Case Study: Amazon: Nike: Spreading Out to Stay Together
Nike, Inc. is an American multinational corporation that is engaged in the design, development and worldwide marketing and selling of footwear, apparel, equipment, accessories and services. The company is headquartered near Beaverton, Oregon, in the Portland metropolitan area. It is the world's leading supplier of athletic shoes and apparel and a major manufacturer of sports equipment, with revenue in excess of US$24.1 billion in its fiscal year 2012 (ending May 31, 2012). As of 2012, it employed more than 44,000 people worldwide. The brand alone is valued at $10.7 Billion making it the most valuable brand among sports businesses. Nike and Precision Castparts are the only Fortune 500 companies headquartered in the state of Oregon, according to The Oregonian. The company was founded on January 25, 1964 as Blue Ribbon Sports by Bill Bowerman and Phil Knight, and officially became Nike, Inc. on May 30, 1978. The company takes its name from Nike the Greek goddess of victory. Nike markets its products under its own brand, as well as Nike Golf, Nike Pro, Nike+, Air Jordan, Nike Skateboarding, and subsidiaries including Cole Haan, Hurley International, Umbro and Converse. Nike also owned Bauer Hockey (later renamed Nike Bauer) between 1995 and 2008. In addition to manufacturing sportswear and equipment, the company operates retail stores under the Niketown name. Nike sponsors many high-profile athletes and sports teams around the world, with the highly recognized trademarks of "Just Do It" and the Swooshlogo. Discussion Questions:
1. When Nike CEO Phil Knight stepped down and handed his job to Bill Perez, he stayed on as chairman of the board. In what ways could Knight’s continued presence on the board have created an informal structure that prevented Perez from achieving full and complete leadership of Nike? Answer: Informal structures are the shadow organization that represents the actual working and communication relationships that may not resemble the formal organizational chart. When knight remained on the board, old communication relationships may have survived his departure from the CEO position, cutting Perez off from valuable information. Knight’s access to the informal communication network may have worked to spread rumors to Knight and back down the communication chain. These rumors may have contained inaccurate information, caused resistance to change and distracted members from their work. This may have reinforced Perez’s position as an outsider.
2. How can Nike utilize both traditional and newer organization structures to support the firm’s heavy strategic commitment to outsourcing?
Answer: Network structures use information technology (IT) to link with networks of outside suppliers and service contractors. This outlines Nike’s efforts to outsource many nonexecutive responsibilities to reduce overhead. In addition to outsourcing production, the research and marketing business centers listed in the case could be part of a network structure. Other functions may include design, advertising, licensing, compliance sports and entertainment marketing. 3. Given the problems Nike has had with sweatshop labour being used in some of its foreign contractors, are there subsystems of the firm that need to be run with a mechanistic rather than organic design? Give examples to support your answer.
Answers: Mechanistic designs are highly centralized and bureaucratic with an emphasis on command and control. This might suggest that mechanistic designs are appropriate for manufacturing in foreign countries. Organic designs are adaptive, decentralized and tend to respond to change more quickly. This would probably be a good fit for an organization that has far flung operations in different countries with different cultures that try to respond to rapidly changing technology, fashion, customer demands and economic conditions. Nike’s manufacturing subsystem...
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