Formerly known as Blue Ribbon Sports, Nike, Inc. was founded in 1964 with its headquarters in Beaverton, Oregon by Bill Bowerman, a field coach at the University of Oregon, and his student Phil Knight. Originally started as a sportswear company, Nike launched their first shoe in 1972 shortly after which it was officially renamed to its present name in 1978 and went public in 1980. Even though they opened their first retail outlet in 1966, they have numerous outlets and distributors today in more than 170 countries. Soon after being recognized in the industry during the late 1980s, Nike slowly expanded its footprint by branching out their lines of products by acquisitions and mergers – a few prominent ones being Cole Haan, Converse, Canstar Sports and Umbro. Officially designed in 1971, the “swoosh” or the curved checkmark is recognized worldwide as Nike’s logo today (Britannica, February 2019).
The flagship product of Nike, Inc. is shoes. Along with manufacturing shoes specific to many on-field games like baseball, golf, soccer, basketball, tennis and volleyball, Nike also produces shoes meant for consumer fashion such as Mary Janes or flip-flops. They have numerous other offerings when it comes to shoes meant for running, cross-training, bicycling, wrestling, cheerleading, auto-racing, aquatic activities or any other athletic and recreational purposes. Moreover, Nike also manufactures apparel for sports activities for both men and women. Nike features a wide variety of collection for its apparel line, including Nike Free, Livestrong, SPARQ and Nike Pro as part of campaign initiatives. Additionally, sports equipment is also a part of Nike’s business. These include yoga mats, swimming caps, gloves, baseball bats, rackets, balls, golf clubs, protective wear etc. (Writer, C). They even expanded to Nike ACG (All Conditions Gear) for extreme sports products like equipment for snowboarding and mountain biking. Their accessories such as bags, watched and socks are also well-known. As of today, their product lines also offer portable heart-rate monitors and high-altitude wrist compasses (Britannica, February 2019). Consumer technology such as the Nike+ app that includes physical education classes, music, and other competitive activities are also part of Nike’s product portfolio (Writer, C). For every brand and product offering associated with Nike is a clearly defined, different customer which branches out opportunities for Nike’s long-term growth (Nike, Inc., 2019).
Given the vast amount of product offerings, Nike implements a combination of Differentiation and Cost Leadership strategies. This is a mix of two or more of Porter’s generic strategies which aim to reduce costs of production while maximizing profitability or reducing selling prices. In the late 1990’s, this generic strategy has helped Nike recoup its customers from the industry competitors, especially Adidas. Nike’s cost leadership strategy is also used to build lasting customer relations and develop brand loyalty by providing rewards for premium customers. From saved costs through their cost leadership strategy, Nike uses their budget on developing innovative and unique products as part of their differentiation strategy. Their aim through innovation is to become more sustainable and keep up with competition through creating highly differentiated products and product lines (Miller, D., 1992).
Nike’s mission statement focuses on innovation implemented by means of new designs for shoes and all related products that they manufacture. Going in line with their mission statement, product development acts as a crucial strategy for Nike’s intensive growth which simply involves the introduction of new products for the purpose of increasing sales revenues. Since customer preferences are constantly changing, product development through new technology ensures that these products remain appealing to the consumers by being set apart from Nike’s competition. Additionally, this product innovation strategy implemented in the design of sport shoes, apparel and equipment also fulfils their financial objective by increasing Nike’s market share (Parnell, J.A., 1997).
Product Lifecycle Planning
The stage sequence of growth and development of an organization or a product is called as the Product Life Cycle. It is characterized by four basic stages: Introduction, Growth, Maturity, and Decline (Kopp, C., 2019). In this section, we will go over the lifecycle analysis of Nike, Inc.
During the Introduction stage, Nike launches a new product accompanied by a wide range of advertisements in the form of posters, billboards and magazines. Because Nike knows that many consumers demand that new product, the cost of advertisement is covered up by selling even a small quantity of the new product which are usually expensive for the consumers. In fact, some products get so popular during the introduction phase that Nike pushes up the prices to get more profit. As this process is repeated, the company generates more profit and that is when Nike enters its Growth phase. Presently, Nike is in the growth state of its life cycle which allows it to develop the skill for value creation and obtain more resources. This increase in resources helps the company to upgrade their labor and use them as competitive advantage. With this skilled labor, each team focuses on a specific product for developing and completing the demand of the customers for that market segment. After growth comes the Maturity stage. In this stage, the customers are not as excited about the product as they were during the introduction stage. The shoes sales might be hitting up, but it does not last long. This is the critical point for any company. If Nike doesn’t take any step in introducing new products with exciting features and innovation, the company would go to decline phase and eventually death. During the Decline phase, the shoes are out in the market but the hype among the customer is not as expected. So, the price of product goes downhill and hence, so does the profit. For any company in the maturity phase, it is very important to retract back to the growth phase as soon as possible to ensure their position stays intact in the market. As depicted in Fig. 1, it is evident that Nike obtained the growth phase soon after the maturity phase. This requires a proper product cycle planning which is why the company is still flourishing in spite of being in a huge competition. This planning starts well before the growth stage, where the development of the business plan is done. This phase includes various aspects like SWOT analysis, market segment analysis, product opportunity, resource statement, feasibility checking and a detailed plan of business goal (Writer, C., 2019).
Good and Services Design Approach
In order to keep product design consistent with business goals, Nike concentrates on advanced technology and market preference, and implements a strategy called the Closed-Loop Business Model. This strategy reuses and recycles all materials to ensure zero waste. Under this strategy, Nike’s products are produced by recycling waste materials as innovators create new product designs that can also be easily disassembled. Nike’s Considered Design range of products includes the newest products that integrate sustainability and current sport needs using the Closed-Loop business model. In the long run, Nike attempts to design products that utilize fewer materials from nature and that can safely go back to nature at the end of their lifecycle. The ultimate goal of Nike Considered Design is to think about sustainability from the beginning of the design process. Instead of designing a new shoe, Nike creates a new model of design which thinks about manufacturing process of shoes. One example of the implementation of this strategy is the Nike Fly-Knit Racer, which is considered to be more environmentally friendly while decreasing long-term production costs. Nike also broke its old rules of not fixing something which is not broken as with this product, they capture 50% of the running shoes market and 92% of basketball shoes market (Writer, C., 2019).
