Nike and Globalization, Research Paper Example

Nike has always been at the forefront when it comes to taking advantage of technology and globalization. The success of the company has also been due to its unrivaled ability to continuously transform itself and keep the innovative spirit alive despite its huge size. The company’s embrace of globalization and technology is evident in almost all aspects of its operations including supply chain and marketing. First of all, the company manages an extensive global supply chain network. As of 2009, the company’s namesake footwear products were being manufactured in four countries of which China accounted for 36 percent of production, Vietnam accounted for 33 percent of production, Indonesia accounted for 21 percent of production, and Thailand accounted for 9 percent of production. The supply chain network for the company’s apparel supplies was even more diverse, involving independent contract manufacturers in 34 countries including China, Thailand, India, Mexico, and Turkey (Datamonitor, July 2009). Similarly, the company does business all over the world. It operates in more than 160 countries in six continents and employs over 40,000 employees worldwide (Nike, Inc.). The company is also probably the largest sponsor of sports celebrities at both local and international levels.

Nike’s advanced global supply chain network could not have been possible due to advancements in technology and the company has successfully exploited technology in other areas as well. One example may be mass-customization which allows customers to order custom products through online portal (Nike, Inc.) even though actual production usually takes place outside the U.S. Nike is also active on social media such as Facebook, Twitter, and YouTube. Thus, it is clear that technology has influenced Nike to evolve its marketing strategy as well. The company has been able to establish direct communication channels with customers and in some instances, has also removed some middle players in the distribution network as a result of internet sales. Marketing has not only been influenced by technological advancements but also by globalization. Even though Nike is one of the world’s most valuable brands and enjoys high recognition rates, the company has responded to unique local circumstances. For example, Nike doesn’t market under its flagship ‘Nike’ brand in China but instead markets itself as “Nai Ke” which means “endurance conquer” (Fetscher, Alon, Littrell, & Chan, 2012).

Nike can utilize the industrial organization model in numerous ways to earn above-average returns. First of all, the middle class has been growing in emerging economies like India, China, and Brazil (Court & Narasimhan, 2010). Nike may benefit from doing local research to identify products that may not be popular in the U.S. and other developed countries but are desired by the middle class in emerging economies. Such a strategy will win the company a tremendous amount of goodwill with the middle class and strengthen brand loyalty. By inventing entirely new product categories in emerging economies, the company will also benefit from first-mover advantage.

There is also a growing concern for the environment on global scale due to global warming. Environmental pollution such as poor-quality air is still a major problem in emerging economies and has only grown worse due to high economic growth rates. One strategy to both build goodwill as well as earn profits may be to offer customers an opportunity to return their obsolete products for recycling. Nike may set regional recycling centers which could generate power for company’s use or the recycled material could be transported to suppliers to make new products. This may lower production costs and fortunately, Nike already possesses recyclable production technology (Nike, Inc., 2013). The need is for the company to significantly expand its recycling efforts and spread the word so that more of the customers are aware of it.

Similarly, Nike can also utilize resource-based model to earn above average returns. Nike has done a great job of enhancing its brand perception by associating with popular sports celebrities. Now the company can pursue the same strategy in fast-growing economies such as China and India where local sports celebrities may have little international recognition but are immensely popular at local level. This will help Nike significantly strengthen its brand reputation as well as gain additional pricing power, resulting in improved profit margins.

Sports apparel, footwear, and accessories industry is closer to the oligopoly market structure than any other structure in both the U.S. as well as in many international markets. But it may be difficult to maintain oligopoly market structure in some countries like China and India where average income levels are relatively lower than the developed nations and cheaper sports brands may be able to gain an edge. Nike can avoid potential competitive threats by helping preserve the oligopoly model through introduction of more affordable product lines. The company already has high brand-recognition rate, thus, it will have an edge over the newer and less popular brands.  And it will not be difficult for Nike to manufacture lower-cost products since it already has an extensive production network in emerging economies with low production costs.

Nike has not stated its vision in either 10-K annual report or on its website but judging from the company’s marketing efforts, Nike’s vision is to be the world’s number one brand in athletic footwear and apparel. The company does mention the fact in the 10-K statement that it is currently the largest seller of athletic footwear and apparel on a global scale (Nike, Inc., 2012). Similarly, Nike’s mission is to bring inspiration and innovation to every athlete in the world (Nike, Inc.). The company specifically emphasizes the fact that it considers everyone with a body, an athlete.

