Analysis of Nike's Global Business Environment Factors and Challenges

This report provides a comprehensive analysis of Nike's global business environment. It examines the key factors of cost, market, environment, and competition that drive global commerce and trade for the company. The report delves into the strategic complexities Nike faces when operating internationally, including rising labor costs, staff issues, and intense competition from brands like Adidas and Under Armour. It evaluates the influences of globalization on organizational governance, leadership, structure, culture, and functions within Nike, highlighting the need for global leaders and adaptive cultural strategies. Furthermore, the report assesses the impact of ethical and sustainable globalization on Nike's functions and explores different decision-making approaches in a global context. Finally, it outlines various routes to internationalization and the associated barriers that Nike may encounter. This report provides a detailed overview of Nike's global strategies and challenges.

Global business enviornmnt of Nike

Table of Contents
Introduction......................................................................................................................................3
Analyse key factors of cost, market, environment and competition that drive global commerce
and trade...........................................................................................................................................3
Explain the complexity of strategic challenges faced by Nike when operating in a global
environment.....................................................................................................................................5
P3 Evaluate the influences of globalization on organizational governance and leadership,
structure, culture and functions within Nike....................................................................................6
Evaluate the influences of ethical and sustainable globalization on organizational functions of
Nike..................................................................................................................................................8
Evaluate the different ways decision making can work effectively in a global context..................9
Determine and articulate the various routes to internationalisation an organisation may adopt,
including key barriers....................................................................................................................10
Conclusion.....................................................................................................................................11

Introduction
Business firms do not work in a vacuum and the actions taken by them often occur in a dynamic
environment. Also there is a presence of different external factors that then put an impact on the
overall performance of the firms (Mahdi and et.al., 2015). The need on part of firms is to
analyse the global business scenario in advance and then function accordingly.
The present study has thus made an attempt to focus on the global business environment of Nike
which is a US based multinational firm that specialises in designing, manufacturing and selling
of footwear, apparaels and equipment’s. The firm has been regarded as largest apparel company
of the world and leading sportswear brand of America (Burgelman, 2017). The firm has held its
position throughout 2017 and also in 2018. The company has positioned itself as the one meant
for serious athletes and is there to provide confidence that it has perfect shoe variant for every
sport. The report is based on case study about global business operations of Nike where emphasis
has been laid on key factors that drive the process of globalisation as well as the strategic
complexities that are linked with its operations in global environment. Study will further be
made on how operations in global market put an Impact on the structure, culture as well as
functions of organisation. Eventually, the impact on globalisation on organisational decision
making will also be done.
Analyse key factors of cost, market, environment and competition that drive global
commerce and trade.
There exist various factors of cost, market, environment as well as competition that is driving
global commerce and trade within Nike. These have been described in below mentioned
sections.
Cost – The cost factor plays an important role for driving the global trade as well as commerce
for Nike. As per the case study, the company has set its cost structure in such a manner that it is
providing added benefits to Nike. For example, the company pays 18 dollars on an average for
the shoe made by the contracts. It consists of 11 dollars for materials; 2 for labour; 4 for
additional cost and 1 for profit. Nike then sells these shoes to the retailers at 36 dollars which is
inclusive of designing, R&D; adverting, shipping; production management; sales and business
cost; taxes and the profit of company. Hence Nike adjusts the cost structure in such a manner so