Nike is very adept at maintaining customer relations and incentivizing new customers to join the Nike family. Not only do they provide member benefits, but they also provide excellent customer service to all customers. Nike’s Nike+ app provides personalized recommendations and offers to users under ‘Featured Picks’ based on customer data and purchase history. Using smart recommendations, Nike makes the purchase process for users easier thus increasing chances of sales and building brand loyalty. Additionally, they also provide benefits to Nike+ app active users by using their goals and interests to offer access to fitness classes, guided meditation and even music. Thus, users can earn and receive rewards digitally based on their physical engagement with Nike products through non-transactional behavior. For example, in November 2017, Nike rewarded its consumers for a non-purchase behavior by inviting them to run a 25-minute 5K through the Nike+ app. The area of interest for consumers was a pair of Nike Zoom Fly trainers which would be given out free of cost to all those who complete the 5K run in under twenty-five minutes. Nike also boasts excellent customer service as they utilize their social media platforms answer all support questions in a timely and friendly manner. Their Twitter account, @NikeSupport, is functional all day, every day and the customer service agents are proficient to assist customers in numerous languages included Dutch, Spanish, German, French, and Italian. In their flagship store, Nike is also building a fifth floor that is exclusive to Nike+ members, thus further encouraging customer engagement with the brand outside of transactional behavior and incentivizing membership. This floor will be characterized by events, special gear, and even one-on-one assessments by Nike experts. Nike keeps the membership free and uses it solely to capitalize on customer relations rather than fee profits (Langrock, S., 2018).
Nike has a very strong brand name and it is well known all around the world. They operate in more than 160 countries. Nike also uses rapid prototyping and innovation techniques to stay ahead of the competition. Nike has a large number of suppliers and subcontractors. Nike also has great customer relation. It provides outstanding customer service. Nike doesn’t manufacture any of their products on their own. They get it done offshore. Because of this they cannot constantly inspect them on a regular basis. This lead to variance in quality. Nike isn’t focusing more on developing countries like China for their sales. They image went bad because of labor controversies. This was because of offshore contractors exploiting workers. Nike has less product line. They should try to explore more sections like formal wear, electronic section etc. Nike has the opportunity to invest in new product development and innovation to get ahead in the competition by releasing different products. There are a lot of developing countries where Nike can focus on to increase their customer base. Nike can also try to improve sustainability by recycling shoes to make them shoes again as customers nowadays are more inclined towards environmentally friendly products. Nike can also try to integrate their sportswear with fashion wear so everyone can wear them. Nike has faced a lot of competition but has able to cope up with it but now because of internet age, many new online based companies can face as a threat to Nike in near future. Nike also face the problem of duplicate products being produced and sold as Nike. This reduces the sales of original Nike product. Nike is mostly dependent on footwear for it revenue. They need to change this strategy. With rapid technological change, Nike is not able to cope up with it. Also it requires a large initial investment.
Quality Management Strategy
Quality and Strategy
The degree to which a product lives up to its endurance, maintainability, order characteristics and performance that a customer expects to get from the product is defined as the quality of that product (Goetsch and Davis, 2014). Nike products are known for their high quality as they successfully meet the demands of consumers from all around the globe. Nike recognizes that the quality characteristics of products and services can be defined in terms of their functionality, appearance, reliability, durability, recovery and contact. To meet the quality standards Nike focuses on various strategies various strategies like TQM (Total Quality Management) and Lean Manufacturing (Shanley, 2004).
Nike Focuses on quality during the manufacturing process to meet the customers’ demand and maintain high standards of quality. Nike’s manufacturing process is inclined towards TQM (Total Quality Management). While other companies’ TQM restrict innovation and creativity, Nike uses it to motivate creativity which lets it to be in the position of continuous improvement and development of new products. TQM helps the company to maintain its image, improve working conditions along the supply chain and encouraging new processes and development. The combination of these three elements through TQM enables Nike to secure market share, differentiate themselves from its competitors and create value for its customers. TQM at Nike also focuses on the production and deliverable capability of the products and services that the market demands in the short and long run. Therefore, Nike ends up utilizing quality management in the entire production facet (Shanley, 2004).
When it comes to the design of Nike products, the concept of design management plays a crucial role in the implementation of TQM. Various methods and techniques are examined to ensure the development of an active system and an organizational structure best suited for product development – Computer Aided Design, Robust Design, Value Analysis, Modular Design and Environmentally Friendly Designs to name a few (Shanley, 2004).
According to Nike, the number of faults in a design along with the efficiency of achieving market demand numbers is a strong indicator of the quality of the design process. For the last few years, Nike has vowed to eliminate waste during production processes by developing environmentally friendly designs. In a world where resources are limited and the threat of water scarcity, climate change and other resource constraints are a much greater threat than the financial crisis, Nike is implementing Green Manufacturing to conserve water, increase energy efficiency and reuse and recycle (Shanley, 2004).
According to Nike, a quality product is one that can be obtained on the basis of current knowledge and technology. Engineers and designers who are proficient in the field find this method very appealing which in returns ends up enhancing their productivity and motivation. In manufacturing processes, Nike strongly endorses teamwork by means of implementing product teams. The designers at Nike work with each other to produce design choices which are smart and eco-friendly right at the beginning of their creative process, while proceeding and solving problems. Designing the product exactly right at first means lesser re-work later as it results in products which are either less defective or not defective at all. Once the quality has be defined and measured, processes will need to conform their quality to proper quality standards. Nike to make its vision achievable, has set Considered Design Standards that every product should meet. Nike’s assurance to the customers is to create innovative performance products while managing its business within nature’s boundaries. So, innovative design is used to design out waste, chemicals, and energy into new materials through various techniques. Nike calls this method Considered Design. When it is implemented alongside the traditional design process, it maximizes the value and quality of the product and reduces the waste during production. It also minimizes carbon dioxide emissions across the whole supply chain (Nike, Inc., 2019).
