The problems include fake factory document cases, cases of workers with incorrect identification and child labor cases. Therefore, Nike set a code of conduct to make sure that suppliers follow the stated best practices. It establishes standards and minimum requirements for suppliers relating with labor, child labor, excessive overtime, compensation and freedom of association. After arising the problems in China, Nike has raised the standards continuously years by years. Nike has the best relationship not only with suppliers but also with customers by delivering the products with speed.

The importance of procurement in Nike

In the supply chain of Nike, it is based on independence contract manufacturing. Its products are made in 42 countries at 567 independent factories in which more than 1 million workers are employed. These factories produce virtually all of the products marketed and sold by Nike. The key suppliers of Nike are primarily headquartered in East and Southeast Asian countries especially operated in Vietnam, Indonesia and China. They are: Pou Chen Corporation – the largest footwear manufacturer in the world. PT Pan Brothers Tbk – Indonesia based apparel manufacturer. Fulgent Sun International Holding Company – a sports and outdoor footwear manufacturer. Eagle Nice International Holdings – a sportswear manufacturer. Delta Galil Industries – an Israeli designer, manufacturer and marketer of leisurewear, active wear, socks and undergarments. In the procurement process, Nike completely relies on external sources for raw materials and manufacturing. As almost all of its products are manufactured by independent contractors, it needs to have broader base of suppliers which supports its business and growth. Therefore, the successful business model of Nike mainly depends on its good supply chain management and procurement process. Therefore, in the Nike, procurement is treated as a strategic function. To support the answers: Firstly, quality is a very important concern in the supply chain of Nike. So it maintains great caution regarding the selection of raw materials and its suppliers. As a strategic function, Nike has employed global procurement team to obtain and purchase raw materials. It takes care of the entire procurement process from selection to contracting with the right suppliers to get the right products and services. Therefore, its strategic sourcing initiatives have helped the brand to keep its promise and maintain its brand image by giving the best quality to the customers.

As the second point, Nike encountered several controversies over its supply chain practices regarding with its labor welfare in the past. Because of this point, Nike mainly focuses more on ethical supply chain practices stronger. When choosing suppliers, Nike’s sourcing strategy focus on suppliers who have shown leadership and commitment in CSR and sustainability as a priority. The suppliers also have to provide more than the minimum quality standards required by Nike. In making relationship with its suppliers, the supply chain management strategy focus of Nike is not only on quality but also on long-term agreements. Therefore, its supply chain partners are those with agile and resilient management systems which make enable them to grow sustainably with the minimized environmental impacts. Its suppliers are judged and audited based on fair labor standards as well to foster a culture of safety, diversity and inclusion down the supply chain. By doing this – Nike’s strategic sourcing initiatives have helped the brand to commit in purchasing sustainable raw materials. Lastly, Nike treat its procurement process as the important strategic function in its organization in the way of setting code of conduct and code leadership standards related to its suppliers. The established code of conduct and code of leadership standards set Nike’s expectations for suppliers with respect to the people and environment. In the aspects of people, Nike respect the rights of the people who work in factories such as requiring to maintain at least minimum wage, equal pay for equal work as well as a commitment to safe and healthy work environments. From the point of the environment, its code of conducts can help a lot the brand to reduce its carbon footprint to the environment. Therefore, we argue that Nike treats procurement as an important strategic function in the organization. The followings are explained how these code of conducts help Nike to maintain its sourcing strategically. •Code of conduct In the code of conduct, Nike has set the minimum standards which are required to meet by suppliers, factories and facilities. It lays down several requirements related to forced labor, child labor, excessive overtime, compensation and freedom of association. Every suppliers who are working with Nike are required to declare that they are sourcing materials from vendors which are Nike code of conduct compliant and they are also comply with the local and national labor laws. In these recent years, Nike has raised the expectations and standards throughout its suppliers. Suppliers are periodically checked and audited to measure whether they are meeting the compliance against the set standards to ensure a risk free supply chain system in the Nike. Therefore, this is how Nike treats its procurement as a strategic sourcing by ensuring that compliances using various methods. •Code of leadership standards Code of leadership standards are set to communicate supplier factories how they should implement to meet the standards set by code of conduct. Detailed criteria are used in evaluating and auditing. Therefore, in the last part of argument, Nike has set code of conduct followed by code of leadership standards in making sure that every supplier or factories making with Nike’s products must meet a rigorous set of compliance set of requirements. They are the integral components of Nike’s sourcing strategy. In summary, Nike is strict in choosing its suppliers or partners globally and has set the standards to them how to work with to meet the standards of Nike in order to ensure to offer the best quality to their customers as well as considering the sustainability of the environment and equality of workers. Therefore, these points support to argue how Nike’s procurement is treated as strategic sourcing.

Logistics Management Logistics can be defined as the process of delivering goods and services to and fro the businesses and storing of both raw materials and finished goods. Logistics management which is a component of supply chain management plans, controls and implements the shipment of goods and services and stores them in order to fulfill customer demands. For any business, logistics is a basic need to be a successful one. One of the benefits of effective logistics management is having customer satisfaction while meeting their requirements and providing best services. Customers expect to be offered fast, accurate and high quality products and provided good service. An effective logistics management can carry out exactly what the customers expect and this leads to customer satisfaction. In turn, customer satisfaction can bring future profitability for the business. Logistics management also creates visibility for supply chain process of the organization. The company’s supply chain process can gain operational insight and become efficient through an advanced transportation management systems which analyze historical data and check the flow of shipping goods. Therefore, good logistics management can enhance customer satisfaction which leads to increased profit and brand reputation for the company. And, the company can save a lot of costs in operations because of supply chain visibility. If the organization manages its logistics properly, the organization can control over storag...