Nike: Product Design and Quality Management

This article explores Nike's product design strategy and quality management approach. It discusses Nike's product portfolio, including shoes, apparel, and sports equipment. It also delves into their product strategy, lifecycle planning, and customer involvement through the Nike+ app. Additionally, it examines Nike's SWOT analysis and their focus on quality management through Total Quality Management (TQM) and Lean Manufacturing.

INTRODUCTION/ COMPANY BACKGROUND
Operational strategy
Product design
Process design
SUPPLY AND CHAIN MANAGEMENT
Quality management
Conclusion
references

Introduction
History
Formerly known as Blue Ribbon Sports, Nike, Inc. was founded in 1964
with its headquarters in Beaverton, Oregon by Bill Bowerman, a field
coach at the University of Oregon, and his student Phil Knight. Originally
started as a sportswear company, Nike launched their first shoe in 1972
shortly after which it was officially renamed to its present name in 1978
and went public in 1980. Even though they opened their first retail outlet
in 1966, they have numerous outlets and distributors today in more than
170 countries. Soon after being recognized in the industry during the late
1980s, Nike slowly expanded its footprint by branching out their lines of
products by acquisitions and mergers – a few prominent ones being Cole
Haan, Converse, Canstar Sports and Umbro. Officially designed in 1971,
the “swoosh” or the curved checkmark is recognized worldwide as Nike’s
logo today (Britannica, February 2019).
Product Portfolio
The flagship product of Nike, Inc. is shoes. Along with manufacturing
shoes specific to many on-field games like baseball, golf, soccer,
basketball, tennis and volleyball, Nike also produces shoes meant for
consumer fashion such as Mary Janes or flip-flops. They have numerous
other offerings when it comes to shoes meant for running, cross-training,
bicycling, wrestling, cheerleading, auto-racing, aquatic activities or any
other athletic and recreational purposes. Moreover, Nike also
manufactures apparel for sports activities for both men and women. Nike
features a wide variety of collection for its apparel line, including Nike
Free, Livestrong, SPARQ and Nike Pro as part of campaign initiatives.
Additionally, sports equipment is also a part of Nike’s business. These
include yoga mats, swimming caps, gloves, baseball bats, rackets, balls,
golf clubs, protective wear etc. (Writer, C). They even expanded to Nike
ACG (All Conditions Gear) for extreme sports products like equipment for
snowboarding and mountain biking. Their accessories such as bags,
watched and socks are also well-known. As of today, their product lines
also offer portable heart-rate monitors and high-altitude wrist compasses
(Britannica, February 2019). Consumer technology such as the Nike+ app
that includes physical education classes, music, and other competitive
activities are also part of Nike’s product portfolio (Writer, C). For every
brand and product offering associated with Nike is a clearly defined,
different customer which branches out opportunities for Nike’s long-term
growth (Nike, Inc., 2019).

Product Strategy
Given the vast amount of product offerings, Nike implements a
combination of Differentiation and Cost Leadership strategies. This is a
mix of two or more of Porter’s generic strategies which aim to reduce
costs of production while maximizing profitability or reducing selling
prices. In the late 1990’s, this generic strategy has helped Nike recoup its
customers from the industry competitors, especially Adidas. Nike’s cost
leadership strategy is also used to build lasting customer relations and
develop brand loyalty by providing rewards for premium customers. From
saved costs through their cost leadership strategy, Nike uses their budget
on developing innovative and unique products as part of their
differentiation strategy. Their aim through innovation is to become more
sustainable and keep up with competition through creating highly
differentiated products and product lines (Miller, D., 1992).
Nike’s mission statement focuses on innovation implemented by means of
new designs for shoes and all related products that they manufacture.
Going in line with their mission statement, product development acts as a
crucial strategy for Nike’s intensive growth which simply involves the
introduction of new products for the purpose of increasing sales revenues.
Since customer preferences are constantly changing, product
development through new technology ensures that these products remain
appealing to the consumers by being set apart from Nike’s competition.
Additionally, this product innovation strategy implemented in the design
of sport shoes, apparel and equipment also fulfils their financial objective
by increasing Nike’s market share (Parnell, J.A., 1997).
Product Lifecycle Planning
The stage sequence of growth and development of an organization or a
product is called as the Product Life Cycle. It is characterized by four basic
stages: Introduction, Growth, Maturity, and Decline (Kopp, C., 2019). In
this section, we will go over the lifecycle analysis of Nike, Inc.
During the Introduction stage, Nike launches a new product accompanied
by a wide range of advertisements in the form of posters, billboards and
magazines. Because Nike knows that many consumers demand that new
product, the cost of advertisement is covered up by selling even a small
quantity of the new product which are usually expensive for the
consumers. In fact, some products get so popular during the introduction
phase that Nike pushes up the prices to get more profit. As this process is
repeated, the company generates more profit and that is when Nike
enters its Growth phase. Presently, Nike is in the growth state of its life
cycle which allows it to develop the skill for value creation and obtain
more resources. This increase in resources helps the company to upgrade
their labor and use them as competitive advantage. With this skilled labor,
each team focuses on a specific product for developing and completing
the demand of the customers for that market segment. After growth