Nike constantly tries to find ways in order to minimize the utilization of raw materials and to handle them responsibly throughout the entire manufacturing process. By constantly improving their processes by reducing the quantity of waste and increasing their overall output, Nike attempts at managing costs, improving quality and complexities in the design phase and in the supply chain (Nike, Inc., 2019).
The Pursuit of Quality
One of the important goals of Total Quality Management is to achieve long-lasting success by means of customer satisfaction. This perspective of TQM is entirely dependent on the participation of all members of an organization in order to proceed and improve the quality of goods, products, services and processes of the organization (Distelhorst, et al., 2014). Often times, it means incorporating various technical tools and management approaches while simultaneously working towards improving existing tools and techniques for consistent improvement within the company (Davrajh and Bright, 2013).
In order to implement TQM in an organization, various practices play an important role which are coaching, communication, involvement, motivational incentives, recognition, team-work promotion etc. The same process goes for the implementation of lean manufacturing in an organization. Like many other brands that believe in the power of their human capital, Nike strongly invests in the workers involved in their supply chain. The industry of footwear and apparel was considered to be tremendously low-technology based, low-skill utilizing and lower-paying jobs for many years in the past. However, this assumption is now being questioned because of the switch to lean manufacturing as it required workers to be highly skilled, knowledgeable and with a decision-making power. Initially, many contractual manufacturer partners of Nike did not have the potential to develop any skills needed for lean manufacturing among their workers. That is when Nike stepped up to assist with Human Resource Management (HRM) training and other aspects to their contractual manufacturers so that they could invest in their workers. In fact, in 2012, Nike fully transitioned to Sustainable Manufacturing Training, which is an integrated model that addresses an entire range of issues, including lean manufacturing, HRM, health and safety, environmental compliance, energy management, environmental sustainability and freedom of association (Shmula, 2014).
Additionally, team meetings play an important and an inevitable role in developing proper method to spread the formulated plan in the entire company. In these meetings, various pathways and methodology are discussed, which helps in communicating the plan to the employees of the company. Also, various conferences and seminars are organized to spread the plan more effectively (Goetsch Davis, 2014). In addition to all of this, numerous other training sessions are given to all the employees and various reading materials like manuals is also provided to enhance their knowledge about the formulated TQM plan. On the other hand, implementation of TQM may pose a few challenges to Nike. Employee resistance and production disturbance resistance may be considered as one of the biggest challenges, which is directly associated with TQM. It is very important to identify these risks which can weaken the implementation of the TQM but this weakness can be eliminated by motivating employees with the help of training workshops and feedback or one-on-one meetings (Oakland, 2014).
The Implementation of Quality
As we discussed above, Nike Inc. is using Total Quality Management (TQM) and Lean Manufacturing for achieving high quality level of product. According to Davrajh Bright, Total Quality helps the organization to enhance and improve their operations while ensuring environmental integrity. Which means, applying total quality management for Nike Inc. can help the company gain more credibility and reputation on consumers and improve the efficiency of daily operation process. There are four steps are included in total quality management of Nike, Plan, Do, Study and Act (Davrajh Bright, 2013).
Plan is the first step, where top managers overview their current operation condition, and indicate the problems, collect data and file all current procedures in operation (Distelhorst, Hainmueller Locke, 2014). In other words, under this step, managers make an operation strategy plan which will solve current problems and make a significant improvement. The second step is Do. Basically, managers record the changes they made, and make documents for these changes in order to collect data in next step Study. During Study step, they will testify these changes by collecting data and evaluate it for ensuring they can achieve their certain goals. Last step is Act. After the strategy plan pass the testify process, Nike will implement this plan and try to get feedback and suggestions from their stakeholders (Distelhorst, Hainmueller Locke, 2014).
In the implementation of Lean Manufacturing, Nike believes that executing minimal changes to reduce the time taken to complete a task is rather troublesome in a large company. And therefore, the entire work is contracted to numerous smaller agencies where it is easier to supervise every task being performed and the presence of multiple agencies ensures that time and capital are spent efficiently. When it comes to vendor selection, Nike follows a strict and rigorous screening process to ensure that the quality of raw materials is apt and is provided in lesser time. Additionally, Nike now takes 38% less time to assess a manufacturer’s partnership capabilities, which is equivalent to 152 days as compared to 246 days in the previous days. Once approved, Nike safeguards its trust with the vendors by qualifying them for long term contracts, provided the vendor consistently maintain the same efficiency in their production processes (Int J Prod Res, 2014).
As we know, Nike combine competitive strategy which includes cost leadership and differentiation. The key point is keeping lower cost during production and research process for competitive advantage. Under this purpose, Nike used Product Focus as their process strategy in the first 15 years of the 21st century and captured 25.44% of sports shoes market by 2017 as seen in graph below (O’Connell, 2019).
According to Edward Ferguson, Nike’s OM must focus more on streamlining and increase their quality of production. This objective is to make sure that the system is efficient (Ferguson, 2017). Product Focus strategy, maintained high production and low variety of product, can help Nike reduce variable cost and enhance efficiency. Even though Nike has several product categories, such as footwear, apparel and sport related accessories, all of its product share most of materials, technologies and design model. To keep Nike’s differentiation, it focus on short-term research and product development since it will introduce new products fast and cut down the payback period. (A.J. Almaney, 2000)
The Nike top management board shifted its plan from being a athletic wear brand to becoming more personalized products. During the meeting at the company's headquarters they placed a strong focus on the consumer decides theme and introduced some interesting ways of customizing their shoes and other apparel. (Piller, F. T., 2018)
Process Design and Redesign
As we know any process is a candidate for design, any successful redesign demands for training and proper action, coordination from departments like technical staff, management and answer to why the change is required (Varun, SeungWilliam, 1995).
