Nike Outsourcing
Matthew Christensen
History C
Thorton
15 February 2013
Cuts Costs * Decreasing overhead through outsourcing is a valuable resource for Nike. Cutting costs by employing workers at a reduced rate or paying less for plant operation allows Nike to invest the additional profits into other areas of the business such as advertising, thereby increasing the potential for company growth. In addition, decreased operational costs are more likely to attract and retain company investors because more money can go into increasing business profitability.
Increases Competitiveness * Because Nike is able to more efficiently produce its product and reduce costs due to outsourcing, it can more competitively price its products. This enables Nike to price its brand at a competitive rate with other companies that sell a similar product. Decreasing competition can help Nike corner the market for its particular products. *
Finances and Risk Reduction * Outsourcing allows Nike to skirt some of the financial obligations it might face with the confines of tax laws in the United States. In addition, when it outsources to subcontractors, Nike assumes less risk associated with producing its product such as insurance liability. Sport goods producer companies have two options for manufacturing their products. They can own and operate the factories, or look for the ways of outsourcing. Facilities that are enough efficient for outsourcing, could be located either domestically or internationally. Outsourcing to domestic firms (US) gives advantage of easy monitoring, skilled workforce, well understood labor rules, but on the other hand it is relatively expensive if compared with outsource in developing countries. By manufacturing products overseas, in the third world economies, tremendous efficiencies are gained because of low salary expense, but in this case company has to face increased difficulty of monitoring the quality of their products and the uncontrolled
History C
Thorton
15 February 2013
Cuts Costs * Decreasing overhead through outsourcing is a valuable resource for Nike. Cutting costs by employing workers at a reduced rate or paying less for plant operation allows Nike to invest the additional profits into other areas of the business such as advertising, thereby increasing the potential for company growth. In addition, decreased operational costs are more likely to attract and retain company investors because more money can go into increasing business profitability.
Increases Competitiveness * Because Nike is able to more efficiently produce its product and reduce costs due to outsourcing, it can more competitively price its products. This enables Nike to price its brand at a competitive rate with other companies that sell a similar product. Decreasing competition can help Nike corner the market for its particular products. *
Finances and Risk Reduction * Outsourcing allows Nike to skirt some of the financial obligations it might face with the confines of tax laws in the United States. In addition, when it outsources to subcontractors, Nike assumes less risk associated with producing its product such as insurance liability. Sport goods producer companies have two options for manufacturing their products. They can own and operate the factories, or look for the ways of outsourcing. Facilities that are enough efficient for outsourcing, could be located either domestically or internationally. Outsourcing to domestic firms (US) gives advantage of easy monitoring, skilled workforce, well understood labor rules, but on the other hand it is relatively expensive if compared with outsource in developing countries. By manufacturing products overseas, in the third world economies, tremendous efficiencies are gained because of low salary expense, but in this case company has to face increased difficulty of monitoring the quality of their products and the uncontrolled