The Winning Pair of Blue Ribbon Sports known as Nike

Quinee and Francis are rejoicing with loud bark and in constant wagging of their tail. This two beautiful doggie knew; that Saturday is our day as a family in the park as we all walk together, have fun and to play.

While Ann is completing what is necessary; food, drinks and the toys of our two babies (Quinee and Francis), I was tying my blue pair of sports walking shoes. The dogs are both in the mood and are getting all the attention – running all around.

Walking in the park, seaside, or just a stroll around with a sporty pair of Nike is one comfortable ritual we use to do as a couple with our dogs in most week ends. There are several reasons why Nike is a choice. And all these years; the practice remains. And to find the many reasons why so that it’s the pair of Nike?, I decided to find the basis deeper than the usual Nike Shoe Shopping at Wallmart to find . . . . . .

The Winning Pair of Blue Ribbon Sports known as Nike

By: Arvin Gumato Pareja

Nike, Inc. is the world’s leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities.

Virtually all Nike products are manufactured by independent contract manufacturers; many of which produce for other globally recognized brands. Most Nike products are made outside of the United States. Nike, Inc. also includes six U.S.-based wholly owned subsidiaries covering activities of the Nike brand, as well as Brand Jordan and Nike Golf, which together represent about 90 percent of company revenues, unless where otherwise noted. Nike has a long-term goal of incorporating subsidiary companies into its corporate responsibility efforts and reporting.

Business Strategy:

Nike mines consumer insights and uses research and development to design premium performance athletic products. The company contract with manufacturers to make and ship products to their partner retailers around the world. Nike create demand for product through marketing and advertising, its presence in sports and its relationships with athletes (sports marketing). For Nike to be successful, the world of sport must be successful. Building their business, the company has to fuel and respond to consumer interest around the world and continually appeal to changing demographics and new markets in a deeply competitive industry. Nike also stimulate growth through smart, effective investments in people, research and development resources and a well managed supply chain. Nike increase shareholder returns by effectively managing its operating costs in proportion to their growth rates. Nike shared information on the company’s growth strategy, including its aim to achieve revenue of $23 billion by Fiscal Year 2011. This strategy is the context for its corporate responsibility efforts. Nike aim to achieve this growth by delivering premium products, growing in its geographic regions and elevating the retail experience.

The Case of Nike and its Global Manufacturing Business Facilities:

Over the last thirty years, the Nike brand has become synonymous with quality footwear and apparel. However, Nike’s goals extend beyond the production of goods. The Nike mission has always been to provide athletes with a competitive edge and help them perform better. Nike has been able to achieve this through a number of different strategies.

It has developed a unique strategy of utilizing global resources and places a great emphasis on product design. These factors, along with many other methodologies have allowed Nike to maintain its reputation and philosophy. This philosophy can be summed up in a quote from the Nike website (nikebiz.com, 2002). That, human potential evolves, so must our products.

For three decades, Nike is committed to giving athletes of every make, model and body style, which compete and recreate in ways never

before imagined, the very best performance product. Products of the pure imagination. Products that move the needle of performance. Products that help the athletes we know who they are.

Nike’s Global Manufacturing Strategy:

An important part of Nike’s supply chain management strategy is using a number of different global manufacturing resources to its advantage. Nike does this for many different reasons. Most importantly, it allows them to take advantage of various economic atmospheres across the world as well as utilize the industrial strengths of different countries.

Features; Nike Manufacturing Trust:

Nike’s supply chain strategy heavily emphasizes the use of multiple sourcing partners. As a result, Nike is always shopping for new and more productive manufacturing sites around the world. In this shopping process, Nike is looking for, among other things, inexpensive labor, low import taxes, and high levels of efficiency in the manufacturing process.

In order to maintain these important parts of their strategy, Nike officials are located at all foreign factories.

Managing a Global Supply Chain and the Challenges:

Nike has run into a number of different challenges in its attempts to continue its global manufacturing strategy. One of the major problems was achieving a level of cooperation with foreign manufacturers. An obvious reason for this is the language barrier between Nike officials and foreign workers. However some issues were more complex than this. At

times, there were significant initial costs relating to updating the technology in the manufacturing facilities. Traveling costs by Nike officials to these foreign locations began to add up while many countries lacked the infrastructure and accounting capabilities to control costs.

Nike has attempted production in Europe as well as multiple locations in Asia. Many issues arose from each of these regions. In Asia, China in particular, Nike ran into the problem of dealing with the bureaucracy involved in working with state owned facilities. Nike had trouble finding local suppliers because of the political and governmental issues involved. Other problems came about simply because Nike officials had different manufacturing ideals than the Chinese. The Chinese didn’t understand Nike’s brand concept and how that related to the need for quality.