Redesign allows the company to bring variation in technology, quality, innovation. It’s kind of represents the shift to horizontal view of business and shift from conventional hierarchy vertical based model. There are various types of redesign tool which are project management, coordination, modeling, business process analysis, human resources analysis and design, system development (GroverMaholtra, 1997).
Nike uses twenty seven tools for managing its supply chain. It was planning to implement Enterprise resource with the objectives such as manufacturing efficiency, increase profit, reduce lead time and improve timed delivery, reduce stock in inventory and the most important was to implement a new enterprise resource planning system built by them. As adapting to new changes doesn’t always give good result. The same way Nike faced many challenges after adopting SAP Enterprise Resource Planning System. The new system couldn’t be customized according to the company’s requirement which caused problems within the company. The problems were mostly related to supply chain management and forecasting which had a great effect on the company. Some of the effects were decreased revenue overtime, improper production and demand, demand couldn’t be fulfilled and wrong order shipping.
These problems within the process can be solved if the process were redesign. Learning from the mistake Nike decided to redesign the process as they required better system for supply chain, forecasting and various improvements in the current system. Nike implemented SCM (Supply Chain Management) which clearly defined the ideology shift from make to sell à make to order. The only mistake while implementing the ERP system earlier was they took it way too fast. To incease the productivity of the system, Nike should adopt the roll out approach rather than the quick big bang approach. One of the most important things is Nike should generate business process template that approved globally (Grover, V. and Malhotra, M., 1997).
In short, we can say that the method of redesigning the process usually include designing the flow of work within an organization for its smooth flow. It gives the company the data about how they can improve the consumers satisfaction, customer service and how to cut cost of operation. (Fitts Aziza, 2010) Nike in the start did not think about the variation in the footwear department and the changes in consumers preference and taste which lead to companies decline. But after properly redesign the process the company has moved to mass-customization. They produced customized footwear by shaking hand with Flex which is based in Mexico. It is not leaving Asian countries, but is moving towards their shoring because of the requirement of the mass customization and meet other demands of the customers. Nike created a three-tiered customized supply chain for their shoes. The process to manufacture the shoes requires complex assembly so they outsource it from China where Nike owned factories. They appointed a manager to go over there and approached to buy them over as they made a move to complete off-shore provider. They also made some redesigning within the firm which would bring great benefits in terms of profit, time and increase customer satisfaction by providing them the right product at the right time. We can see what changes are made by them. (Grover, V., Jeong, S., Kettinger, W. and Teng, J., 1995)
Nike also moved into online strategy where they decided to offer three levels of customization. In first level they let customer decide their preference for customization and had many choice around fifteen. But later they realized that customers are producing bad designs. The second tier had around eight choices and they were delivered in fourteen days of order. The third tier had light modification and was not customer preference. It was stocked in inventory nearby for fast delivery within a week. They also started personalization on t-shirts, socks, shorts etc. So customers can write any number, name and get them customized as they like (Handfield, R., 2016)
Nike is considered one of the pioneers of mass customization in footwear industry, the company launched NikeiD in 1999 which offered designer footwear on internet. The Air Force One was one of the first personalized shoe and after realizing the public liked this concept, the brand further developed the idea. Today Nike offers countless customizable shoes, not only online but also in person at studios across the world. The online system is professionally designed to make the design process user friendly for customers. NikeiD website also offers customizable apparel. When an order is placed, the manufacturing process begins immediately thus preventing cancellations or modifications to the design, nevertheless their standard return policy of 30 days still applies.
In 2017, Nike introduced a new corporate initiative called Consumer Direct Offense with 3D printing at the core of the process. This initiative was developed to reduce the average product creation timeline by 50% by implementing additive manufacturing. Additive manufacturing allows this facilitation of speed through the rapid prototyping process. Rapid prototyping enables Nike production team to produce a personalized footwear in some hours as compared to months. Nike began experimenting with this technology in 2013 through their football cleats. By 2016, Nike had invested a lot more in additive manufacturing and began developing customized shoes for elite athletes for the Olympics. In 2018, Nike expanded their investment as they developed the Nike Flyprint. The product development team was able to translate complex athlete data into prototype iterations with unprecedented quickness and precision. Nike is planning to commercialize this initiative and monetize over it with heavy investments over the next five year. As a result, we can see the company propelling in the direction of cosmetic mass customization as they are beginning to use individual performance data from movements to translate into their products (Ruffin, M).
Nike also came up with the Triple Double Strategy (2X) in mid-2017 in which they decided to increase the efficiency by using innovation as a tool by doubling the speed of distribution of its products to market along with doubling its connections with the consumers. (Nike, Inc. News. 2017, June 15). A disrupt yourself way, the entire focus of this process redesign is the Nike Consumer Experience (NCX) which feeds the 2X initiative by including a wide chain of Nike’s wholesalers along with its own direct-to-consumer partners. (Nike, Inc. News. 2017, June 15).
The main idea behind 2X is to “edit to amplify” (Michael Spillane. Nike, Inc. Investors. 2017, October) wherein Nike will be putting 25% lesser styles in the market to turn up the sales by restricting distribution channels to only the ones that deliver the fastest and grow with most profits. Before the Triple Double Initiative, Nike had a massive 30,000 slate of retailers which were planned to be cut down to only a special 40 that offered superior customer experiences, quality services and a storytelling that differentiated the brand along with Nike own direct retail online and offline platform. (Nike, Inc. News. 2017, June 15).
