Nike's Business Strategy Case Study

In the last few decades, many companies like Nike faces a dilemma: remain a limited company that is able to serve only a small part of the world, or expand the operation to serve an ever-growing market that could even become worldwide?

Nike choose the second one, but its growth wasn’t easy, they had to modify their business model, and this had serious consequences.

In this paper, I’m going to analyze Nike growth and what were the consequences.

Nike at the beginning

The first company created in the U.S. 1961 was called Blue Ribbon Sports (BRS). The original business model, written by co-founder Knight in the early 1960s, was different from all other shoe company: he choose to start by outsourcing production to Japan, a country was

production

Nike adopted the policy to produce in undeveloped and cheaper country purely for economic reasons: to sell a price-competitive product in prospering market, production had to be the cheaper possible.

Positive effect of Nike strategy

Nike’s evolution brought many negative effects, but it created also numerous positive effects. To start, by importing cheaper product, Nike could count on a cheap price. This had two advantages: Nike’s product was affordable, and this helped grew the company’s market all over the world. The other advantage is the profitability: with this lower price, Nike was extremely lucrative, since they had a large profit margin to play with.

Another advantage was variety: since Nike was able to produce in many different countries, they had specialized branches, and thus being able to expand its offering from footwear to apparel and garment.

Having suppliers from different countries had another advantage: each of them can help Nike to penetrate in their regional market, and thus keeping a close supervision in every area in the world. Nike had factories everywhere, and this is a key to success in a

And this is not only a culturerelated problem since there are a lot of barriers and duties to penalize foreign manufacturer, that you can prevent my producing in the country that you’re selling. It’s an extremely powerful weapon to expand Nike’s commercial reach.

Negative effect of Nike’s strategy

Even though the business model is profitable and has its perks, Nike became also an example of how globalization brings with it many ethical questions. “Should multinational companies abide by so-called international labor and environmental standards, or is simply regulatory imperialism and de factor protectionism in another guise?” (Locke and Siteman,

2002).

Since the beginning, Nike’s business model has been criticized because it’s based on the exploitation of countries in which workers were not treated fairly.

In each and every country Nike was manufacturing, many irregularities have been found and exposed by the international press. Nike’s Korean suppliers, to satisfy the ever growing demand, moves its production to Indonesia, where wages were lower and regulation was bland. Here workers were not paid the minimum daily wage, 1$, which was hardly enough to survive in that