There were arguments about investing in the production of new shoes as well as pricing and cost issues. Nike began producing in Europe because of the trade restrictions existing in China and the level of difficulty to do

business in the region. However, European manufacturers were never able to reach the efficiency of Asian sites, even when quotas, duties, and manufacturing costs are considered. This is largely because of Asia’s inexpensive labor.

Overcoming Challenges of Global Optimization

Nike has been successful in overcoming these problems in several different ways. Nike is able to utilize a small number of partners that have many positive characteristics including infrastructure, material resources, technical know-how, labor management and operational experience. This allows Nike to minimize the risk of losing technology to less reliable subcontractors. Nike has built valuable, long term relationships with these partners. These relationships didn’t necessarily ensure the lowest costs, but in return, Nike gained shorter lead times for delivery, increased quality, and the ability to manufacture innovative products.

Nike has also come up with a concept to diversify production equally between facilities in five different countries. This way, Nike could easily shift production from one country to another if political instability or trade restrictions in a certain country caused any problems for them.

One other way that Nike has improved upon its global strategy is encouraging expansion to other regions like Vietnam and Indonesia through existing Korean and Taiwanese partners. The Koreans had problems with this because they wanted strict control over foreign factories, so there was no local management. However, the Taiwanese were more progressive in their approach. They were eager to recruit local management and gradually phase out their own management teams. This resulted in smoother operations, decreased conflicts with management and increasing jobs in their local communities.

Designing the Nike Products:

Nike has been designing all of their products in-house since it launched its own name branded shoes in 1971. Nike employs 400 people for the design and development of footwear, apparel, and sports equipment located at headquarters in Beaverton, Oregon. Globalization has led Nike to understand that different countries have other performance desires. Such as in Japan where runners prefer shoes lighter and with a lower profile to the traditional designs made by Nike. As a result, Nike plans on opening a research and design department in Japan. Developing foreign markets may require more than American based designs to satisfy public expectations resulting in Nike having to consider designing internationally.

Presentation:

Nike thrives on design that is not only cosmetically pleasing, but designs that focus on performance. Whether designers are making custom shoes for athletes or the public, high performance is the issue. Striving to lighten, increase responsiveness, fit, support, injury protection, and cushioning are all factors involved in the design process. Often products are designed for such athletes as Michael Jordan that focuses on improving success on the court. Designers will meet several times a year with Jordan to develop the right design that eventually may be applied to all of Nikes shoes to increase performance abroad.

Concept to Prototype:

In order to proceed to a final prototype, the design must undergo numerous interrogations. The “Concept Review” is a group of managers from various departments who comment on the qualities of the shoe in the design phase. Critical points often reviewed are: meeting marketing expectations, competitive pricing, profitability, performance, applied technology and does it compete with products at the same price? After approval, the design goes from illustration to a three dimensional sample. Creating the sample will be done either at headquarters or one of the Asian manufacturing sites depending on the designs complexity.

Developing the upper part of the shoe includes a designer working with the engineering group to produce what typically totals over forty pieces. Where as the bottom of the shoe might be made of clay or wood but when put together with the upper, will be a three dimensional representation of the drawing. Some samples can go through up to fifteen design changes with the end result of a sample in every color that has been planned.

Production:

The manufacturing plant produces a set of samples with the real materials to be sent back to headquarters for final approval. The approval consists not only of the samples, but consideration of the entire seasonal product lines mix, redesigns and prices. After approval, the plant begins to commercialize the product for mass production that includes scaling to all the required sizes and the development of the volume production process. After all the processes have been determined, the manufacturer orders materials needed for production based on Nike’s forecasts.

Philosophy; Order & Inventory:

Nike’s order/inventory management system is based on long term future forecasts. Nike has established a “futures” program that rewards retailers with significant discounts if orders are placed six months in advance. Nike uses these orders as a basis for global demand. This demand information is used to set production levels at Nike’s various manufacturing locations worldwide. The manufacturers will produce the demanded quantity of goods and distribute them to the retailers within one month of the expected delivery date.

Order/Inventory Management:

There are many limits and vulnerabilities with this strategy. Nike accepts all “future” orders without considering their manufacturers production capacities and promises delivery within one month of requested delivery date. Nike attempts to remedy this flaw by ordering their manufacturers to produce up to 55% for the anticipated level of goods, before any demand information is available and sometimes up to four months in advance of receiving any orders. They then add to production when the “futures” information becomes available. Unfortunately, if there has been an excess inventory of products produced before the demand information is available, then Nike will have to pay its manufacturers for the goods they produced or partly produced, even though there is no demand for them.