By the end of 2018, the revenues of Nike increased by 9% followed by a 10% increase in the beginning of 2019. Overall, Nike, Inc. was celebrating a double-digit international growth earlier this year alongside gaining high pace in the North America region, which is considered to be its premier market. (Forbes. 2018. December.). In fact, Nike gives the credit to NCX for 100% growth in 2018 virtually. (Euromonitor. 2018, November). Mentioned below is how Nike did it:
Nike picked up from a pool a total of 40 outstanding retail performers who knew their customer segments inside out. These retailers were meant to provide exceptional customer experience to the buyers on behalf of Nike, both through physical shopping experience or online. These retailers were meant to gain the most access to Nike most popular products and limited-edition products along with the most budget for marketing so as to draw buyers away from the remaining undifferentiated sellers. (Forbes. 2018. December.).
These were carefully crafted steps to drive 80% more sales by the end of 2023 in North America region through differentiated NCX retailers, up from 40% in 2017. The challenge was 60% sales in this region were through undifferentiated sellers, which are not destined to survive. (Trevor Edwards. 2018). Even though the categorization criteria for Differentiated v/s Undifferentiated retailers has not been defined, Nike, Inc. gives examples of Nordstorm and Foot Locker to provide an understanding. (Forbes. 2018. December.).
Simultaneously with the initiation of 2X Strategy and aligning with the principles of NCX, Nike worked to enhance their shopper’s experience by revamping the Nike mobile app. Before this, like any other loyalty program, NikePlus rewards would account for easy access to exclusive products. However, with the software upgrade, members now have access to personalized work-outs, free entry in evens , free delivery, one month return policy and access to Nike experts – all for a little extra charge. The more a customer spends on the app or uses the fitness app, more are his benefits for additional services, access to VIP experiences, unlocking of limited-edition products or personalized discounts. (Forbes. 2018. December.).
The play here is to get as much customer data as possible allowing the company to further drill-down into their customer’s preferences. A deep-dive into the customer’s shopping habits lets Nike control their future engagements with the brand by personalizing the entire experience. (Forbes. 2018. December.). Even though it started off in 2017, there are over 100 million subscribers of NikePlus and the number is predicted to increase three times by 2023. It’s reported that NikePlus members make triple the amount of purchases as non-members on the actual Nike website, www.nike.com. (Euromonitor. 2018, November).
Alongside, Nike is experimenting with the formats of its physical stores in several locations. The Nike Live store model changes fifteen percent of clothing and twenty five percent of footwear products every two weeks as compared to the standard time-frame of 30-45 days. (Forbes. 2018. December). The swapping of products at a frequency of two weeks maintains the fast-forward fashion statement that Nike is trying to brand.
A fairly new concept, there are only a few Nike Live stores – the famous Nike, Inc. flagship store on 5thAve in New York City or a smaller version on Melrose Ave, Los Angeles. Another varying addition to the stores is the House of Innovation in Shanghai which is a recently developed concept that uses Nike Arena for activities like products in display rotates around an axis. Given that this is a new concept within retail stores which can be customized for different cities, one could potentially host workshops and presentations in the arena. (Forbes. 2018. December).
Nike locates its manufacturing facilities all around the world in continents like Asia, South America and Africa. The manufacturing plants are specifically placed close to raw materials excess area and cheap labor sources. However, this leads most manufacturing facilities to be placed further away from consumers, thus resulting in higher distribution and transportation costs. Nevertheless, the savings are still significant as cheaper production greatly offsets the higher costs of transportation. As globalization continues to develop, the cost savings will only increase yielding higher revenues for Nike through this location strategy.
According to the U.S. Department of Labor, the minimum wage in the United States is $7.25 per hour (2019). If the workers work 8 hours per day, then their minimum daily wage would be $58. Compared to the United States, the countries in South Asia have lower minimum daily wages. Based on the picture below, Arief Subhan shows that the minimum daily wage is at the range from $2.68 to $10. In other words, we can hire at least 5 more workers in South Asia than in the United States.
A big part of Nike’s OM is dealing with the strategy to be used in layout of its facilities. The objective is to maximize workflow based on human resources, capacity requirements, technology, and inventory requirements (Ferguson, E., 2017, February 7). Nike’s operation manager is responsible for the layout of the facilities owned by Nike and they follow certain strategy like the workplace should be such that the employees can move freely. Nike doesn’t have control over the layout design of third party contractors (Ferguson, E., 2017, February 7).
After opening its first headquarters in Beaverton, Oregon in 1990, Nike has been focusing on expanding its offices that provides as a good working environment. The Nike Worldwide Headquarters has a unique character which is more like a college campus with trees, green space and even a man-made lake named after the company itself, Lake Nike (News, Nike, Inc., 2016).
The recent extensions of the building into a wider, greener landscape with adjacent and interconnected interiors tell about Nike’s power of teamwork and creativity. Also, all the building designs aim for LEED Platinum Certification (News, Nike, Inc., 2016). They also follow an environment friendly approach which include solar for lights, radiant convection for large buildings and sustainable water treating plant (Libby, Brian. 2017).
With every expansion since 1990, Nike has been working to collaborate sport, innovation within its building structures and, thus, striving for the company's growth while simultaneously respecting its surroundings. Key aspect of the Nike Worldwide Headquarters is the naming convention followed for every aspect of the entire campus as they are all named after famous athletes who were key figures in Nike history, for example, the Ronaldo Lacrosse Field, or the Mia Hamm Research Lab (News, Nike, Inc., 2016).
The largest structure is expected to be Serena Williams Building which is to be spread out on 1 million square feet equal to almost three city blocks. This structure will be a contrast to all the other older structure designs on the campus and will feature plenty of curved glass (News, Nike, Inc., 2016).
In 2011, Nike contracted with Henderson Engineers to update old stores for expansion and build new stores. The Nike Factory Stores implement a pilot mechanical design which reduces energy consumption by 27% with a two-and-a-half-year payback. As a result of Henderson’s innovative designs, every stores and offices made by them are LEED Gold certified (Henderson Engineers, n.d.).