comes the Maturity stage. In this stage, the customers are not as excited
about the product as they were during the introduction stage. The shoes
sales might be hitting up, but it does not last long. This is the critical point
for any company. If Nike doesn’t take any step in introducing new
products with exciting features and innovation, the company would go to
decline phase and eventually death. During the Decline phase, the shoes
are out in the market but the hype among the customer is not as
expected. So, the price of product goes downhill and hence, so does the
profit. For any company in the maturity phase, it is very important to
retract back to the growth phase as soon as possible to ensure their
position stays intact in the market. As depicted in Fig. 1, it is evident that
Nike obtained the growth phase soon after the maturity phase. This
requires a proper product cycle planning which is why the company is still
flourishing in spite of being in a huge competition. This planning starts
well before the growth stage, where the development of the business plan
is done. This phase includes various aspects like SWOT analysis, market
segment analysis, product opportunity, resource statement, feasibility
checking and a detailed plan of business goal (Writer, C., 2019).
Good and Services Design Approach
In order to keep product design consistent with business goals, Nike
concentrates on advanced technology and market preference, and
implements a strategy called the Closed-Loop Business Model. This
strategy reuses and recycles all materials to ensure zero waste. Under this
strategy, Nike’s products are produced by recycling waste materials as
innovators create new product designs that can also be easily
disassembled. Nike’s Considered Design range of products includes the
newest products that integrate sustainability and current sport needs
using the Closed-Loop business model. In the long run, Nike attempts to
design products that utilize fewer materials from nature and that can
safely go back to nature at the end of their lifecycle. The ultimate goal of
Nike Considered Design is to think about sustainability from the beginning
of the design process. Instead of designing a new shoe, Nike creates a
new model of design which thinks about manufacturing process of shoes.
One example of the implementation of this strategy is the Nike Fly-Knit
Racer, which is considered to be more environmentally friendly while
decreasing long-term production costs. Nike also broke its old rules of not
fixing something which is not broken as with this product, they capture
50% of the running shoes market and 92% of basketball shoes market
(Writer, C., 2019).
Customer Involvement
Nike is very adept at maintaining customer relations and incentivizing new
customers to join the Nike family. Not only do they provide member
benefits, but they also provide excellent customer service to all
customers. Nike’s Nike+ app provides personalized recommendations and
offers to users under ‘Featured Picks’ based on customer data and
purchase history. Using smart recommendations, Nike makes the
purchase process for users easier thus increasing chances of sales and

building brand loyalty. Additionally, they also provide benefits to Nike+ app
active users by using their goals and interests to offer access to fitness
classes, guided meditation and even music. Thus, users can earn and
receive rewards digitally based on their physical engagement with Nike
products through non-transactional behavior. For example, in November
2017, Nike rewarded its consumers for a non-purchase behavior by
inviting them to run a 25-minute 5K through the Nike+ app. The area of
interest for consumers was a pair of Nike Zoom Fly trainers which would
be given out free of cost to all those who complete the 5K run in under
twenty-five minutes. Nike also boasts excellent customer service as they
utilize their social media platforms answer all support questions in a
timely and friendly manner. Their Twitter account, @NikeSupport, is
functional all day, every day and the customer service agents are
proficient to assist customers in numerous languages included Dutch,
Spanish, German, French, and Italian. In their flagship store, Nike is also
building a fifth floor that is exclusive to Nike+ members, thus further
encouraging customer engagement with the brand outside of
transactional behavior and incentivizing membership. This floor will be
characterized by events, special gear, and even one-on-one assessments
by Nike experts. Nike keeps the membership free and uses it solely to
capitalize on customer relations rather than fee profits (Langrock, S.,
2018).
SWOT Analysis
Nike has a very strong brand name and it is well known all around the
world. They operate in more than 160 countries. Nike also uses rapid
prototyping and innovation techniques to stay ahead of the competition.
Nike has a large number of suppliers and subcontractors. Nike also has
great customer relation. It provides outstanding customer service. Nike
doesn’t manufacture any of their products on their own. They get it done
offshore. Because of this they cannot constantly inspect them on a regular
basis. This lead to variance in quality. Nike isn’t focusing more on
developing countries like China for their sales. They image went bad
because of labor controversies. This was because of offshore contractors
exploiting workers. Nike has less product line. They should try to explore
more sections like formal wear, electronic section etc. Nike has the
opportunity to invest in new product development and innovation to get
ahead in the competition by releasing different products. There are a lot
of developing countries where Nike can focus on to increase their
customer base. Nike can also try to improve sustainability by recycling
shoes to make them shoes again as customers nowadays are more
inclined towards environmentally friendly products. Nike can also try to
integrate their sportswear with fashion wear so everyone can wear them.
Nike has faced a lot of competition but has able to cope up with it but now
because of internet age, many new online based companies can face as a
threat to Nike in near future. Nike also face the problem of duplicate
products being produced and sold as Nike. This reduces the sales of
original Nike product. Nike is mostly dependent on footwear for it revenue.

They need to change this strategy. With rapid technological change, Nike
is not able to cope up with it. Also it requires a large initial investment.
Quality Management Strategy
Quality and Strategy
The degree to which a product lives up to its endurance, maintainability,
order characteristics and performance that a customer expects to get
from the product is defined as the quality of that product (Goetsch and
Davis, 2014). Nike products are known for their high quality as they
successfully meet the demands of consumers from all around the globe.
Nike recognizes that the quality characteristics of products and services
can be defined in terms of their functionality, appearance, reliability,
durability, recovery and contact. To meet the quality standards Nike
focuses on various strategies various strategies like TQM (Total Quality
Management) and Lean Manufacturing (Shanley, 2004).
Nike Focuses on quality during the manufacturing process to meet the
customers’ demand and maintain high standards of quality. Nike’s
manufacturing process is inclined towards TQM (Total Quality
Management). While other companies’ TQM restrict innovation and
creativity, Nike uses it to motivate creativity which lets it to be in the
position of continuous improvement and development of new products.
TQM helps the company to maintain its image, improve working
conditions along the supply chain and encouraging new processes and
development. The combination of these three elements through TQM
enables Nike to secure market share, differentiate themselves from its
competitors and create value for its customers. TQM at Nike also focuses
on the production and deliverable capability of the products and services
that the market demands in the short and long run. Therefore, Nike ends
up utilizing quality management in the entire production facet (Shanley,
2004).
When it comes to the design of Nike products, the concept of design
management plays a crucial role in the implementation of TQM. Various
methods and techniques are examined to ensure the development of an
active system and an organizational structure best suited for product
development – Computer Aided Design, Robust Design, Value Analysis,
Modular Design and Environmentally Friendly Designs to name a few
(Shanley, 2004).
According to Nike, the number of faults in a design along with the
efficiency of achieving market demand numbers is a strong indicator of
the quality of the design process. For the last few years, Nike has vowed
to eliminate waste during production processes by developing
environmentally friendly designs. In a world where resources are limited
and the threat of water scarcity, climate change and other resource
constraints are a much greater threat than the financial crisis, Nike is
implementing Green Manufacturing to conserve water, increase energy
efficiency and reuse and recycle (Shanley, 2004).