Effectiveness of strategy:

Nike’s current strategy for managing its ordering and inventory is not effective. Long lead times associated with Nike’s order/inventory policies is a major vulnerability to managing demand. Lead time for orders Nike places with its manufacturers is around four months. In addition Nike pre-orders four months in advance because its manufacturers cannot meet demand. Nike purposely does not meet demand on high end shoes in hopes to encourage customers into newer models. Long lead times, poor forecasts, and unmet demand add great variability to Nike’s supply chain.

Limitations and susceptibility:

The futures program creates significant variance because it requires production to begin ten month’s in advance due to the fact that manufacturer’s capacity cannot meet demand in six months. Variance in the supply chain increases further when retailers are overstocked and permitted by Nike to cancel futures orders. With all this variance it is likely excess inventory will remain, and not uncommon for Nike to hold excess inventory on freight ships, docked and waiting for the necessary demand.

Additional fluctuations in demand are increased because designers do not base designs on past sales data. If high-top sneakers were not in demand and designers did not know due to a lack of information, they may develop another high-top sneaker that has no demand thus adding to the cost and overall inefficiency of the supply chain.

Alternative Strategy; Order/Inventory:

An alternative to this ineffective strategy would be to establish a POS Point of Sales information system at all retail locations. This would help Nike create accurate short term forecasts of demand that could be delivered to manufacturers in a timely manner. There is also a need for Nike to establish a distribution network that will sustain a predetermined inventory level. This will decrease the bullwhip effect that is inherent in the current supply chain. Nike will have the ability to meet short term demand with their distribution centers while accepting shipment from their manufacturers.

Information Systems Recommendation:

It would be advantageous for Nike to establish an ERP system to support this new strategy. This effort should be coupled with the goal if integrating their many independent manufacturers into their ERP Enterprise Resource Planning system. This integration would give Nike more control over the production process and better control of information. This information control is imperative to the future success of the organization if Nike is to manage the supply chain from the manufacturer to the retailer efficiently. If Nike were able to easily retrieve information from each level of the supply chain in real-time, they would be able to cut costs, and streamline their supply chain and manufactures could begin production based on POS data gathered by way of the ERP system from retailers. Supply chain integration is the key to the future success of Nike.

Strengths:

• Nike is a very competitive organization. Phil Knight (Founder and CEO) is often quoted as saying that 'Business is war without bullets.' Nike has a healthy dislike of is competitors. At the Atlanta Olympics, Reebok went to the expense of sponsoring the games. Nike did not. However Nike sponsored the top athletes and gained valuable coverage.
• Nike has no factories. It does not tie up cash in buildings and manufacturing workers. This makes a very lean organization. Nike is strong at research and development, as is evidenced by its evolving and innovative product range. They then manufacture wherever they can produce high quality product at the lowest possible price. If prices rise, and products can be made more cheaply elsewhere (to the same or better specification), Nike will move production.
• Nike is a global brand. It is the number one sports brand in the World. Its famous 'Swoosh' is instantly recognizable, and Phil KnightPhil Knight even has it tattooed on his ankle.

Weaknesses:

• The organization does have a diversified range of sports products. However, the income of the business is still heavily dependent upon its share of the footwear market. This may leave it vulnerable if for any reason its market share erodes.
• The retail sector is very price sensitive. Nike does have its own retailer in Nike Town. However, most of its income is derived from selling into retailers. Retailers tend to offer a very similar experience to the consumer. Can you tell one sports retailer from another? So margins tend to get squeezed as retailers try to pass some of the low price competition pressure onto Nike.

Opportunities:

• Product development offers Nike many opportunities. The brand is fiercely defended by its owners whom truly believe that Nike is not a fashion brand. However, like it or not, consumers that wear Nike product do not always buy it to participate in sport. Some would argue that in youth culture especially, Nike is a fashion brand. This creates its own opportunities, since product could become unfashionable before it wears out i.e. consumers need to replace shoes.
• There is also the opportunity to develop products such as sport wear, sunglasses and jewelry. Such high value items do tend to have associated with them, high profits.
• The business could also be developed internationally, building upon its strong global brand recognition. There are many markets that have the disposable income to spend on high value sports goods. For example, emerging markets such as China and India have a new richer generation of consumers. There are also global marketing events that can be utilized to support the brand such as the World Cup (soccer) and The Olympics.