as to earn substantial amount of profit from its product. It however faced certain challenges as
the countries’ where the operations of Nike are based often change the labour cost structure
which somewhere impacts the supply chain and production facilities of the company thereby
threatening overall serves in the nation. This happened with Nike where the company had to
relocate itself to Korea and Taiwan on account of increase in cost structure in Japan due to
tighter labour market; impact of oil crisis in Japan followed by a shift in exchange rate of
dollar/yen due to Nixon shock (Childs and Jin, 2018). Similar such situations happened in US as
well. With the passage of time, an increase in labour cost within these countries was also seen
because of which the company moved its manufacturing plants to Indonesia, China and Vietnam.
Environment – Nike has always made an attempt to keep the environmental factor within its
stride. Nike believes in the concept of environmental sustainability hence as per the case study
during the year 1993 the company set up a Reuse-a-shoe program for encouraging people by
which they can recycle their old shoes which were then recycled to create sports surfaces in form
of basketball courts, running tracks and playgrounds. Other than using eco-friendly concern as an
opportunity the firm faced certain challenges as well in its environmental safety standards as
Toluene concentrations within one of its Vietnam factories exceeded the set level and resulted in
chemical release in the nearby areas. This led to creation of skin and heart ailments to the people.
However, the company responded quite positively in this respect and created a department being
Nike Environmental Action Team (NEAT) (1993) which was placed under Corporate
Responsibility and Compliance Department (Larson and York, 2017). As of now, Nike has
dedicated itself specifically to complying with labour and environmental norms in the nations
where it has the presence of manufacturing units. Other than this, the company has also actively
involved itself in United Nations Global Compact so as to adhere with the standard of
environmental sustainability.
Competition and market -The industry where Nike is operating is so highly competitive one and
the company has been competing aggressively with Adidas and reebok in spite of being the top
sports footwear brad in the world. The competition from Adidas is very big as it not only
competes with Nike in the area of footwear but also in clothing and accessories segment. Reebok
is regarded as 2nd biggest competitor of Nike around the globe on account of its recent designs
and cool looks of its shoes (Grow, 2016). Both of them are competing with Nike majorly in
European and Chinese markets after they lost grounds in the region. Since the year 2014, Adidas

has increased its marketing and demand creation activities so as to recover the lost grounds in
China and Europe.
Market – the company is expecting a substantial amount of growth in the emerging markets in
comparison to the developed regions. The growth has also been witnessed as by the end of year
2015 the sales from emerging nations doubled to 4 billion dollars which was just 2 billion dollars
in the year 2010. It is being expected that running, football and sportswear are most likely to
drive growth within these markets in the coming 5 years (Hemphill and WHITE, 2016). Other
than this, women and young athletes categories may provide the company with additional
business. The company in this regard in expected to capture a god market share within Chins and
may reach up to $6.5 billion in revenues by the end of 2020 (Here Are The Three Key Growth
Drivers For Nike, 2015). The growth is being expected in china on account of emerging middle
class and passion of Chinese people towards sports.
Explain the complexity of strategic challenges faced by Nike when operating in a global
environment
There is a presence of various strategic challenges that are being faced by Nike in the global
environment where the company is operating.
 Increase in labour cost- on account of the increase in labour cost the company is required
to shift its manufacturing plants to low cost nations. This is quite challenging for the
company as the need is to create a market in new nation, make contact with suppliers, and
understand the government policies among others. This situation happened with Nike as
per the case study when it had to move its manufacturing plant to Korea and Taiwan for
the first time and then to Indonesia, Vietnam and China (Liu, Zhang and Desbordes,
2017).
 Staff issues – Several incidents have been reported in Nike where the workers in its
plants of Indonesia were suffering from sexual and verbal abuse; overtime issue on a
compulsory basis as well as no medical care. The case study further reveals about child
labour practices in its factories of Pakistan within Sialkot region which is known for
producing 70 percent of high quality footballs of the world for brands such as Nike,
Reebok and Adidas. The company was also found to pay poor wages to workers in
Indonesian factories which were not even equivalent to US$1 on a daily basis (Sotiriadou
and Hill 2015). There was also a presence of Health and Safety Problems in Vietnam as

the employees were not provided with personal protective equipment while working in
factories which violated Nike’s code of conduct. This was during the time of 1991 when
Nike denied about its responsibility for monitoring the malpractices that was done on part
of the suppliers. It thus became a target of many campaigners and the process of global
boycott began. It was by 1996 that the company started addressing the issues in a
productive manner. All these incidents have caused a decrease in brand image of the
company from time to time which somewhere created a negative impact on the sales as
well as consumer loyalty (Vigneron and Johnson, 2017).
 Struggling apparel industry - This is the challenge of present times that is being faced by
Nike as consumers do not wish to spend any money on the apparel segment. A recent
study by Morgan Stanley has predicted that the sales of apparel and footwear industry
will grow by 1 to 3 percent in the next few months but it has gone down by 5 percent on a
yearly basis (McLynn, 2017).
 Rising competition – Nike is facing stiff challenge from brands such as Adidas and Under
Armour which has stalled the earnings per share growth of the company. Adidas is giving
a tough competition by reviving its classic Stan Smith, Superstar as well as Gazelle
Sneakers. This has resulted in more consumers who are buying its running shoes. Under
armour on the other hand has gained an edge over Nike in basketball shoe category and is
also doubling its apparel investments. Under Armour is going to launch a luxury at
leisure line by hiring designer being Tim Coppens on the other hand Adidas has also
launched a new clothing line. Although it is clear that both the brands have a long way to
go before catching Nike but still they pose a significant strategic challenge for Nike
(Lutz, 2016).
P3 Evaluate the influences of globalization on organizational governance and leadership,
structure, culture and functions within Nike.
Globalization has influenced the overall operations of Nike in many ways with respect to
leadership, structure, culture and functions. The impact is as follows;
Impact on leadership - Globalization has resulted in some major impacts on the overall working
of Nike. For example, in the area on leadership the company is required to create global leaders
who can operate in varied kinds of culture, legal, regulatory a well as economic system with
great ease and attain the overall objective of Nike. The company should train the leaders in such