According to Nike, a quality product is one that can be obtained on the
basis of current knowledge and technology. Engineers and designers who
are proficient in the field find this method very appealing which in returns
ends up enhancing their productivity and motivation. In manufacturing
processes, Nike strongly endorses teamwork by means of implementing
product teams. The designers at Nike work with each other to produce
design choices which are smart and eco-friendly right at the beginning of
their creative process, while proceeding and solving problems. Designing
the product exactly right at first means lesser re-work later as it results in
products which are either less defective or not defective at all. Once the
quality has be defined and measured, processes will need to conform their
quality to proper quality standards. Nike to make its vision achievable, has
set Considered Design Standards that every product should meet. Nike’s
assurance to the customers is to create innovative performance products
while managing its business within nature’s boundaries. So, innovative
design is used to design out waste, chemicals, and energy into new
materials through various techniques. Nike calls this method Considered
Design. When it is implemented alongside the traditional design process,
it maximizes the value and quality of the product and reduces the waste
during production. It also minimizes carbon dioxide emissions across the
whole supply chain (Nike, Inc., 2019).
Nike constantly tries to find ways in order to minimize the utilization of
raw materials and to handle them responsibly throughout the entire
manufacturing process. By constantly improving their processes by
reducing the quantity of waste and increasing their overall output, Nike
attempts at managing costs, improving quality and complexities in the
design phase and in the supply chain (Nike, Inc., 2019).
The Pursuit of Quality
One of the important goals of Total Quality Management is to achieve
long-lasting success by means of customer satisfaction. This perspective
of TQM is entirely dependent on the participation of all members of an
organization in order to proceed and improve the quality of goods,
products, services and processes of the organization (Distelhorst, et al.,
2014). Often times, it means incorporating various technical tools and
management approaches while simultaneously working towards
improving existing tools and techniques for consistent improvement
within the company (Davrajh and Bright, 2013).
In order to implement TQM in an organization, various practices play an
important role which are coaching, communication, involvement,
motivational incentives, recognition, team-work promotion etc. The same
process goes for the implementation of lean manufacturing in an
organization. Like many other brands that believe in the power of their
human capital, Nike strongly invests in the workers involved in their
supply chain. The industry of footwear and apparel was considered to be
tremendously low-technology based, low-skill utilizing and lower-paying
jobs for many years in the past. However, this assumption is now being
questioned because of the switch to lean manufacturing as it required

workers to be highly skilled, knowledgeable and with a decision-making
power. Initially, many contractual manufacturer partners of Nike did not
have the potential to develop any skills needed for lean manufacturing
among their workers. That is when Nike stepped up to assist with Human
Resource Management (HRM) training and other aspects to their
contractual manufacturers so that they could invest in their workers. In
fact, in 2012, Nike fully transitioned to Sustainable Manufacturing
Training, which is an integrated model that addresses an entire range of
issues, including lean manufacturing, HRM, health and safety,
environmental compliance, energy management, environmental
sustainability and freedom of association (Shmula, 2014).
Additionally, team meetings play an important and an inevitable role in
developing proper method to spread the formulated plan in the entire
company. In these meetings, various pathways and methodology are
discussed, which helps in communicating the plan to the employees of the
company. Also, various conferences and seminars are organized to spread
the plan more effectively (Goetsch Davis, 2014). In addition to all of this,
numerous other training sessions are given to all the employees and
various reading materials like manuals is also provided to enhance their
knowledge about the formulated TQM plan. On the other hand,
implementation of TQM may pose a few challenges to Nike. Employee
resistance and production disturbance resistance may be considered as
one of the biggest challenges, which is directly associated with TQM. It is
very important to identify these risks which can weaken the
implementation of the TQM but this weakness can be eliminated by
motivating employees with the help of training workshops and feedback
or one-on-one meetings (Oakland, 2014).
The Implementation of Quality
As we discussed above, Nike Inc. is using Total Quality Management
(TQM) and Lean Manufacturing for achieving high quality level of product.
According to Davrajh Bright, Total Quality helps the organization to
enhance and improve their operations while ensuring environmental
integrity. Which means, applying total quality management for Nike Inc.
can help the company gain more credibility and reputation on consumers
and improve the efficiency of daily operation process. There are four steps
are included in total quality management of Nike, Plan, Do, Study and Act
(Davrajh Bright, 2013).
Plan is the first step, where top managers overview their current operation
condition, and indicate the problems, collect data and file all current
procedures in operation (Distelhorst, Hainmueller Locke, 2014). In other
words, under this step, managers make an operation strategy plan which
will solve current problems and make a significant improvement. The
second step is Do. Basically, managers record the changes they made,
and make documents for these changes in order to collect data in next
step Study. During Study step, they will testify these changes by
collecting data and evaluate it for ensuring they can achieve their certain
goals. Last step is Act. After the strategy plan pass the testify process,

Nike will implement this plan and try to get feedback and suggestions
from their stakeholders (Distelhorst, Hainmueller Locke, 2014).
In the implementation of Lean Manufacturing, Nike believes that
executing minimal changes to reduce the time taken to complete a task is
rather troublesome in a large company. And therefore, the entire work is
contracted to numerous smaller agencies where it is easier to supervise
every task being performed and the presence of multiple agencies
ensures that time and capital are spent efficiently. When it comes to
vendor selection, Nike follows a strict and rigorous screening process to
ensure that the quality of raw materials is apt and is provided in lesser
time. Additionally, Nike now takes 38% less time to assess a
manufacturer’s partnership capabilities, which is equivalent to 152 days
as compared to 246 days in the previous days. Once approved, Nike
safeguards its trust with the vendors by qualifying them for long term
contracts, provided the vendor consistently maintain the same efficiency
in their production processes (Int J Prod Res, 2014).
Process Strategy
As we know, Nike combine competitive strategy which includes cost
leadership and differentiation. The key point is keeping lower cost during
production and research process for competitive advantage. Under this
purpose, Nike used Product Focus as their process strategy in the first 15
years of the 21st century and captured 25.44% of sports shoes market by
2017 as seen in graph below (O’Connell, 2019).
According to Edward Ferguson, Nike’s OM must focus more on
streamlining and increase their quality of production. This objective is to
make sure that the system is efficient (Ferguson, 2017). Product Focus
strategy, maintained high production and low variety of product, can help
Nike reduce variable cost and enhance efficiency. Even though Nike has
several product categories, such as footwear, apparel and sport related
accessories, all of its product share most of materials, technologies and
design model. To keep Nike’s differentiation, it focus on short-term
research and product development since it will introduce new products
fast and cut down the payback period. (A.J. Almaney, 2000)[1]
The Nike top management board shifted its plan from being a athletic
wear brand to becoming more personalized products. During the meeting
at the company's headquarters they placed a strong focus on the
consumer decides theme and introduced some interesting ways of
customizing their shoes and other apparel. (Piller, F. T., 2018)
Process Design and Redesign
As we know any process is a candidate for design, any successful redesign
demands for training and proper action, coordination from departments
like technical staff, management and answer to why the change is
required (Varun, SeungWilliam, 1995).
Redesign allows the company to bring variation in technology, quality,
innovation. It’s kind of represents the shift to horizontal view of business

