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Nike Case Study Analysis
Nike: Spreading Out to Win the Race
Nike is indisputably a giant in the athletics industry. The Portland, Oregon, company is known worldwide for its products, none of which it actually makes. It has thrived by knowing how to stay small, focusing on core competencies, and outsourcing manufacturing.
But if you don’t make anything, what do you actually do? If you outsource everything, what’s left? A lot of brand recognition, as it turns out.
Behind the Swoosh
Nike continues to outpace the athletic shoe competition while spreading its brand through an ever-widening universe of sports equipment, apparel, and paraphernalia. The ever-present Swoosh graces everything from bumper stickers to sunglasses to high school sports uniforms. Nike products embody a love of sport, discipline, ambition, practice, and all other desirable traits of athleticism.
The company has cleverly kept its advertising agency nestled close to home, but has relied extensively on outsourcing many non-executive and back office responsibilities to reduce overhead. Nike is structured around its core competency in product design—not manufacturing. It has taken outsourcing to a new level, with sub-contractors producing all of its shoes.
Whoops
Although outsourcing production hasn’t hurt product quality, it has challenged Nike’s reputation for social responsibility, especially regarding work conditions and labor practices at some suppliers. In a move designed to turn critics into converts, Nike posts information on its website detailing every one of the hundreds of factories that it uses to make shoes, apparel, and other sporting goods. It released the data in conjunction with a comprehensive corporate responsibility report summarizing the environmental impact and the labor situations of its contract factories.
Nike also encourages designers to develop environmentally sustainable designs like the Nike Free, a lightweight running shoe that boosted sales dramatically. Nike’s Sustainable Business & Innovation Lab funds outside startups focused on alternative energies, more efficient approaches to manufacturing, and the promotion of healthy lifestyles.
Pesky Competition
Nike has so far balanced size and pressure to remain successful by leveraging a decentralized and networked organization structure. Individual business centers—such as research, production, and marketing—are free to focus on their core competencies without worrying about the effects of corporate bloat.
This company has found continued marketplace success by positioning itself not simply as a sneaker company but as a brand that fulfills the evolving needs of today’s athletes and athletes-at-heart. Will Nike continue to profit from its organization structure, or will it spread itself so thin that its competition has a chance to overtake it?
Source: Schermerhorn Jr., J.R., Bachrach, D.G. (2016) Nike: Spreading Out to Win the Race. In Exploring Management (Cases for Critical Thinking).
Case Analysis Questions
Answer the following in up to 350 words each.
Describe the factors that drive Nike’s decision to stick with some form of network organizational structure rather than own its manufacturing operations.
| With a network structure, managers are responsible for controlling and coordinating the relationships that are both internal and external. In my opinion, Nike chooses to stick with a network organizational structure because the company brand is known worldwide for outsourcing. With Nike outsourcing just about everything, they have been able to meet their goals. Since outsourcing has helped Nike to reach their goals, why would they want to change that? With outsourcing, companies have the experience and knowledge that is needed to help these others companies be successful. If Nike did not outsource, they would have to create specific departments within the company and hire employees that specialize in these areas, such as making shoes. The analysis mentions how Nike encourages designers to develop environmentally sustainable designs like the Nike Free, which is a lightweight running shoe that boosted sales dramatically. Nike has the ability to communicate with other companies and let them know exactly what they are looking for. With Nike choosing to outsource, it allows them to reduce the overhead, while also being a more cost efficient option for the company. Having a network based organizational structure allows Nike to be flexible and focus their energy on core competencies, since they are outsourcing the manufacturing. |
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Assess why Nike’s choice of a decentralized and networked organization structure worked well for them.
| Nike’s choice of a decentralized and networked organization structure has worked well for them because they have individual business centers – such as production, research, and marketing, which are free to focus on core competencies without worrying about the effects of corporate bloat. Nike remains successful because of their decision to allow outside companies help with business decisions. Nike is able to be more successful since they are using outside companies that specialize in things such as design. Decentralized organizations rely on a team, which is the exact reason why Nike continues to have such a strong and well rounded brand that is loved by both athlethes and individuals alike. |
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Summarize the current state of competition in this industry. Assess if Nike continuing to pull away from rivals, or if they are catching up.
| Nike is know around the world for their footwear, but there are competitors, such as Adidas and Reebok. According to Chin (2018), “Nike appears to be edging out rival Adidas in the competition of sneaker dominance.” In 2018, Nike dominated the top 10 selling shoes. The analysis states how Nike has positioned itself as not just a sneaker company, but a brand that fulfills the evolving needs of both athletes and individuals. I find that Nike has made a smart decision to expand to other things outside of shoes, such as clothing and accessories, because many people like to match their shoes with their clothes, so this gives Nike an edge over competitors. It is also important to continue evolving when it comes to new and trendy designs, so that Nike can continue to get the attention of the consumer. Outsourcing keeps Nike one step ahead of their competitors because they are using input from experts outside of the company to help keep them at the top of their game. |
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Assess whether Nike’s organizational structure is still a major strength that contributes to its success, or if it is creating problems that will call for organizational design changes in the future.
| I feel that the organizational structure of Nike remains a major strength that allows them to continue to successfully grow as a business. The main reason for this is because outsourcing really helps to make the work process easier, allowing Nike to focus on the company’s core. Some of the benefits of outsourcing would be an increase in efficiency, lower costs, faster service, and allowing the company to focus on their overall core. Nike chooses to outsource, as it is more convenient and also allows the suppliers to design and make changes as necessary. These outsourced companies are able to put all their focus on these designs, thus making it easier for them to make changes as necessary to the product. I truly feel that Nike is doing really well with their organizational structure and I do not believe that problems are being created that would cause for organizational design changes in the future. |
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Determine whether a matrix structure could improve performance for Nike.
| A matrix structure has two managers, that have different roles, that employees would report to. There is a functional manager and a project manager. A functional manager would be the manager that has direct authority over a department. This manager does not usually work directly with team projects, but rather they are the one that takes care of sales, marketing, etc. The project manager, on the other hand, works directly with the team to help reach the goals. A matrix structure could definitely improve the performance for Nike, as each manager would be responsible for specific tasks. This is beneficial because then there is not all of the responsibilities on just one individual. A matrix structure would be a good fit for a company like Nike because they need to have the ability to respond quickly to market demand. Nike could really be able to respond to changes in the market much quicker with the use of the matrix structure. |
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