a manner that they are carefully able to consider the company from varied angles where they are
moving to (Bartlett and Beamish, 2011). This can be in form of barriers to entry; competitive
landscape; consumer base; governmental regulations and cultural issues that are prevalent within
the nation. The leaders are also required to focus on a good communication strategy which aids
in provision of productive cultural interaction (Cazzura, 2011). They are thus required to treat
employees of different cultures in a different manner. This is a huge requirement as Nike has
operations in almost all parts of the world.
Impact on culture – as per Competing Values Framework, the organizational culture within Nike
is of Adhocracy one which is based on the principles of dynamic and creative work environment.
Leaders try to instill innovation within the employees and also make them take risks. The
creation of new products and services is considered as a major success within the company so as
to reach the long term goal of growth and new resource creation. There is further a prevalence of
individual initiative and freedom (Burgelman, 2017). With the increase prevalence of
globalization, Nike is required to deal with increased cultural diversity within the workforce.
Hence the management must ensure that the work culture of the company is such that it suits the
needs and requirement of all the employees. The need is here to provide trainings to the
employees in the area of Cultural, religious and ethnic diversity so that all employees accept each
other wholeheartedly.
Impact on structure - Globalisation has brought a change in management structure of Nike as
well by making it a decentralized one. This structure provides the benefit of utilising the local
management team of the nation and being conversant with the culture and markets. The company
must provide training to the local employers about the objectives of parent firm being Nike (Liu,
Zhang and Desbordes, 2017).
Impact on functions – The company in order to be tune with globalization is required to invest in
technological innovation so that products can be produced at low cost per unit. Technology must
be instilled in delivery as well so that the customers are able to receive the product on time no
matter where they are located (Do, Ko and Woodside, 2015). Innovation in communication
systems is also required so as to work on consumer feedback and connect with them directly.

P4 Evaluate the influences of ethical and sustainable globalization on organizational
functions of Nike
The ethical as well as sustainable globalisation has put a huge impact on the overall operations of
Nike. There was a time during 1990s that Nike was targeted by the global boycott campaign for
initially denying the responsibility for any malpractice that took place in its sub-contractor
factories. This put a big impact on the overall image of the company and now the corporation
makes a big attempt to work on the principles of openness and transparency. But it is also true
that there is still some issues in the supplier factors of Nike which is somewhere stopping the
firm from becoming Ethical Consumer best buy company. However it is also true that the firm
has come a long way from the issue it faced around 20 years ago (Dewhurst, Harris and
Heywood, 2012). Far from the exploitative practices that were prevalent among the suppliers of
Nike in 1990 the management is of the view point that there is a need to create valued contract
factory workforce that can provide better business to factories. This concept can then aid in
building of a highly, skilled and engaged work force.
The overall functions of Nike have been influenced on environmentally sustainable grounds as
well when Greenpeace launched its Detox Challenge and targeted brands such as Nike so as to
make their suppliers stop dumping chemical waste in the waterways all over the world. Nike
took step in a few weeks’ time and produced a plan through which it can go toxic free by year
2020 (Birch, 2012). Nike in the recent times have also launched Sustainable Business
and Innovation unit to make sure that the environmental issues are not an addition to the core
decision making of firm. In the same manner, there has also been an establishment of Sourcing
and Manufacturing Sustainability Index which encourages the procurement staff to work on the
concepts of lean and green (Balch, 2012). In the present times, Nike has been regarded as a
sustainable firm within its sector and also appeared in the list of top 10 Most Admired
Companies released by Fortune. The firm has committed itself to bring an improvement in
the overall environmental impact; provision of transparency in the business processes and
ensure decent work conditions to the labourers with its supply chain (Liu, Zhang and
Desbordes, 2017).