and shift from conventional hierarchy vertical based model. There are
various types of redesign tool which are project management,
coordination, modeling, business process analysis, human resources
analysis and design, system development (GroverMaholtra, 1997).
Nike uses twenty seven tools for managing its supply chain. It was
planning to implement Enterprise resource with the objectives such as
manufacturing efficiency, increase profit, reduce lead time and improve
timed delivery, reduce stock in inventory and the most important was to
implement a new enterprise resource planning system built by them. As
adapting to new changes doesn’t always give good result. The same way
Nike faced many challenges after adopting SAP Enterprise Resource
Planning System. The new system couldn’t be customized according to
the company’s requirement which caused problems within the company.
The problems were mostly related to supply chain management and
forecasting which had a great effect on the company. Some of the effects
were decreased revenue overtime, improper production and demand,
demand couldn’t be fulfilled and wrong order shipping.
These problems within the process can be solved if the process were
redesign. Learning from the mistake Nike decided to redesign the process
as they required better system for supply chain, forecasting and various
improvements in the current system. Nike implemented SCM (Supply
Chain Management) which clearly defined the ideology shift from make to
sell à make to order. The only mistake while implementing the ERP system
earlier was they took it way too fast. To incease the productivity of the
system, Nike should adopt the roll out approach rather than the quick big
bang approach. One of the most important things is Nike should generate
business process template that approved globally (Grover, V. and
Malhotra, M., 1997).
In short, we can say that the method of redesigning the process usually
include designing the flow of work within an organization for its smooth
flow. It gives the company the data about how they can improve the
consumers satisfaction, customer service and how to cut cost of
operation. (Fitts Aziza, 2010) Nike in the start did not think about the
variation in the footwear department and the changes in consumers
preference and taste which lead to companies decline. But after properly
redesign the process the company has moved to mass-customization.
They produced customized footwear by shaking hand with Flex which is
based in Mexico. It is not leaving Asian countries, but is moving towards
their shoring because of the requirement of the mass customization and
meet other demands of the customers. Nike created a three-tiered
customized supply chain for their shoes. The process to manufacture the
shoes requires complex assembly so they outsource it from China where
Nike owned factories. They appointed a manager to go over there and
approached to buy them over as they made a move to complete off-shore
provider. They also made some redesigning within the firm which would
bring great benefits in terms of profit, time and increase customer
satisfaction by providing them the right product at the right time. We can
see what changes are made by them. (Grover, V., Jeong, S., Kettinger, W.

and Teng, J.,
1995)
Nike also moved into online strategy where they decided to offer three
levels of customization. In first level they let customer decide their
preference for customization and had many choice around fifteen. But
later they realized that customers are producing bad designs. The second
tier had around eight choices and they were delivered in fourteen days of
order. The third tier had light modification and was not customer
preference. It was stocked in inventory nearby for fast delivery within a
week. They also started personalization on t-shirts, socks, shorts etc. So
customers can write any number, name and get them customized as they
like (Handfield, R., 2016)
Nike is considered one of the pioneers of mass customization in footwear
industry, the company launched NikeiD in 1999 which offered designer
footwear on internet. The Air Force One was one of the first personalized
shoe and after realizing the public liked this concept, the brand further
developed the idea. Today Nike offers countless customizable shoes, not
only online but also in person at studios across the world. The online
system is professionally designed to make the design process user
friendly for customers. NikeiD website also offers customizable apparel.
When an order is placed, the manufacturing process begins immediately
thus preventing cancellations or modifications to the design, nevertheless
their standard return policy of 30 days still applies.
In 2017, Nike introduced a new corporate initiative called Consumer Direct
Offense with 3D printing at the core of the process. This initiative was
developed to reduce the average product creation timeline by 50% by
implementing additive manufacturing. Additive manufacturing allows this
facilitation of speed through the rapid prototyping process. Rapid
prototyping enables Nike production team to produce a personalized
footwear in some hours as compared to months. Nike began
experimenting with this technology in 2013 through their football cleats.
By 2016, Nike had invested a lot more in additive manufacturing and
began developing customized shoes for elite athletes for the Olympics. In
2018, Nike expanded their investment as they developed the Nike
Flyprint. The product development team was able to translate complex
athlete data into prototype iterations with unprecedented quickness and
precision. Nike is planning to commercialize this initiative and monetize
over it with heavy investments over the next five year. As a result, we can
see the company propelling in the direction of cosmetic mass
customization as they are beginning to use individual performance data
from movements to translate into their products (Ruffin, M).
Nike also came up with the Triple Double Strategy (2X) in mid-2017 in
which they decided to increase the efficiency by using innovation as a tool
by doubling the speed of distribution of its products to market along with
doubling its connections with the consumers. (Nike, Inc. News. 2017, June
15). A disrupt yourself way, the entire focus of this process redesign is the
Nike Consumer Experience (NCX) which feeds the 2X initiative by