Threats:

• Nike is exposed to the international nature of trade. It buys and sells in different currencies and so costs and margins are not stable over long periods of time. Such an exposure could mean that Nike may be manufacturing and/or selling at a loss. This is an issue that faces all global brands.
• The market for sports shoes and garments is very competitive. The model developed by Phil Knight in his Stamford Business School days (high value branded product manufactured at a low cost) is now commonly used and to an extent is no longer a basis for sustainable competitive advantage. Competitors are developing alternative brands to take away Nike's market share.
• As discussed above in weaknesses, the retail sector is becoming price competitive. This ultimately means that consumers are shopping around for a better deal. So if one store charges a price for a pair of sports shoes, the consumer could go to the store along the street to compare prices for the exactly the same item, and buy the cheaper of the two. Such consumer price sensitivity is a potential external threat to Nike.

Profile of Nike, Inc.

Nike, Inc. is a major sportswear and equipment supplier based in the United States. The company is headquartered in Beaverton, Oregon, which is part of the Portland metropolitan area. It is the world's leading supplier of athletic shoes and apparel and a major manufacturer of sports equipment with revenue in excess of $18.6 billion USD in its fiscal year 2008 (ending May 31, 2008). As of 2008, it employed more than 30,000 people worldwide. Nike and Precision Castparts are the only Fortune 500 companies headquartered in the state of Oregon, according to The Oregonian.

The company was founded on January 25, 1964 as Blue Ribbon Sports by Bill Bowerman and Philip Knight, and officially became Nike, Inc. in 1978. The company takes its name from Nike the Greek goddess of victory. Nike markets its products under its own brand as well as Nike Golf, Nike Pro, Nike+, Air Jordan, Nike Skateboarding and subsidiaries including Cole Haan, Hurley International, Umbro and Converse. Nike also owned Bauer Hockey (later renamed Nike Bauer) between 1995 and 2008. In addition to manufacturing sportswear and equipment, the company operates retail stores under the Niketown name. Nike sponsors many high profile athletes and sports teams around the world, with the highly recognized trademarks of "Just do it" and the Swoosh logo.

Company Overview:

It started with a handshake between two visionary Oregonians - Bowerman and his University of Oregon runner Phil Knight. They and the people they hired evolved and grew the company that became Nike from a US-based footwear distributor to a global marketer of athletic footwear, apparel and equipment that is unrivaled in the world.

Along the way, Nike has established a strong Brand Portfolio with several wholly-owned subsidiaries including Cole Haan, Converse Inc., Hurley International LLC, NIKE Golf, and Umbro Ltd. The world headquarters is located near Beaverton, Oregon, a suburb of Portland. So while the Pacific Northwest is the birthplace to Nike, today we operate in more than 160 countries around the globe. Through our suppliers, shippers, retailers and other service providers, we directly or indirectly employ nearly one million people. That includes more than 30,000 Nike employees across six continents, each of whom makes their own contribution to fulfill our mission statement: to bring inspiration and innovation to every athlete* in the world.

Origins and history:

Nike, originally known as Blue Ribbon Sports, was founded by University of Oregon track athlete Philip Knight and his coach Bill Bowerman in January 1964. The company initially operated as a distributor for Japanese shoe maker Onitsuka Tiger, making most sales at track meets out of Knight's automobile. The company's profits grew quickly, and in 1966, BRS opened its first retail store, located on Pico Boulevard in Santa Monica, California. By 1971, the relationship between BRS and Onitsuka Tiger was nearing an end. BRS prepared to launch its own line of footwear, which would bear the newly designed Swoosh.

The first shoe to carry this design that was sold to the public was a soccer shoe named "Nike", which was released in the summer of 1971. In February 1972, BRS introduced its first line of Nike shoes, with the name Nike derived from the Greek goddess of victory. In 1978, BRS, Inc. officially renamed itself to Nike, Inc. Beginning with Ilie Nastase, the first professional athlete to sign with BRS/Nike, the sponsorship of athletes became a key marketing tool for the rapidly growing company.

The company's first self-designed product was based on Bowerman's "waffle" design. After the University of Oregon resurfaced the track at Hayward Field, Bowerman began experimenting with different potential outsoles that would grip the new urethane track more effectively. His efforts were rewarded one Sunday morning when he poured liquid urethane into his wife's waffle iron. Bowerman developed and refined the so-called 'waffle' sole which would evolve into the now-iconic Waffle Trainer in 1974.

By 1980, Nike had reached a 50% market share in the United States athletic...