P5 Evaluate the different ways decision making can work effectively in a global context.
There can be use of different ways wherein decision making can work effectively for Nike. First
is the command decision making in which the management can decide without consulting the
team members. This can be quite effective in situations where things are moving very quickly
and there is a need for immediate guidance (Larson and York, 2017). For example, these
decisions can be taken in Nike during the time of technical failure within one of the
manufacturing units of company.
Then comes collaborative decision making where the leaders gather the team members and
request feedback about the issue. The leader is there to make a final call but takes proper data
from employees so that an informed decision can be done. This decision making can be suitable
in Nike when an issue of product recalls arrive for the company. The need here in this regard will
be to ask the employees as to what problems they find in the product. Market research team can
also be consulted so as to gather data about consumer feedback (Do, Ko and Woodside, 2015).
The final decision can be taken by the management about the concerned products but viewpoints
can be gathered from the employees.
Consensus based decision making is another form and is more like a democratic vote. Leaders
can gather the team members and ask them to give votes. Decision is then taken on the basis of
majority votes. This decision in Nike can be done in the day to day operations such as instilling
new machinery within the manufacturing unit. The employees who are working on the process
can give votes as to whether there is a need for new machinery (Bartlett and Beamish, 2011).
The decision can then be made after watching how many employees are in favour of it.
Convenience decision-making can usually be taken in firms when the leader is surrounded by
trusted peers and the leaders can then side-line himself from decision making. In short Nike
manager can adhere with the process of complete delegation to his trusted members. This
strategy can aid in measuring the decision making skills of employees and also empower the
team (Liu, Zhang and Desbordes, 2017). This further leads to building up of increased
responsibility and confidence within the staff members.

P6 Determine and articulate the various routes to internationalisation an organisation may
adopt, including key barriers.
Exporting - this strategy can be used by Nike where it can export its footwear, apparels and
sporting goods in other nations form its manufacturing units. This will aid in avoiding expenses
of setting up a manufacturing plant in new country. They must also focus on distributing as well
as marketing the products in new nation and also take decisions with respect to packaging,
pricing and labelling of the products (Larson and York, 2017). This strategy can result in barriers
in from of low control over products, lack of local knowledge about the foreign market among
others.
Partnerships and Strategic Alliances – The company in this regard can enter into a strategic
alliance with local partner. This will help Nike to get s know how about local culture, market and
ways of doing business better than other firms. This strategy can be quite advantageous for
making a mark in Middle East nations where foreign-owned companies are required to have a
local partner before starting their operations in the nation (Bartlett and Beamish, 2011). The
barrier to be faced by the company in this regard can be a lack of direct control and a chance that
partners goal may differ from goal of Nike.
Acquisitions - internationalisation though usage of acquisition strategy can help Nike in getting a
quick access within new market. But the need here is that Nike gets aware of the laws within the
target nation. For example, China has placed many restrictions on foreign ownership. In the same
manner, developed nations like United States have laws for addressing the acquisitions. The
strategy can however be costly for the company and integration issues may arise in the home
office as well.
Green field venture – This strategy is about establishing a new and wholly owned subsidy in a
foreign nation by constructing the facilities from start. This strategy can be advantageous for
Nike in its expansion plans as there is a presence of flexibility for creating exact IT system as per
the needs of firm (Do, Ko and Woodside, 2015). But it can also result in high entry barrier as
building up the infrastructure from scratch is not so cost effective.
From the above strategies it can be said that the choice of internalisation route depends upon on a
lot of factors such as tariff rates, degree of product adaption; cost factor; government rules and
regulations among others. Hence the need on part of managerial officials of Nike is that it should
decide the strategy as per its requirement.

Conclusion
From the above report it can be concluded that varied factors such as cost, market, environment
as well as competition have been driving the process of global commerce and trade within Nike.
These have also created strategic challenges for the firm in form of rising labour cost and
competition; environmental issues; struggling apparel industry among others which some where
affected the operations of Nike in past as well as present. The process of globalization further
influenced governance and leadership, structure, culture and functions within Nike. The
company is now required to have global leaders and create a culture that promotes the existence
of cultural diversity. There is further a need to be the best in the area of technology to gain
maximum advantage. It is also required to adhere with ethical and sustainable practices so as to
garner consumer loyalty and gain an edge over the competitive firms.