including a wide chain of Nike’s wholesalers along with its own direct-to-
consumer partners. (Nike, Inc. News. 2017, June 15).
The main idea behind 2X is to “edit to amplify” (Michael Spillane. Nike,
Inc. Investors. 2017, October) wherein Nike will be putting 25% lesser
styles in the market to turn up the sales by restricting distribution
channels to only the ones that deliver the fastest and grow with most
profits. Before the Triple Double Initiative, Nike had a massive 30,000
slate of retailers which were planned to be cut down to only a special 40
that offered superior customer experiences, quality services and a
storytelling that differentiated the brand along with Nike own direct retail
online and offline platform. (Nike, Inc. News. 2017, June 15).
By the end of 2018, the revenues of Nike increased by 9% followed by a
10% increase in the beginning of 2019. Overall, Nike, Inc. was celebrating
a double-digit international growth earlier this year alongside gaining high
pace in the North America region, which is considered to be its premier
market. (Forbes. 2018. December.). In fact, Nike gives the credit to NCX
for 100% growth in 2018 virtually. (Euromonitor. 2018, November).
Mentioned below is how Nike did it:
Nike picked up from a pool a total of 40 outstanding retail performers who
knew their customer segments inside out. These retailers were meant to
provide exceptional customer experience to the buyers on behalf of Nike,
both through physical shopping experience or online. These retailers were
meant to gain the most access to Nike most popular products and limited-
edition products along with the most budget for marketing so as to draw
buyers away from the remaining undifferentiated sellers. (Forbes. 2018.
December.).
These were carefully crafted steps to drive 80% more sales by the end of
2023 in North America region through differentiated NCX retailers, up
from 40% in 2017. The challenge was 60% sales in this region were
through undifferentiated sellers, which are not destined to survive. (Trevor
Edwards. 2018). Even though the categorization criteria for Differentiated
v/s Undifferentiated retailers has not been defined, Nike, Inc. gives
examples of Nordstorm and Foot Locker to provide an understanding.
(Forbes. 2018. December.).
Simultaneously with the initiation of 2X Strategy and aligning with the
principles of NCX, Nike worked to enhance their shopper’s experience by
revamping the Nike mobile app. Before this, like any other loyalty
program, NikePlus rewards would account for easy access to exclusive
products. However, with the software upgrade, members now have access
to personalized work-outs, free entry in evens , free delivery, one month
return policy and access to Nike experts – all for a little extra charge. The
more a customer spends on the app or uses the fitness app, more are his
benefits for additional services, access to VIP experiences, unlocking of
limited-edition products or personalized discounts. (Forbes. 2018.
December.).

The play here is to get as much customer data as possible allowing the
company to further drill-down into their customer’s preferences. A deep-
dive into the customer’s shopping habits lets Nike control their future
engagements with the brand by personalizing the entire experience.
(Forbes. 2018. December.). Even though it started off in 2017, there are
over 100 million subscribers of NikePlus and the number is predicted to
increase three times by 2023. It’s reported that NikePlus members make
triple the amount of purchases as non-members on the actual Nike
website, www.nike.com. (Euromonitor. 2018, November).
Alongside, Nike is experimenting with the formats of its physical stores in
several locations. The Nike Live store model changes fifteen percent of
clothing and twenty five percent of footwear products every two weeks as
compared to the standard time-frame of 30-45 days. (Forbes. 2018.
December). The swapping of products at a frequency of two weeks
maintains the fast-forward fashion statement that Nike is trying to brand.
A fairly new concept, there are only a few Nike Live stores – the famous
Nike, Inc. flagship store on 5thAve in New York City or a smaller version on
Melrose Ave, Los Angeles. Another varying addition to the stores is the
House of Innovation in Shanghai which is a recently developed concept
that uses Nike Arena for activities like products in display rotates around
an axis. Given that this is a new concept within retail stores which can be
customized for different cities, one could potentially host workshops and
presentations in the arena. (Forbes. 2018. December).
Location Strategy
Nike locates its manufacturing facilities all around the world in continents
like Asia, South America and Africa. The manufacturing plants are
specifically placed close to raw materials excess area and cheap labor
sources. However, this leads most manufacturing facilities to be placed
further away from consumers, thus resulting in higher distribution and
transportation costs. Nevertheless, the savings are still significant as
cheaper production greatly offsets the higher costs of transportation. As
globalization continues to develop, the cost savings will only increase
yielding higher revenues for Nike through this location strategy.
According to the U.S. Department of Labor, the minimum wage in the
United States is $7.25 per hour (2019). If the workers work 8 hours per
day, then their minimum daily wage would be $58. Compared to the
United States, the countries in South Asia have lower minimum daily
wages. Based on the picture below, Arief Subhan shows that the minimum
daily wage is at the range from $2.68 to $10. In other words, we can hire
at least 5 more workers in South Asia than in the United States.
Layout Strategy
A big part of Nike’s OM is dealing with the strategy to be used in layout of
its facilities. The objective is to maximize workflow based on human
resources, capacity requirements, technology, and inventory
requirements (Ferguson, E., 2017, February 7). Nike’s operation manager
is responsible for the layout of the facilities owned by Nike and they follow

certain strategy like the workplace should be such that the employees can
move freely. Nike doesn’t have control over the layout design of third
party contractors (Ferguson, E., 2017, February 7).
After opening its first headquarters in Beaverton, Oregon in 1990, Nike
has been focusing on expanding its offices that provides as a good
working environment. The Nike Worldwide Headquarters has a unique
character which is more like a college campus with trees, green space and
even a man-made lake named after the company itself, Lake Nike (News,
Nike, Inc., 2016).
The recent extensions of the building into a wider, greener landscape with
adjacent and interconnected interiors tell about Nike’s power of teamwork
and creativity. Also, all the building designs aim for LEED Platinum
Certification (News, Nike, Inc., 2016). They also follow an environment
friendly approach which include solar for lights, radiant convection for
large buildings and sustainable water treating plant (Libby, Brian. 2017).
With every expansion since 1990, Nike has been working to collaborate
sport, innovation within its building structures and, thus, striving for the
company's growth while simultaneously respecting its surroundings. Key
aspect of the Nike Worldwide Headquarters is the naming convention
followed for every aspect of the entire campus as they are all named after
famous athletes who were key figures in Nike history, for example, the
Ronaldo Lacrosse Field, or the Mia Hamm Research Lab (News, Nike, Inc.,
2016).
The largest structure is expected to be Serena Williams Building which is
to be spread out on 1 million square feet equal to almost three city blocks.
This structure will be a contrast to all the other older structure designs on
the campus and will feature plenty of curved glass (News, Nike, Inc.,
2016).
In 2011, Nike contracted with Henderson Engineers to update old stores
for expansion and build new stores. The Nike Factory Stores implement a
pilot mechanical design which reduces energy consumption by 27% with a
two-and-a-half-year payback. As a result of Henderson’s innovative
designs, every stores and offices made by them are LEED Gold certified
(Henderson Engineers, n.d.).
All Nike stores are characterized by their distribution space and location of
furniture, allowing customers to conveniently pass through them and
make comfortable purchases. The different sections of the store are
divided by extensive corridors to make the product differentiation easy.
Every section is aimed at focusing on one or more major sports that Nike
specializes in were running, football and basketball is the most common
sports, are found mostly in every store. Even though the distribution
space might seem convenient to some customers, it frequently ends up in
confusing them by having to visit almost every section in the store to find
the exact sport they are looking for (Molina, Diana. 2016).