All Nike stores are characterized by their distribution space and location of furniture, allowing customers to conveniently pass through them and make comfortable purchases. The different sections of the store are divided by extensive corridors to make the product differentiation easy. Every section is aimed at focusing on one or more major sports that Nike specializes in were running, football and basketball is the most common sports, are found mostly in every store. Even though the distribution space might seem convenient to some customers, it frequently ends up in confusing them by having to visit almost every section in the store to find the exact sport they are looking for (Molina, Diana. 2016).
The spacious store entrances without any visual barriers allows the customers to see clearly from outside to inside and tempting them to do more than just window-shopping. The design is such that customers outside the store would often see mannequins hanging from the ceiling throwing a ball or just running, or a large screen with an intense game playing where players are obviously sporting Nike gear (Molina, Diana. 2016).
Moreover, with every new limited-edition product that Nike brings out, they also want to create good relationship with all their customers. A good example is the launch of limited edition Zoom LeBron IV NYC shoe for which a 5,500 square foot pop-up retail store was opened in Manhattan. By creating a biopic journey of LeBron James’ through narration-based themes, the customer was able to dive deep into LeBron’s athletic world. The background music in this store was shoes tapping on floor of a gym and the dribbling of basketball along with crystal clear acrylic tubes suspended from the ceiling that held LeBron’s personal objects like his favorite cereal and a model of the house where he grew up. Displays like these helped Nike create an energized urban retail experience for all of its customers (EightInc., n.d.)
Nike’s HR Strategy of Labor Planning and Job Design
Nike, Inc. is among the international organizations that consider human resources (HR) strategy as a central tool to the realization of their vision. One HR strategy that Nike employs is labor planning and this helps in maintaining its position in the athletics wear and footwear industry. As a move to ensure employment stability, Nike's management hires employees on demand-based and constant employment basis (Nike, Inc., 2019). Most employees in this company work on permanent terms with their salaries commensurate to the positions they hold. For instance, Nike has committed to increasing workforce remuneration to ensure equality for the people who work in similar job categories. This move will see about 7000 employees get additional pay to bridge the gap between them and the individuals who hold the same positions (Thomas Lucas, 2018). However, Nike has demand-based employees who work in the respective departments in its stores. This situation implies that the personnel get to work when there is an additional demand for labor and this makes the cost of hiring them vary.
Nike’s policy about labor planning also take into consideration various aspects like time of workers, job specification and classification and other rules. Employees at Nike also enjoy paid leave that includes paid holidays together with summer hours (Nike, Inc., 2019). The adaptable work time ensures that the workers have good rest and become innovative so the company can maintain its position in the competition (Azmi, 2019). Additionally, Nike has different job designations that include managerial positions and CEO among others and they exist globally. Every employee has specific roles and responsibilities attached to his/her docket and they should follow the available work rules when executing these obligations (Mariappanadar, 2019). The reason for the existence of these positions is to promote flexibility in staffing to give the company a competitive advantage (Thakor, 2013). Through the use of labor planning tools among them human resources management systems, Nike has managed to promote innovation among its employees and this has made it remain a leading entity in the industry.
Nike also implemented developed human resources management training in factories in Vietnam and Southern China which helps them in strengthening their manufacturers HR systems. Each plant is given a survey to be filled by workers working there to see if they’re facing any problem. This is to check the bond and trust between them. Once the results are out, the HR are known with the problems going on within the plant. They then plan what is to be done in the next 6 months to overcome the problems faced by workers and they also address this problem to the human resource management. Each factories set different goals required for them. For example: One plant improved their employee satisfaction from 5% to 15% while other increased the technical skills of the worker. Each plant had their own plan of progress that the employees had to follow so that the system can work smoothly and efficiently (Nikebiz.com, 2010).
Nike also provide training for the workers to improve innovation, efficiency and better control of the plant. Nike released an online portal for its employees to obtain training in various areas like leadership, management, retail, merchandising and also business strategy called NikeU. Currently, over 80% already have a NikeU account. According to statistics, more than 170,00 online sessions and around 32,000 face to face sessions were taken by employees in 2003 (statista.com). Nike is also constantly trying to improve this training system by providing different language so employees from all over the world can train on it with ease. Nike also has this training program application on phone for their employees, so they can train anywhere and anytime (The Budapest Times, 2013).
Nike also plans effective for the retention of employees. They know that it is the fundamental factor for the development of the company. Nike uses an employee benefit program for its employees which provide benefits for them as well as their family in terms of health, wellness and also helps create a good working condition. Some of the example of this kind of compensation are health insurance, retirement savings plans, disability insurance, accident insurance, paid vacations, paid fraternity and paternity leave, gym discounts, travel discount, etc. Nike knows that till all benefits will help the company grow as it will motivate the employee to work better. These are all the tangible compensation provided to the Nike employees to motivate. Nike also uses intangible compensation to motivate employees which are appreciation, recognition, empowerment etc. These all motivates the employee to work better and efficiently (U.S. EPA, 2006).
Nike has developed tools and guidelines for itself to improve HRM in their production facilities. Since they believes that human resource policies are essential to build a workforce which is consistently engaged, they ensure that their capable, qualified management follows the law and standards. Since most of Nike’s work is dependent on its suppliers, they believe that by investing resources in innovative and upcoming systems, process, experienced and skilled employees for human resources will help their supplier to employ people who fits in the role accordingly who is motivated in driving Nike’s success (Human Resource Management, Nike, Inc., 2019).
Suppliers and sub-contractors are helped by Nike to build out a strong and unified human resource management capabilities (Purpose, Nike, Inc., 2019). As an unified approach to Nike’s Lean Management appraoch, their regional teams work with suppliers from the respective areas to measure and develop HRM capabilities. Specifically, Nike helped suppliers to develop processes in such a way that helps in obtaining accurate data and conduct analysis on HRM related quantitative and qualitative units, assess strengths, weaknesses of their supplier and identify ways for improvement, provide training to strengthen supplier human resource management systems to involve as many workers as they can to increase their motivation and engagement and to identify opportunities for further investment (Human Resource Management, Nike, Inc., 2019). Nike, Inc. aims to continuously grow and improve their approach by making partners with companies whose main focus is to develop techniques to back up their suppliers for investments in workforce and their management (Human Resource Management, Nike, Inc., 2019).
