THE NIKE CASE STUDY

RUNNING HEAD: NIKE CASE STUDY

1NIKE CASE STUDY
1. Every year, Nike moves an average of 800 million units of their products through the process
of supply chain. The manufacturing network of the company consists of over 700 factories in 42
countries. Nike does not have a manufacturing plant for its own even though the footwear and
the apparels make upto eighty percent of their revenue. the company has taken the strategy of
outsourcing the manufacturing to the third parties. For companies like Nike, it is a strange ritual
to perform, since the reputation of the company totally depends upon the quality of the products
they are making. And this vast outsourcing can often hamper the product quality. Nike however
ensures that the independent contractors source the raw materials required for the manufacturing
to the manufacturing host country duly (Distelhorst, Hainmueller & Locke, 2017).. By
outsourcing the manufacturing, the company gains a huge cost advantage. Moreover, it optimises
the manufacturing as well as the production process. The company mainly delegates the
manufacturing part to the third world countries particularly China, Vietnam etc. where the wage
of labours are less. This helps the company in making a huge savings in the cost of production.
Moreover, by outsourcing the manufacturing process, the company can foster a continued
innovation process. In order to have a check on the quality, the company asks the plants to make
certain samples at first. The approval consists not only the samples but also the consideration of
the entire seasonal products like redesigns, mix and prices (Paine, Hsieh & Adamsons, 2013).
Only after it is approved, the plant starts commercialising the products. this lean manufacturing
process by the company helps in the improvement of efficiency and fosters better productivity.
2. The supply chain policies of Nike has earned the company a considerable amount of profit.
However, there is certain problem related to this global supply chain that caused for the fall of
reputation. The company’s manufacturing process includes the outsourcing of the production to a
host country, particularly to the third world countries like China, Vietnam, India and others. The

2NIKE CASE STUDY
company does this with the aim of cost reduction (Zick, 2013). However, this has made the
company to have a diversified and extended supply chain. The main problem that the company
faced due to this was its complaints against the poor condition of the workers and the unhealthy
working condition. Since the manufacturing plants are not directly owned by the company, the
company cannot exert any kind of legal rule regarding payment or labour laws. The
manufacturing plant owner gets the chance of exploiting the labours and making profit out of it.
The blame often falls on the company itself. An organised and mechanised supply chain policy
can help the company in overcoming such problems. The use of machineries will not only ensure
the consistency regarding the quality of the products but also help in regulating and minimising
the physical labour of the workers. A digital supply chain will further ensure the reaching f the
raw materials uniformly to all locations. A mechanised organisational design will enhance better
communication and regulation. The larger an organisation grows, the more is the need of
structuring and mechanising (Hemphill & WHITE III, 2016)..
4. One of the major problem that the company faced it the rise of competition in the market. The
entry of the giants like Adidas or Reebok are trying to catch up the market of Nike in terms of
variation and quality. the small brands are also playing a hard role in the competition with their
production of same type of fashion in a far low price. The threats of the new entrants have been a
problematic situation for nike at this stage. In order to overcome the problem the company has
identified the following areas for improvement:
a. Market expansion- the company has decided for a market penetration policies in further new
markets and target the consumers of every segments. They have focused more on the
modification of their products according to the market preferences.