The spacious store entrances without any visual barriers allows the
customers to see clearly from outside to inside and tempting them to do
more than just window-shopping. The design is such that customers
outside the store would often see mannequins hanging from the ceiling
throwing a ball or just running, or a large screen with an intense game
playing where players are obviously sporting Nike gear (Molina, Diana.
2016).
Moreover, with every new limited-edition product that Nike brings out,
they also want to create good relationship with all their customers. A
good example is the launch of limited edition Zoom LeBron IV NYC shoe
for which a 5,500 square foot pop-up retail store was opened in
Manhattan. By creating a biopic journey of LeBron James’ through
narration-based themes, the customer was able to dive deep into LeBron’s
athletic world. The background music in this store was shoes tapping on
floor of a gym and the dribbling of basketball along with crystal clear
acrylic tubes suspended from the ceiling that held LeBron’s personal
objects like his favorite cereal and a model of the house where he grew
up. Displays like these helped Nike create an energized urban retail
experience for all of its customers (EightInc., n.d.)
Nike’s HR Strategy of Labor Planning and Job Design
Nike, Inc. is among the international organizations that consider human
resources (HR) strategy as a central tool to the realization of their vision.
One HR strategy that Nike employs is labor planning and this helps in
maintaining its position in the athletics wear and footwear industry. As a
move to ensure employment stability, Nike's management hires
employees on demand-based and constant employment basis (Nike, Inc.,
2019). Most employees in this company work on permanent terms with
their salaries commensurate to the positions they hold. For instance, Nike
has committed to increasing workforce remuneration to ensure equality
for the people who work in similar job categories. This move will see about
7000 employees get additional pay to bridge the gap between them and
the individuals who hold the same positions (Thomas Lucas, 2018).
However, Nike has demand-based employees who work in the respective
departments in its stores. This situation implies that the personnel get to
work when there is an additional demand for labor and this makes the
cost of hiring them vary.
Nike’s policy about labor planning also take into consideration various
aspects like time of workers, job specification and classification and other
rules. Employees at Nike also enjoy paid leave that includes paid holidays
together with summer hours (Nike, Inc., 2019). The adaptable work time
ensures that the workers have good rest and become innovative so the
company can maintain its position in the competition (Azmi, 2019).
Additionally, Nike has different job designations that include managerial
positions and CEO among others and they exist globally. Every employee
has specific roles and responsibilities attached to his/her docket and they
should follow the available work rules when executing these obligations
(Mariappanadar, 2019). The reason for the existence of these positions is

to promote flexibility in staffing to give the company a competitive
advantage (Thakor, 2013). Through the use of labor planning tools among
them human resources management systems, Nike has managed to
promote innovation among its employees and this has made it remain a
leading entity in the industry.
Nike also implemented developed human resources management
training in factories in Vietnam and Southern China which helps them in
strengthening their manufacturers HR systems. Each plant is given a
survey to be filled by workers working there to see if they’re facing any
problem. This is to check the bond and trust between them. Once the
results are out, the HR are known with the problems going on within the
plant. They then plan what is to be done in the next 6 months to
overcome the problems faced by workers and they also address this
problem to the human resource management. Each factories set different
goals required for them. For example: One plant improved their employee
satisfaction from 5% to 15% while other increased the technical skills of
the worker. Each plant had their own plan of progress that the employees
had to follow so that the system can work smoothly and efficiently
(Nikebiz.com, 2010).
Nike also provide training for the workers to improve innovation, efficiency
and better control of the plant. Nike released an online portal for its
employees to obtain training in various areas like leadership,
management, retail, merchandising and also business strategy called
NikeU. Currently, over 80% already have a NikeU account. According to
statistics, more than 170,00 online sessions and around 32,000 face to
face sessions were taken by employees in 2003 (statista.com). Nike is also
constantly trying to improve this training system by providing different
language so employees from all over the world can train on it with ease.
Nike also has this training program application on phone for their
employees, so they can train anywhere and anytime (The Budapest
Times, 2013).
Nike also plans effective for the retention of employees. They know that it
is the fundamental factor for the development of the company. Nike uses
an employee benefit program for its employees which provide benefits for
them as well as their family in terms of health, wellness and also helps
create a good working condition. Some of the example of this kind of
compensation are health insurance, retirement savings plans, disability
insurance, accident insurance, paid vacations, paid fraternity and
paternity leave, gym discounts, travel discount, etc. Nike knows that till all
benefits will help the company grow as it will motivate the employee to
work better. These are all the tangible compensation provided to the Nike
employees to motivate. Nike also uses intangible compensation to
motivate employees which are appreciation, recognition, empowerment
etc. These all motivates the employee to work better and efficiently (U.S.
EPA, 2006).
Nike has developed tools and guidelines for itself to improve HRM in their
production facilities. Since they believes that human resource policies are

