Nike Company’s Value Chain Management

Introduction

Nike is an internationally renowned company headquartered in Beaverton (Oregon) that sells athletic footwear and apparel. The company has a workforce exceeding 33,000 employees working in various stores across the world. Nike operates in almost 200 countries across the globe, and it was among the highly innovative companies in 2013. The company’s “swoosh” logo is one of the most recognizable company signs in the world.

The “swoosh” logo is crucial to the company’s core value, and the logo remains significant because it allows Nike’s customers to differentiate the company’s products from other competitors’ products. The company is committed to sustainable operations that allow Nike to turn the risks involved in the apparel industry into a competitive advantage. The company has sustained high-profit margins due to its ability to appeal to traditional and contemporary consumers. Nike manufactures different types of sports shoes and apparel to old consumers who seek comfortable products. Nike also provides trendy shoes and apparel that appeal to the younger generation of consumers. To understand Nike’s value chain management, it is important to understand the company’s organizational culture because this helps in comprehending the decisions made by Nike’s management.

Organizational Culture

Nike is an internationally known brand that has achieved much of its success due to its corporate culture built on a commitment to design innovations. The company boasts of a creative and dedicated workforce consisting of more than 33,000 workers focused on helping Nike to achieve its target in developing innovative products. Nike is proud of its history and culture, and it ensures that all its employees are aware of the company’s background (Nisen par. 5).

Although many organizations argue that secrecy is harmful to the organizational culture, Nike’s management insists on exclusivity and secrecy of its internal projects to maintain the projects’ and the company’s value. The company’s employees are committed to maintaining Nike’s secrets because they understand the pride of working for such a successful company. The culture of secrecy enables Nike to benefit its public image and marketing since its customers are rarely aware of the company’s new projects. Despite the secrecy, Nike remains a popular brand that appeals to a wide diversity of consumers attracted to its mystic and cool culture. Nike boasts of using shoe and apparel technologies to enhance the performance of athletes, and this has made many athletes use sports gear from the company.

Nike’s mission is to remain the leading supplier of athletic equipment in the world by offering products of high quality. Although Nike encourages its employees to be innovative during the manufacturing process, the company’s management retains control of the research and development process. Nike’s leaders understand the importance of having control over the manufacturing process. One of the reasons used in supporting this decision is that it helps in regulating the manufacturing costs. Nike has also invested significantly in the sustainable use of natural resources and the reduction of environmental pollution.

Value Chain Analysis

The main activities involved in Nike’s value chain consist of retail sales, distribution, marketing, assembly, component manufacturing, product design, and technology development. Nike focuses on designing and marketing of various sports equipment and apparel, and this implies that the company controls its design and marketing processes.

Retail Sales

Nike mainly uses three channels to distribute its products to its customers. Some of the products are sold to wholesale traders in international markets and the United States. The company also sells its goods to its customers directly through its factor retail outlets or via e-commerce. Finally, the company sells its products to various brand divisions that distribute the products to the customers.

Distribution

The company primarily operates five distribution centers located in Memphis, Tennessee. Nike owns two of the five distribution centers but leases the other three. The company also operates sixteen distribution centers in various locations outside the United States. The company ships equipment products and apparel from its Foothill Ranch distribution center in California.

Marketing

Nike uses a wide variety of marketing tools to advertise its products to its customers. The company sponsors many teams and sports events as a means of creating awareness of the sportswear and equipment. Nike also operates an official website, although its customers can access various products through other media such as TV advertisements, social media, and print media.

Assembly

Nike has contracted more than 900 firms to assemble its products in various factories. Most of these firms exist in Asia, where the company opened several factories in the 1980s. Outsourcing of the assembly allows Nike to be flexible in producing large quantities of products and avoiding the fixed costs related to manufacturing. Outsourcing allows Nike to concentrate on designing and marketing its products while allowing the company to leave the manufacturing activities to its affiliates (Newlands and Mark 328). However, the company experiences challenges in transporting its finished products from Asia to various markets due to delays and transportation costs.

Component Manufacturing

Nike outsources the manufacturing of some of its shoe parts to ease the overall logistics involved in the manufacturing of various products. The company also obtains its components in foreign countries where the company has assembly factories. Some of Nike’s facilities within the United States include the manufacturing plants in St. Louis, Oregon, Missouri, and Portland. In addition to producing its components, Nike also manufactures products for companies in various industries.

