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Supply chain activities at NIKE

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					                             NIKE CORPORATION


Introduction
  NIKE, world’s major public trader of athletic footwear and apparel, currently enjoys a
42% market share of the domestic footwear industry, with sales of $3.77 billion is
dominating the US athletic shoe market. It designs and sells wide range of footwear and
uniforms for variety of sports. The company has more than 700 retail stores worldwide
and about 23000 retail accounts in US. Most of the manufacturing units are located in
Asia, including Indonesia, China, Taiwan, India, Thailand, Vietnam, Pakistan,
Philippines, and Malaysia.


Major Competitor
   Adidas AG is the major competitor of Nike Inc. Adidas, is not completely different
from Nike in terms of products they offers. Adidas is into the manufacturing and
marketing of athletic as well as non-athletic footwear and apparel. Nike has a notable
advantage when it comes to economies of scale. Adidas Group is second only to this
company in terms of sales and market share. It enjoys 22% of the worldwide athletic
footwear and apparel market.




             Source: Daily Finance



Nike earned slightly less revenue of 19014M in the year 2010 as compared to 19176M in
year 2009. It has 42% rises in its total net income in the year 2010 from 1486.7 to
1907.7M respectively (Nike income statement, 2010). On the other hand, Adidas Group
had total sales of $15,889.1M in 2010 (Adidas income statement, 2010) which was
remarkably low as compared to the sales of Nike Corporation.
Core Competency

The top notch athletic footwear companies compete with one another in terms of
advertising; focusing on creating the brand image and the products they are trying to
market (Drbul et al. 2006).

Endorsing products with Celebrity marketing campaigns is the key component in which
athletic shoe makers tries to differentiate their brands and associate their shoes with
professional athletes and other celebrities to leverage brand image. The most remarkable
of these relationships is between Nike and Michael Jordan. Despite Jordan’s retirement
several years ago, the Air Jordan line is the huge source of profit and brand support for
Nike (Kang 2006).

The success of the Jordan and other celebrity endorsements has helped Nike to
differentiate its products from its competitors especially Adidas whose brand image has
so far failed to break the typical technical image. (Karnitschnig & Kang 2005).

Nike employed unique distribution tactic in 2005 allowing its customers to design their
own shoes. This personalization allows customers to choose colors, materials etc of their
own choice to the shoes (Holmes 2006).



Operations Strategy

   Nike is actively engaged in the outsourcing of its products to the Asian markets for
over two and half decades. Their majority of output is produced by their factories in
China, Indonesia and Vietnam. These production units are 100% owned by
subcontractors, with the majority of their output consisting solely of Nike products. Nike
has completely outsourced all of its operations but has kept only two main operations to
in-house production- product designing and brand management.

Inventory Management

   Nike’s inventory turnover ratio is 4.4 (Nike Inc,NYSE:NKE) which exceeds the
industry average of 4.34 (Weygandt, 1996). A slight Reduction in the inventory level is
required. Inventory turnover management will benefit Nike greater cash flows, reduced
storage costs and less product spoilage. It can also reduce Nike’s inventory of out-of-
fashion shoes and clothing. Nike employed MRP software helps the store managers to
keep the track of the materials to be purchased through an online exchange result in
significant cost and time saving to the company (Shah, 2009).
References
Adidas: Income statement (2010). Retrieved on May 20, 2011 from
http://www.hoovers.com/company/adidas_AG/stjyti-1-1njea5.html
Dogiamis, G. & Vijayashanker, N. (2009) Adidas: Sprinting Ahead of Nike, Retrieved on
May 20, 2011 from http://www.mcafee.cc/Classes/BEM106/Papers/2009/Adidas.pdf

Drbul, Robert, et al. (2006, January). Textiles, Apparel & Footwear: Outlook for 2006.
Lehman Brothers

Dunsen V. S. (1998). The Manufacturing Practices of the Footwear Industry: Nike vs. the
Competition, UNC - Chapel Hill, INTS 092

Dw Staff, (2006).EU Approves Adidas-Reebok Merger Retried on May 20, 2011 from
http://www.dw-world.de/dw/article/0,,1870303,00.html

Holmes, S. & Bernstein, A. The new Nike. (2004, September). Bloomberg Business Week,
Washington. Retrieved on May 20, 2011 from
http://www.businessweek.com/magazine/content/04_38/b3900001_mz001.htm
Holmes, S. (2006). Adidas’ World Cup Shutout: U.S. Fans of Soccer’s Big Event Will
See Only Adidas Ads on Television. Nike’s Response: A MySpace-style Site for Soccer
Nuts. Business Week, pp. 106-107
Karnitschnig, Matthew & Kang. (2005, August). Leap Forward: For Adidas, Reebok
Deal Capps Push to Broaden Urban Appeal; Known for Its Engineering, German
Company takes on Nike in Lifestyle Market; Teaming Up with Missy Elliot. Wall Street
Journal, p. A1
Kang, Stephanie. (2006, January). Sports Shoe Rivals Step Up. The Wall Street Journal.

Nike (NKE) stock quote, Retrieved on May 20, 2011 from
http://www.wikinvest.com/wiki/Nike_%28NKE%29

Nike Stock Performance, Daily Finance Retrieved on May 20, 2011 from
http://www.dailyfinance.com/company/nike-inc/nke/nys/top-competitors
Nike: Income statement (2010). Retrieved on May 20, 2011 from
http://www.hoovers.com/company/NIKE_Inc/rcthci-1-1njea5.html
Nike Inc,NYSE:NKE| ratios and returns, www.Forbes.com. Retrieved on May 20, 2011
from http://finapps.forbes.com/finapps/jsp/finance/compinfo/Ratios.jsp?tkr=NKE
Shah, J. (2009, May). Supply Chain Management: Text and Cases, Prentice Hall

Weygandt, J. J., Kieso, D. E., & Kell, W. G. (1996). Accounting Principles (4th ed.).
New York, Chichester, Brisbane, Toronto, Singapore: John Wiley & Sons, Inc.

				
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