essential to build a workforce which is consistently engaged, they ensure
that their capable, qualified management follows the law and standards.
Since most of Nike’s work is dependent on its suppliers, they believe that
by investing resources in innovative and upcoming systems, process,
experienced and skilled employees for human resources will help their
supplier to employ people who fits in the role accordingly who is
motivated in driving Nike’s success (Human Resource Management, Nike,
Inc., 2019).
Suppliers and sub-contractors are helped by Nike to build out a strong and
unified human resource management capabilities (Purpose, Nike, Inc.,
2019). As an unified approach to Nike’s Lean Management appraoch, their
regional teams work with suppliers from the respective areas to measure
and develop HRM capabilities. Specifically, Nike helped suppliers to
develop processes in such a way that helps in obtaining accurate data and
conduct analysis on HRM related quantitative and qualitative units, assess
strengths, weaknesses of their supplier and identify ways for
improvement, provide training to strengthen supplier human resource
management systems to involve as many workers as they can to increase
their motivation and engagement and to identify opportunities for further
investment (Human Resource Management, Nike, Inc., 2019). Nike, Inc.
aims to continuously grow and improve their approach by making
partners with companies whose main focus is to develop techniques to
back up their suppliers for investments in workforce and their
management (Human Resource Management, Nike, Inc., 2019).
Nike’s Job Standard
Nike, Inc. also works towards evaluating its business impact and business
targets to ensure they are conducting business ethically and sustainably
while keeping in mind about human rights in the supply chain and
production process simultaneously (Human Resource Management, Nike,
Inc., 2019). Nike has confidence that the combining the respect for human
rights and their production processes, human potential cannot be on
point. This makes Nike a strong follower of human rights as defined by the
Universal Declaration of Human Rights which states that ‘all human
beings are born free and equal in dignity and rights’ (Human Resource
Management, Nike, Inc., 2019).
As Nike’s most of the business is based on its Because most of Nike’s
business is dependent on its supply chain, they focus on growing their
relation with who have the same thinking as of theirs in respecting rights
of humans. Nike expects their suppliers to have the proper Code of
Conduct which is matches the international standards and also they have
to follow all the requirement to produce for Nike. Nike also expects its
suppliers to follow its Code Leadership Standards which describes in detail
it has to work according to local laws and standard (Human Rights, Nike,
Inc., 2019).
Nike’s Code of Conduct also states that the underage workers are not
allowed to work at the contracted manufacturing unit and the minimum
requirement to work is of at least 16 years, or should have past the

national legal age of compulsory schooling and minimum working age,
whichever is higher. It also forbids the employment of workers aged
between 16 to 18 years in hazardous positions like working in chemically
hazard place or where heavy machinery are located, and even working
past sunset (Human Rights, Nike, Inc., 2019). Infact, Nike’s Code of
Conduct surpasses that of the International Labor Organization’s, which
only has an age limit of 14 to 15 years in some developing countries, so
much so that it involves specific verification and background checks for
every new worker hired prior to starting employment. It also includes
actions the supplier must face if they violate these codes of conducts and
standards. These requirements are inclined towards protecting the well-
being and the rights of a worker and revolve around putting a hold on
child labor from work-space while giving benefits for them to attend
school or a vocational training until they are allowed to work (Human
Rights, Nike, Inc., 2019).
Additionally, Nike’s commitment to core labor rights also forbids forced
labor at their contractor factories. However, this is not as easy to
implement as it sounds because in most foreign markets or migrant
workers, obtaining a job through a consultant is quite common. These
consultants charge a commission on every successful recruitment making
it difficult to control the age limit of workers associated with these
consultants. After a careful evaluation of these challenges, Nike became
an example for other companies on how to implement a supply chain
policy such as to prevent child labor. It also became one of the first
companies to employ specific requirement for offshore workers so they’re
not exploited by their contractors (Human Rights, Nike, Inc., 2019).
Nike strongly believes in the Employer Pays Principle, which means that
every worker should be ppaid full cost of employment and no employee
should pay for a job. This made them join the Institute for Human Rights
and Business’ Leadership Group for Responsible Recruitment (LGRR)
(Human Rights, Nike, Inc., 2019). Nike also became the founding signatory
to the American Apparel and Footwear Association Fair Labor
Association’s Apparel Footwear Commitment on Responsible
Recruitment to address the risks for forced labor nationally and
internationally (Human Rights, Nike, Inc., 2019).
The Nike Code of Leadership, mentioned earlier, also includes the ways in
which risks of forced labor can be addressed, like requiring a worker
freedom of movement within the facility or posing bonds, contracts or
deposits as a condition of employment. Additionally, it also addresses the
risks that a foreign worker and interns might be vulnerable to and the
actions to be taken by Nike management to eradicate such situations
(Human Rights, Nike, Inc., 2019). The Nike Code of Leadership also
specifies the ways in which suppliers should respect the rights of workers
to associate freely without interfering in matters of union activities. This
could be done by intimidating, harassing or retaliating against workers
participating in a union, and the Nike Code of Leadership requires to
prohibit it (Human Rights, Nike, Inc., 2019).

Additionally, Nike is also a member of the Responsible Business
Alliance’s Responsible Labor Initiative (RLI) which gives help to various
contractors and suppliers to give them proper understanding of forced
labor disadvantages through various tools and also help them improve
their work environment and hiring process (Human Rights, Nike, Inc.,
2019).
Nike’s code of conduct motivates gender equality and prohibits
discrimination in recruitment, compensation or any other aspects of
employment. Most of the employees working for Nike are female and are
at higher risk of being exploited by their male colleague. Nike know about
this situation so they have other strict standard to protect women (Human
Rights, Nike, Inc., 2019).
Compensation can not only obey the contracts that Nike sign with
employees, but also an appropriate compensation model which motivate
them and achieve a high level of working efficiency. The compensation
includes, prevailing wage, overtime fees, social insurance and some
benefits. In addition, Nike has collaborated with academic consultants,
and renewed their compensation model, in order to create a sustainable
compensation system (Human Rights, Nike, Inc., 2019).
Working-hours is depending on the local legislation that protect workers
health and safety. Nike implement a more stricter principles than other
organization. And Nike pay overtime at a premium rate of 125% or higher
of base rate (Human Rights, Nike, Inc., 2019).
Every employee expects good working condition which is safe and
hygienic for them. To make sure the employees are happy, Nike require
suppliers to provide a safe, hygienic and healthy workplace. And give
employees properly training of work safety which includes fire drills, CPR
training and other safety trainings (Human Rights, Nike, Inc., 2019).
Nike monitors suppliers with internal and external audits done at regular
intervals. This includes audits by Fair Labor Association and other
organizations like the International Labor Organization’s Better Work
Programme. These audits are done on a scheduled time based on
suppliers previous performance. Also, when any supplier is found in
violation of Nike’s standard, it is required to reverify and improve the
issues identified. If still the suppliers is not able to improve, it would cause
permanent termination of business between them (Human Rights, Nike,
Inc., 2019).
Nike also has grievance process for employees which motivates them to
raise their voice if any problem is faced by them anonymously and
confidently without fear of retaliation. The systems need to upto
standards to respond to workers regarding their problems in a timely
manner. In order to reduce communication gap between the upper
management and the workers they have a two-way communication
channel which helps in filling the gap of miscommunication. Suppliers has
union who plays an important role in negotiating on behalf of the workers
(Human Rights, Nike, Inc., 2019)

