Week 10 - Vertical Integration Strategies

Nike's vertical integration strategy is on the surface, non existent.  However, in my opinion, I see that Nike has vertically integrated various parts of it's business.  As stated in my discussion last week for class,  I do not believe there's a "one-size-fits-all" strategy when it comes down to what makes a firm or industry more efficient.

To me it would seem it truly depends on what the business is about, where it is in it's age/stage, what the 1 year, 2 year, 5 year goals look like to determine the best approach.  Further, it could be appropriate to have certain areas of a business with different strategies...some vertical some not.  I think that's the key...

I see Nike as taking this multiple approach strategy to their business model.  They have vertically integrated their supply chain operations, and IT solutions but they have left the manufacturing for the most part not integrated.  Nike still relies on contracted factories overseas as well as shipping and air of their freight.  They do not own those factories or ships/planes/trucks.  It would seem this makes the most sense for Nike's overall strategy to get their end product to the consumer in the most economical and efficient way.

 It is pretty fascinating to think that back in the day when they first started, it was basically building a shoe from a waffle maker and selling out of a trunk!  What a complex, well oiled machine they have built in a relatively short time period.

Week 9 - Tacit Collusion: Cooperation to Reduce Competition

The definition on our text tells us that tacit collusion exists when firms coordinate their production and pricing strategies indirectly by observing the output and pricing decisions of other firms.  One great example of how Nike plays this game is by their factory schedule.  Many of the factories Nike uses, are also used by other competing brands such as Adidas.  Interestingly enough, the products have enough similarities in the construct and shipping destinations that allow for multiple brands use the same factory partners.

Starting back in 2005, Nike began assessing how they could leverage collaboration of factories across several brands.  Not only looking for a better way to manage factory relations, but also to create industry-wide efficiency for buyers and suppliers.

It will be challenging for Nike to be challenged with price cuts from competitors as Nike pretty well sets the price in the market for athletic footwear and apparel.  They hold the greatest amount of share in the industry and most follow their lead.

Now, from a cheating standpoint, I cannot say I've heard or read anything that would suggest the various brands collaborating on factories and production schedules has come to light.  Plus, it would stand to reason that it really is in the best interest of those top firms to utilize factories especially if they are taking the same strategy of not investing in brand-owned and operated factories to produce their various lines of business.  To increase profits across all brands, it would seem to benefit all by coordinating.




References
Barney, Jay B. (2014-01-17). Gaining and Sustaining Competitive Advantage (4th Edition) (Page 246). Prentice Hall. Kindle Edition.

http://www.nikebiz.com/crreport/content/workers-and-factories/3-10-1-our-approach.php?cat=brand-collaboration

Week 8 - Flexibility: Real Options Analysis Under Risk and Uncertainty

Options.  Options.  And MORE Options.  Nike is abound with options.

One of the smartest, in my opinion, routes Nike has taken with regards to options is the availability of choices in each segment of business.  Although they are known as starting out at a running company, they have quickly (relatively speaking) become a supplier of all athletic products ranging from Women's Training, Soccer, Football, etc.  One of the reasons Nike has been able to be successful with the multitude of products and lines is really in part due to the organizational structure they live and breath by.  It's a matrix organization that creates synergies and leverages the company-wide assets.

Nike's ability to quickly change, react to a market pressure across all of the lines of business is also another unique challenge.  In order for all lines of business to be profitable, Nike is challenged to ensure they can quickly make a modification to ensure they are offering what their consumers want.  And, by the way, one of Nike's co-founder's, Bill Bowerman, stated many years ago, "If you have a body, you are an athlete".  A statement of this magnitude requires great flexibility to quickly change directions if need be at a given time.  If you think about the various seasons and the athletic or sporting activities associated, there's quite a bit to keep on track and remain new and innovative.

Overall, it would seem Nike has sustained a competitive advantage by being so flexible with their product lines and offerings.  By taking advantage and capitalizing on that strength, Nike is able to continue being the leader in the athletic apparel, footwear and equipment industry.  The environment they foster within the company is one of team work, key learning's, and constant drive to offer new and exciting products.

Week 7 - Differentiation Strategies

According to our latest chapter text, we have learned that implementing a product differentiation strategy is not as easy as one might think.  On first thought, one might think pick a product, make it different, slap a higher price tag on it and bam! you have product differentiation.  Well, turns out it is more complicated than that, and guess what else?  Nike has really cracked the nut on that....

First, yes of course Nike has easily (or presumably) replicated products.  Shoes, apparel and equipment can be made, and is made even in some of the very same factories, across several companies.  Very light soccer shoes, for example, are made both by Nike and Adidas.  Both have certain features that are of specific and unique to different football players.  However, that said, Nike has more than just a lightweight soccer boot, they have a special technology called Flywire built into their boot.  This is just an example of how slight differences in technologies can sway what or which type of cleat a soccer player might choose based solely on their own preferences.

What makes Nike even more unique is how they've cracked the code on how to manage through implementing a differentiation strategy.  As noted, there are some natural rubs in the organization when implementing or utilizing this type of strategy.

Beginning with coordination of teams, Nike does this exceedingly well.  There is a definite sense of individual idea creation and category success, but always an underlying sense of team success is utmost importance.  Next, there is some sense of chaos and at the end of the day, some groups (finance/accounting) might wonder how that just all happened, there is a major sense of collaboration pulling it all together.

Another aspect that Nike has down pat is respecting the past, but always looking at the future.  I've never experienced such a great value or presence of where it all started, but where it needed to go.  Employees take pride in their employee number, which the lower the number the longer the employee.

Nike is a great example to many of our texts call-out's to potential pitfalls from an organizational structure.  In my opinion, Nike is a great case study on how to go about setting up for success across those potential issues.

Week 6 - Cost Leadership

Nike's cost leadership position is not something that defines them.  Nike is known for world class, best in industry athletic apparel that comes with a premium price.  In a sense, they are the opposite or perfect example of what a cost leader equates to in the footwear, apparel and equipment arena.

In my opinion, I would argue that Nike does employ some cost leadership strategies by developing and maintaining long term, high volume product creation relationships around the globe to ensure they are continuously recognizing economies of scale.  Nike's ever-increasing orders to factories that have built long, sustainable relationships with Nike, will be able to continue to decrease the cost of the products created.  The less turnover in factory relationships Nike has, the more stable and efficient the products can be produced.

However, on another note, Nike implements a matrix organizational structure which does not exactly lined them up for a cost leadership strategy.  Most groups within the organization work cross functionally with many stakeholders, with many layers of staff working upward, across and down to ensure all areas of business are represented.  They operate like a well oiled machine with company-wide participation.

Again, on the flip side, Nike's compensation structure does motivate employees (at every single level in the organization) to think about top and bottom line.  All employees are bonus eligible, and all have the same ultimate goal that does promote efficiency and savings where they can be had across the company.  Employees are encouraged to think outside of the box and find better, faster ways to accomplish activities which would lend more to a cost leadership strategy.  But, all in all, Nike's product is premium...  better quality, better performance, elite.