Product Design

Nike has invested heavily in its design processes to ensure that the company’s products are of exceptional quality. The company manages the product design and incorporates innovative technologies to manufacture products that appeal to customers on the basis of their function and design.

Technology Development

Nike has invested in the technology used in designing and manufacturing its products for more than four decades. The company uses its technology in producing the waffle tread pattern to increase the grip on athletic shoes. Other technologies incorporated in Nike’s designs include an air cushion in shoe soles to increase their comfort and innovative stitching of the shoe pieces.

Resource-Based View (RBV) of Nike

The resource-based view of Nike helps in understanding the company’s internal sources of competitiveness. The resource-based view explains the competitiveness of organizations on the basis of the characteristic of the resources they possess. Nike, just like other organizations, must determine the operations it has to internalize and the ones it has to outsource (Barrar and Roxane 19). Such decisions are critical in the currency markets due to the stiff global competition that exists between Nike and competitors such as Adidas and Puma. The value, rarity, imitability, and organization (VRIO) framework are important in identifying Nike’s internal resources that are different from those of its competitors (the heterogeneous resources). The VRIO framework also helps in the identification of Nike’s resources that are similar to those of its competitors (the immobile resources). Identification of the heterogeneous and immobile resources helps in illustrating the company’s real strengths and weaknesses in the apparel and shoe industry.

Value

The company is renowned within the athletic textile industry, where it has remained a dominant business with immense experience in manufacturing products of high quality. Nike is vertically integrated, and the company is directly responsible for all the activities ranging from R&D to the production of finished products. The vertical integration gives the company the freedom to be a first mover in new markets or easily enter existing markets. Nike can also use its vertical integration to deter its competitors from threatening its position as a leading company in the sports shoes and apparel industry. For instance, Nike introduced its Dri-Fit sweat-wicking material to compete with similar material from Under Armour Company. Nike applied its dominance in exploiting the available market opportunities.

Rarity

Nike controls resources that are currently available to a few of its competitors. The company also can invent and redesign various products to enable the company to reduce competition from other companies. Although some of the company’s competitors may focus on one product or market segment to gain some competitive advantage over Nike, the company can quickly overturn the temporary competitive advantage. The company enjoys the capacity and resources to imitate the product manufactured by its competitors or make better products. For instance, Nike produced the Nike-Bauer hockey equipment in response to the CCM hockey equipment. Nike’s ability to respond to a wide variety of threats is unique since the company has very many competitors and operates in diverse segments. Despite all this, Nike maintains its position as the internationally renowned sports shoes, sports apparel, and sports equipment manufacturer.

In-imitability

Nike invests extensively in its research and development to ensure that its products are unique, and this makes it difficult for companies with little capital to compete with Nike. The company creatively designs its products to make them costly to duplicate, and this deters Nike’s potential competitors seeking to imitate the company’s products. In addition, companies that succeed in imitating Nike’s products have to dislodge the company from its dominance in the sports shoes and apparel market. It is difficult to displace Nike from its position within its market since the company’s brand name, and logo are unique and renowned by many customers.

Organization

Nike is committed to maintaining its dominance over its competitors in various market segments, and the company’s management has invested in ensuring that the company remains innovative. The company has implemented procedures and policies to ensure that the company efficiently exploits its resources. Since its creation more than fifty years ago, the company has achieved sustained growth that has enabled Nike to differentiate its products from shoes to all sports equipment.

Conclusions

Nike continues to have a robust value chain management due to its strong organizational culture committed to innovativeness. Although the company manufactures a wide variety of sportswear and equipment, it continues to take the lead over its competitors in various segments due to the high quality of its products. An evaluation of the company’s value chain indicates that Nike has a good opportunity to continue its dominance in the sportswear and equipment industry for many years.

Works Cited

Barrar, Wayne, and Roxane Gervais. Global Outsourcing Strategies: An International Reference on Effective Outsourcing Relationships. Aldershot, England: Gower, 2006. Print.

Newlands, David, and Mark J. Hooper. The Global Business Handbook: The Eight Dimensions of International Management. Farnham, Surrey, England: Gower, 2009. Print.

Nisen, Max. At Nike, Workers Quote the Company’s Maxims like the Ten Commandments. 2013. Web.