Nike’s Job Standard
Nike, Inc. also works towards evaluating its business impact and business targets to ensure they are conducting business ethically and sustainably while keeping in mind about human rights in the supply chain and production process simultaneously (Human Resource Management, Nike, Inc., 2019). Nike has confidence that the combining the respect for human rights and their production processes, human potential cannot be on point. This makes Nike a strong follower of human rights as defined by the Universal Declaration of Human Rights which states that ‘all human beings are born free and equal in dignity and rights’ (Human Resource Management, Nike, Inc., 2019).
As Nike’s most of the business is based on its Because most of Nike’s business is dependent on its supply chain, they focus on growing their relation with who have the same thinking as of theirs in respecting rights of humans. Nike expects their suppliers to have the proper Code of Conduct which is matches the international standards and also they have to follow all the requirement to produce for Nike. Nike also expects its suppliers to follow its Code Leadership Standards which describes in detail it has to work according to local laws and standard (Human Rights, Nike, Inc., 2019).
Nike’s Code of Conduct also states that the underage workers are not allowed to work at the contracted manufacturing unit and the minimum requirement to work is of at least 16 years, or should have past the national legal age of compulsory schooling and minimum working age, whichever is higher. It also forbids the employment of workers aged between 16 to 18 years in hazardous positions like working in chemically hazard place or where heavy machinery are located, and even working past sunset (Human Rights, Nike, Inc., 2019). Infact, Nike’s Code of Conduct surpasses that of the International Labor Organization’s, which only has an age limit of 14 to 15 years in some developing countries, so much so that it involves specific verification and background checks for every new worker hired prior to starting employment. It also includes actions the supplier must face if they violate these codes of conducts and standards. These requirements are inclined towards protecting the well-being and the rights of a worker and revolve around putting a hold on child labor from work-space while giving benefits for them to attend school or a vocational training until they are allowed to work (Human Rights, Nike, Inc., 2019).
Additionally, Nike’s commitment to core labor rights also forbids forced labor at their contractor factories. However, this is not as easy to implement as it sounds because in most foreign markets or migrant workers, obtaining a job through a consultant is quite common. These consultants charge a commission on every successful recruitment making it difficult to control the age limit of workers associated with these consultants. After a careful evaluation of these challenges, Nike became an example for other companies on how to implement a supply chain policy such as to prevent child labor. It also became one of the first companies to employ specific requirement for offshore workers so they’re not exploited by their contractors (Human Rights, Nike, Inc., 2019).
Nike strongly believes in the Employer Pays Principle, which means that every worker should be ppaid full cost of employment and no employee should pay for a job. This made them join the Institute for Human Rights and Business’ Leadership Group for Responsible Recruitment (LGRR) (Human Rights, Nike, Inc., 2019). Nike also became the founding signatory to the American Apparel and Footwear Association Fair Labor Association’s Apparel Footwear Commitment on Responsible Recruitment to address the risks for forced labor nationally and internationally (Human Rights, Nike, Inc., 2019).
The Nike Code of Leadership, mentioned earlier, also includes the ways in which risks of forced labor can be addressed, like requiring a worker freedom of movement within the facility or posing bonds, contracts or deposits as a condition of employment. Additionally, it also addresses the risks that a foreign worker and interns might be vulnerable to and the actions to be taken by Nike management to eradicate such situations (Human Rights, Nike, Inc., 2019). The Nike Code of Leadership also specifies the ways in which suppliers should respect the rights of workers to associate freely without interfering in matters of union activities. This could be done by intimidating, harassing or retaliating against workers participating in a union, and the Nike Code of Leadership requires to prohibit it (Human Rights, Nike, Inc., 2019).
Additionally, Nike is also a member of the Responsible Business Alliance’s Responsible Labor Initiative (RLI) which gives help to various contractors and suppliers to give them proper understanding of forced labor disadvantages through various tools and also help them improve their work environment and hiring process (Human Rights, Nike, Inc., 2019).
Nike’s code of conduct motivates gender equality and prohibits discrimination in recruitment, compensation or any other aspects of employment. Most of the employees working for Nike are female and are at higher risk of being exploited by their male colleague. Nike know about this situation so they have other strict standard to protect women (Human Rights, Nike, Inc., 2019).
Compensation can not only obey the contracts that Nike sign with employees, but also an appropriate compensation model which motivate them and achieve a high level of working efficiency. The compensation includes, prevailing wage, overtime fees, social insurance and some benefits. In addition, Nike has collaborated with academic consultants, and renewed their compensation model, in order to create a sustainable compensation system (Human Rights, Nike, Inc., 2019).
Working-hours is depending on the local legislation that protect workers health and safety. Nike implement a more stricter principles than other organization. And Nike pay overtime at a premium rate of 125% or higher of base rate (Human Rights, Nike, Inc., 2019).
Every employee expects good working condition which is safe and hygienic for them. To make sure the employees are happy, Nike require suppliers to provide a safe, hygienic and healthy workplace. And give employees properly training of work safety which includes fire drills, CPR training and other safety trainings (Human Rights, Nike, Inc., 2019).
Nike monitors suppliers with internal and external audits done at regular intervals. This includes audits by Fair Labor Association and other organizations like the International Labor Organization’s Better Work Programme. These audits are done on a scheduled time based on suppliers previous performance. Also, when any supplier is found in violation of Nike’s standard, it is required to reverify and improve the issues identified. If still the suppliers is not able to improve, it would cause permanent termination of business between them (Human Rights, Nike, Inc., 2019).