Nike is among the companies that have successfully integrated sourcing
strategies in their supply chain management. Despite Nike capturing a
greater segment of the US footwear and apparel industry, its
manufacturing activities occur overseas. Similar conditions happen in
other countries where Nike only uses retailers to sell its products to
customers as opposed to manufacturing them locally in those nations.
Nike has a global commodity chain whose responsibility is to provide
insight concerning design, distribution as well as marketing activities for
the company. As a global sourcing archetype, Nike relies entirely on
external sources for raw materials and their manufacturing (Nike, Inc.,
2019c). The company works with independent contractors to manufacture
its products and focuses on improving its relationship with them (Nike,
Inc., 2019b). As a result, Nike has developed an extensive supply base to
support its business and facilitate its growth. Even though the sourcing of
raw materials and manufacturing services are externally based, Nike
remains focused on the quality of the products it sells to its customers
since it is among the critical facets of its supply chain. The process
involves being cautious concerning raw material and suppliers’ selections.
All these approaches work to ensure that the company maintains its
quality services to customers.
A better understanding of the sourcing strategy that Nike uses requires a
close analysis of the sources of its raw materials and the places where the
manufacturing of its products occurs. Currently, Nike makes its products
in 41 countries where it has contracted 523 manufacturing factories with
1, 088, 415 employees (Nike, Inc., 2019b). The factories are responsible
for the production of almost everything that Nike markets and sells to its
clients. This situation implies that Nike works with many suppliers that the
company uses for the provision of raw materials and the manufacturing of
its footwear and apparel. Due to the high number of bidders, the company
subjects its new suppliers to New Source Approval Process (Nike, Inc.,
2019c). The process considers any risks involved in starting a supplier
relationship with a company in a given country. One condition for supplier
approval is that one must receive a Bronze audit rating before it can
commence its production operations. Therefore, the process of
manufacturer acquisition is rigorous, and it involves quality and risk
considerations to ensure that Nike retains its competitive advantage in
this industry.
Another vital facet of Nike’s sourcing strategy is that the company has set
a code of conduct to govern the behavior and the operations of its
suppliers. The code of conduct outlines the threshold standards that
suppliers’ factories and facilities should meet to warrant their continued
cooperation with Nike and quality delivery to the customers (Nike, Inc.,
2019c). Through the code of conduct, Nike aims to improve the conditions
of manufacturing and reduce any negative impacts that workers can
sustain while executing their duties. The company uses the code of
conduct to minimize any detrimental effects that manufacturing can have
on local communities as well as the environment. Owing to the
importance of this initiative, the company launched its code of conduct in

1992 and has continuously evolved it to improve various outcomes (Nike,
Inc., 2019c). Besides, Nike has a code of leadership standards that work in
tandem with the code of conduct and communicates how suppliers should
implement the latter.
Finally, the fact that Nike's sourcing strategy considers supplier behavior,
customer expectations, and cost of operations, it supports the company's
sustainability. The codes of conduct and leadership ensure that suppliers
behave responsibly and maintain the required quality standards for the
products they avail to the market (Nike, Inc., 2019c). As a result, meeting
customer tastes and preferences wins their loyalty and this move
promotes a company's sustainability (Ivanov, Tsipoulanidis, Schönberger,
2017). Another important part of the sourcing strategy is that Nike
considers the cost implication of the country where these suppliers
operate and, therefore, prefers to work with the ones with the lowest cost
such as Taiwan and China among others (Sichol, 2019). Therefore,
sustainability remains a special component of the sourcing strategy that
Nike uses in its supply chain management.
Nike Inc., being the largest maker of athletic footwear, apparel and
accessories, runs a successful global business entirely based on its
massive supply chain management. Even though it’s marketing style is as
unique as its product quality and product design, Nike has ensured that its
supply chain network remains the strongest as its entire business empire
is dependent on its supply chain. Overall, Nike’s supply chain model has
evolved a lot over the past few years where the focus has gradually
shifted towards its environmental footprint, quality of products and
customer service. Nike relies entirely on its broad base of external
suppliers for raw materials and manufacturing while keeping quality as
the central theme. The global procurement team Nike ensures that the
entire procurement process from selecting to contracting with the
appropriate suppliers for the appropriate goods and services is up to
standards set by Nike itself (Pratap, A., September 2019.).
While the products are made in 42 countries at 567 independent factories
employing more than 1 million workers, they are officially marketed and
sold by Nike. In 2018, 124 of these independent factories located in 13
countries accounted for 9% of Nike’s footwear sales, and 328 apparel
factories located in 37 countries accounted for more than 15% retail sales
(Manufacturing Map, Nike, Inc., 2018).
In 2008, Nike faced a major bump when its Chinese supply chain (firm’s
largest with 180 contracted manufacturers) was found to be inefficient
with complying to company’s code of conduct in terms of providing
appropriate training and awareness among the employees and poor
communication of factory standards by suppliers to workers. The Nike
factories in China employ more than 210,000 workers but the issues
revolved around fake documentation being used for background
verification or even underage laborers (Retuers, 2008). Owing to this
controversy surrounding labor welfare in the past, Nike has now made
ethical supply chain as its main focus. The suppliers who have shown

leadership in CSR and sustainability are now given precedence in Nike’s
sourcing strategies to ensure that their supply chain partners have agile
and resilient management systems. This helps in sustainable growth with
reduced impact on the environment while simultaneously creating a
culture of safety, diversity and inclusion down the supply chain. Because
of this, Nike now judges and audits its suppliers based on fair labor
standards (Pratap, A., September 2019).