The company’s motto “Just Do It.” has been clearly inspired by its mission to inspire people. Nike has a history of innovation and the company has always been ahead of the competition in embracing new technologies that may help athletes enjoy better performance. Even though the company is a footwear and apparel manufacturer, it has wholeheartedly embraced digital technology as well due to its potential in improving athletic performance levels. A great example is Nike’s Nike+ Running App (Nike, Inc.) which is compatible with several devices including smartphone. Even though Nike+ Running App is not the company’s core product, it demonstrates that innovation drives the company and is the key behind company’s success. Nike strives to be a one-stop shop for all of the needs of athletics whether it is related to a physical activity or one of the popular sports. This commitment to innovation gives prestige to the brand as well as builds brand loyalty. As a result, the company is able to enjoy pricing power and attractive profits. Not surprisingly, the company’s net income was approximately $2.22 billion during the fiscal year 2012 (Nike, Inc., 2012). The company’s vision to be the number sports brand also inspires it to continuously seek improvements in operations and one example is its highly efficient global supply chain network which enables the company to take advantage of economies of scale.

Nike’s stakeholders have also played an important role in the company’s success. First of all, Nike has a reputation for one of the best places to work in America. When Nike was first listed in the Fortune 100 Best Companies to Work For in 2006, almost half of the company’s employees were females and roughly 40 percent were minorities (Fortune). Happy workforce results in higher average productivity and the reputation also helps the company attract high-quality talent.

The company’s suppliers also play a major role in company’s success and remain at the leading edge of innovation. The company carefully chooses its suppliers which can meet the quality expectations of the company as well as adopt sustainable production practices. Nike now recycles 85 percent of the waste that would otherwise go to landfills (Nike, Inc.). This helps lower production costs, improves profit margins, and also provides positive publicity to the company.

Nike’s customers also play a huge role in the company’s success. Their customer loyalty encourages the company to introduce new products because the risk of failure is lower due to a loyal customer base that trusts the brand. Nike’s innovative marketing strategies have also played a huge role in strengthening customer loyalty such as association with college and league teams which have very loyal fan bases. Nike’s customers are willing to pay higher prices for Nike’s products because they trust Nike for quality products.

References

Court, D., & Narasimhan, L. (2010, July). Capturing the world’s emerging middle class. Retrieved July 10, 2013, from http://www.mckinsey.com/insights/consumer_and_retail/capturing_the_worlds_emerging_middle_class

Datamonitor. (July 2009). NIKE, Inc.

Fetscher, M., Alon, I., Littrell, R., & Chan, A. (2012, September). In China? Pick Your Brand Name Carefully. Harvard Business Review, p. 26.

Fortune. (n.d.). Fortune 100 Best Companies to Work For (2006). Retrieved July 10, 2013, from http://money.cnn.com/magazines/fortune/bestcompanies/snapshots/945.html

Nike, Inc. (2012). Form 10-K. Annual Report, Beaverton, Oregon.

Nike, Inc. (2013, May 29). Reuse-A-Shoe. Retrieved July 10, 2013, from http://www.nike.com/us/en_us/c/better-world/stories/2013/05/reuse-a-shoe

Nike, Inc. (n.d.). Business Overview. Retrieved July 10, 2013, from http://www.nikeresponsibility.com/report/content/chapter/business-overview

Nike, Inc. (n.d.). Locations. Retrieved July 10, 2013, from http://nikeinc.com/pages/locations

Nike, Inc. (n.d.). Nike ID. Retrieved July 10, 2013, from http://www.nike.com/us/en_us/c/nikeid?cp=usns_kw_AL!1778!3!18949462862!e!!g!nike%20custom%20id

Nike, Inc. (n.d.). Nike+ Running App. Retrieved July 10, 2013, from http://nikeplus.nike.com/plus/products/gps_app/

Nike, Inc. (n.d.). Our Mission. Retrieved July 10, 2013, from http://nikeinc.com/pages/about-nike-inc