Nike also has grievance process for employees which motivates them to raise their voice if any problem is faced by them anonymously and confidently without fear of retaliation. The systems need to upto standards to respond to workers regarding their problems in a timely manner. In order to reduce communication gap between the upper management and the workers they have a two-way communication channel which helps in filling the gap of miscommunication. Suppliers has union who plays an important role in negotiating on behalf of the workers (Human Rights, Nike, Inc., 2019)
Nike is among the companies that have successfully integrated sourcing strategies in their supply chain management. Despite Nike capturing a greater segment of the US footwear and apparel industry, its manufacturing activities occur overseas. Similar conditions happen in other countries where Nike only uses retailers to sell its products to customers as opposed to manufacturing them locally in those nations. Nike has a global commodity chain whose responsibility is to provide insight concerning design, distribution as well as marketing activities for the company. As a global sourcing archetype, Nike relies entirely on external sources for raw materials and their manufacturing (Nike, Inc., 2019c). The company works with independent contractors to manufacture its products and focuses on improving its relationship with them (Nike, Inc., 2019b). As a result, Nike has developed an extensive supply base to support its business and facilitate its growth. Even though the sourcing of raw materials and manufacturing services are externally based, Nike remains focused on the quality of the products it sells to its customers since it is among the critical facets of its supply chain. The process involves being cautious concerning raw material and suppliers’ selections. All these approaches work to ensure that the company maintains its quality services to customers.
A better understanding of the sourcing strategy that Nike uses requires a close analysis of the sources of its raw materials and the places where the manufacturing of its products occurs. Currently, Nike makes its products in 41 countries where it has contracted 523 manufacturing factories with 1, 088, 415 employees (Nike, Inc., 2019b). The factories are responsible for the production of almost everything that Nike markets and sells to its clients. This situation implies that Nike works with many suppliers that the company uses for the provision of raw materials and the manufacturing of its footwear and apparel. Due to the high number of bidders, the company subjects its new suppliers to New Source Approval Process (Nike, Inc., 2019c). The process considers any risks involved in starting a supplier relationship with a company in a given country. One condition for supplier approval is that one must receive a Bronze audit rating before it can commence its production operations. Therefore, the process of manufacturer acquisition is rigorous, and it involves quality and risk considerations to ensure that Nike retains its competitive advantage in this industry.
Another vital facet of Nike’s sourcing strategy is that the company has set a code of conduct to govern the behavior and the operations of its suppliers. The code of conduct outlines the threshold standards that suppliers’ factories and facilities should meet to warrant their continued cooperation with Nike and quality delivery to the customers (Nike, Inc., 2019c). Through the code of conduct, Nike aims to improve the conditions of manufacturing and reduce any negative impacts that workers can sustain while executing their duties. The company uses the code of conduct to minimize any detrimental effects that manufacturing can have on local communities as well as the environment. Owing to the importance of this initiative, the company launched its code of conduct in 1992 and has continuously evolved it to improve various outcomes (Nike, Inc., 2019c). Besides, Nike has a code of leadership standards that work in tandem with the code of conduct and communicates how suppliers should implement the latter.
Finally, the fact that Nike's sourcing strategy considers supplier behavior, customer expectations, and cost of operations, it supports the company's sustainability. The codes of conduct and leadership ensure that suppliers behave responsibly and maintain the required quality standards for the products they avail to the market (Nike, Inc., 2019c). As a result, meeting customer tastes and preferences wins their loyalty and this move promotes a company's sustainability (Ivanov, Tsipoulanidis, Schönberger, 2017). Another important part of the sourcing strategy is that Nike considers the cost implication of the country where these suppliers operate and, therefore, prefers to work with the ones with the lowest cost such as Taiwan and China among others (Sichol, 2019). Therefore, sustainability remains a special component of the sourcing strategy that Nike uses in its supply chain management.
Nike Inc., being the largest maker of athletic footwear, apparel and accessories, runs a successful global business entirely based on its massive supply chain management. Even though it’s marketing style is as unique as its product quality and product design, Nike has ensured that its supply chain network remains the strongest as its entire business empire is dependent on its supply chain. Overall, Nike’s supply chain model has evolved a lot over the past few years where the focus has gradually shifted towards its environmental footprint, quality of products and customer service. Nike relies entirely on its broad base of external suppliers for raw materials and manufacturing while keeping quality as the central theme. The global procurement team Nike ensures that the entire procurement process from selecting to contracting with the appropriate suppliers for the appropriate goods and services is up to standards set by Nike itself (Pratap, A., September 2019.).
While the products are made in 42 countries at 567 independent factories employing more than 1 million workers, they are officially marketed and sold by Nike. In 2018, 124 of these independent factories located in 13 countries accounted for 9% of Nike’s footwear sales, and 328 apparel factories located in 37 countries accounted for more than 15% retail sales (Manufacturing Map, Nike, Inc., 2018).
In 2008, Nike faced a major bump when its Chinese supply chain (firm’s largest with 180 contracted manufacturers) was found to be inefficient with complying to company’s code of conduct in terms of providing appropriate training and awareness among the employees and poor communication of factory standards by suppliers to workers. The Nike factories in China employ more than 210,000 workers but the issues revolved around fake documentation being used for background verification or even underage laborers (Retuers, 2008). Owing to this controversy surrounding labor welfare in the past, Nike has now made ethical supply chain as its main focus. The suppliers who have shown leadership in CSR and sustainability are now given precedence in Nike’s sourcing strategies to ensure that their supply chain partners have agile and resilient management systems. This helps in sustainable growth with reduced impact on the environment while simultaneously creating a culture of safety, diversity and inclusion down the supply chain. Because of this, Nike now judges and audits its suppliers based on fair labor standards (Pratap, A., September 2019).
Additionally, Nike’s smarter distribution and logistics network is also efficient enough to cater to the needs of its individual customer needs in a faster way by helping with faster shipments and quicker response to customer demands. The distribution and logistics centers add speed to the entire s