Nike Inc. Operations Evaluation Essay

Pages: 11 (3551 words)  ·  Bibliography Sources: 4  ·  File: .docx  ·  Level: College Senior  ·  Topic: Business

SAMPLE EXCERPT . . .
Threats

Situation with labor laws in developing countries where Nike has contracts with manufacturers has caused major problems with media painting the organization as supporters of unfair labor practices in recent years.

Stigma that has caused political, social, economic, issues including lawsuits and even boycotting of Nike products in the U.S. And abroad. Threatening the survival of the Brand from such attacks against its stability and reputation.

Economic conditions shown by a PEST analysis points to Nike having to monitor its currencies very carefully to track the fluctuations in prices due to instability.

Due to economic downturn over the past few years, many former customers are choosing lower cost footwear rather than the Nike brand.

Conclusions

The conclusions drawn from the SWOT analysis on the strengths and opportunities side show that Nike is very adept at promoting and marketing their products, using the top athletes. This marketing strategy has worked well in selling athletic footwear with famous athletes sponsoring the product. Some of the athletes that have sponsored Nike include Bo Jackson, Michael Jordan, John McEnroe, and Jerry Rice, Tiger Woods, and Alberto Salazar to name a few (Nikebiz. com 2011). Over $20 billion annually has been earned through advertising and athletic sportswear and shoes carrying the names of these top athletes.

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There are many more competitors entering the market from the very manufacturing locations where Nike also has an investment. Though the business model of buy low, sell high has worked in the past, due to so many new competitors and developing countries entering the market, this is no longer necessarily the model that will carry Nike into the future. Many competitors are manufacturing their own high quality, low cost alternatives to compete with Nike and other footwear industry leaders. This is beginning to chip away Nike's market share.

Essay on Nike Inc. Operations Evaluation of Assignment

On the other hand internal weaknesses and external threats revolve around the fact that Nike needs to improve its oversight of manufacturers and suppliers that have been contracted to provide products. Their hands off approach has cost them dearly in terms of credibility and ethical standing in the western world. This is due to several complaints by NGO organizations and reports from the media. The backlash has branded Nike as a company that turns a blind eye to child labor, underpaid laborers working in hazardous and unsanitary conditions. While managers that refuse to accept responsib1ility for deplorable factory conditions. Meanwhile the competitors in developing countries stand ready with comparable quality products to step in to overtake Nike's share of the market.

Critical Evaluation

PEST Analysis (NetMba. com 2011).

Growth Opportunities

Evaluation of Political Factors

A movement organized against Nike relating to the problems with thousands of workers facing unsanitary and poor working arrangements led to NGOs organizing against the footwear giant. Nike was under serious attack for intentionally exploiting developing countries and plagued with accusations against their operations that allowed human right issues such as child labor and extended hours without pay (Harvard Business Case 2010). The issues of Child labor surfaced first in Pakistan and Cambodia which alone caused millions of dollars in lost revenues due to boycotts by former customers in the U.S., Europe and other nations around the globe. The company faced serious accusations next in operating their companies under deplorable working conditions as many were forced to work for months without pay or days without time off in countries such as Vietnam and China. Add to this those who were paid under the legal minimum wage in Indonesia, and you have an Anti-Nike Movement (Harvard Business Case 2010). The founder of Nike Phil Knight, felt his company was under attack and the political fallout caused him to say in 1998 at a Press meeting that ""the Nike product has become synonymous with slave wages, forced overtime, and arbitrary abuse.

In analyzing the political fallout of such allegations, it is amazing how the company can one moment be affiliated with excellence in athletic achievement by the best sports athletes in the world. Now considered in the undesirable position of representing inhuman civil rights for children and underpaying the poorest workers who struggle to feed their families under "Nike's" alleged employment. The problems associated with global expansion are shown here to be risky at worst due to the multiple relationships with suppliers, manufacturers and workers who are not within the same political legal obligations as the parent company (Harvard Business Case 2010).

Economic Evaluation

There are several operational variations that are present in the Nike business segments that reflect economically on its productivity. The company is considered in the athletic footwear category however the majority of its suppliers produce sportswear and other goods, only 740 of the 6,800 contractors actually design shoes. With the most concentration of manufacturers of shoes in China (Harvard Business Case 2010).

In evaluating the remaining Nike sportswear contracts are with 580 plants around the world. The footwear industry is much easier to control due to the long-term commitment between Nike and its contractees. This is because a footwear factory requires a long-term commitment by the manufacturer in investments in plant equipment and setting up suppliers for raw materials in addition to government regulations. It is more overhead intensive.

Technological

A classic case of how the technological advances of today has helped Nike in its ability to produce footwear Just in Time to meet consumer demand is through long-term contracts with both Korea and Taiwan manufacturers. They are able to control inventories through technological tools on the plant floor such as satellite as designs are created and beamed directly to multiple plants at the same time of newly sketched designs. The designers can then collaborate from various locations simultaneously around the world to get the raw materials, achieve the final design, and build the product. Next relaying full color catalogs of information including specifications and production schedules by internet portals or online catalogs to various retailers for ordering.

Economical Repercussions due to Marketing Mix

Versus the sportswear or apparel industry that is relatively easier to set up with a basic garment shop, less expensive equipment and a higher concentration in laborers. However there is less control and cooperation in addition to less governmental oversight and less investment by the contractee. With the apparel industry there may be more than one company being supplied by the same plant alongside Nike, as well, possibly competitors of Nike. In analyzing why there are so many problems with the apparel side of the industry for Nike this is apparent due to less government, less cooperation by the factory contractee, and company (Nike) managerial control. This type of differences in product development has a major influence over the production results including revenues. This creates a great area of risk that Nike must learn to manage these volatile conditions that can spell disaster due to these multiple tier supplier relationships in the apparel industry. Not to mention the trends in apparel change frequently compared to footwear. So once the product is produced it is imperative that it get to market right away while demand is hot and retailers are ordering the apparel merchandise. If the retailers decide to cancel an order due to low demand, it may be too late for Nike to notify contractees and the result is loss revenues in millions or dollars (Harvard Business Case 2010). Therefore this need for fast product to market creates problems with labor and wages (as mentioned with child labor, low wages, and poor working climate) that has caused Nike to lose face in the eye of consumers.

Evaluation of Social Factors

Nike had contracts to several Indonesian manufacturers that hired over 20,000 workers. As mentioned earlier Nike had talked many of its Korean Manufacturers to move to other countries to save production costs. Four of these Korean factories had moved to Indonesia. Since Nike had backed the Korean manufacturers they came under scrutiny for the way the factories treated workers and how they were managed. There were many organizations that were reporting information about how these plants were run. They are called Non-Government Organizations or NGOs. Basically consumer or employee relation activists representing civil and human rights. The number of shoes designed by the factories in Indonesia are over six million and the NGOs were reporting that the workers were exploited and earning very minimal wages along with very inhuman working conditions. They reported that many workers earned less than $1 U.S. dollar a day (Harvard Business Case 2010). These NGO organizations contacted the local governments to demand better wages and working conditions. At the time Nike asked the governments for an exemption from the minimum wage requirement to ensure production would continue. Many Indonesian workers felt threatened on the job by the supervisors they worked for. The Korean managers were known to be very unfair when it came to wages. As these Labor groups uncovered this information through many years of undercover investigation, the facts were reported on television by CBS Special Report that targeted Nike as the… [END OF PREVIEW] . . . READ MORE

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