Nike, Inc. : Case Study in Operations Management
Prepared for: Dr. Davidson, Concord University
December 4th, 2012
Low-cost, time-efficient manufacturing of goods is a key feature of a successful production company in today’s competitive global economy. Operations management, often abbreviated in the business world as OM, is defined as “...the set of activities that creates value in the form of goods and services by transforming inputs into outputs (Heizer and Render, p. 4).” Every day, factories take in raw materials and use the labor hours and skills of their employees to transform those same materials into a variety of consumer products, as quickly as is possible to turn out a high-quality product. One of the leading firms in the high-performance athletic wear business is the industry giant Nike, Inc., a longstanding member of the Dow Jones U.S. Footwear Index. Brilliantly successful in all three functions that organizations perform in operations management to produce goods (and services)--marketing, production, and financing, Nike, Inc. (who also owns brands Converse, Hurley, Umbro International, and Cole Haan) has consistently outperformed its competitors both in the stock market and in consumer products. As they seek to fulfill their mission statement: “To bring inspiration and innovation to every athlete in the world (Nike.com).”
Global Environment and Operations Strategy
Today’s market is a global one, and every country’s success depends on how well it interacts with other countries with which it does business, creating a global interdependence. The ability to be flexible in sources of supply and export/import duties, which is essential to operate internationally, is something in which Nike excels. Founded in Oregon in 1968, today Nike has become hugely successful both nationally and internationally, with 16 non-U.S. distribution centers that helped account for the 57% of total revenues during the 2011 fiscal year that came from international sales (Nike 2011 Annual Report, p. 4). One of the main reasons Nike (and many other companies) expanded to international operations was to reduce costs, mainly in the manufacturing department. Combined, factories in Vietnam, China, Indonesia, and India produced approximately 98% of one of Nike’s biggest products, footwear (Nike 2011 Annual Report, p. 5), and most of the apparel is produced outside the United States as well. Something that is very important in today’s economy is the sustainable operation of a business, using resources in the most efficient way possible. As the largest seller of athletic apparel and footwear in the world, Nike is extremely competitive in their overcrowded industry and use the advantages provided by their global position successfully. In order to get somewhere, you have to have a destination in mind. The same holds true for operations management--without a goal or a mission to accomplish, a company has no direction. Written mission statements put into words the company’s mission, which is the “...purpose or...rationale for an organization’s existence (Heizer and Render, p. 34).” Nike’s mission statement is rather abstract but passionate: “To bring inspiration and innovation to every athlete in the world (Nike.com).” In order to achieve its missions and goals, an organization has to have a strategy. An organizational strategy embodies the mission statement and sets down concrete, factual plans in order to complete that mission, by capitalizing on the firm’s strengths and opportunities and working to avoid threats and weaknesses. Nike sets itself apart from other companies by using a differentiation strategy, which focuses on adding perceived value as compared to other company’s products through uniqueness and quality and exploiting Nike’s continued excellent innovation for their apparel and footwear. Consequently, their...
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