Nike: Spreading Out to Win the Race

Nike is indisputably a giant in the athletics industry. The Portland, Oregon, company is known worldwide for its products, none of which it actually makes. It has thrived by knowing how to stay small, focusing on core competencies, and outsourcing manufacturing.

But if you don’t make anything, what do you actually do? If you outsource everything, what’s left? A lot of brand recognition, as it turns out.

Behind the Swoosh

Nike continues to outpace the athletic shoe competition while spreading its brand through an ever-widening universe of sports equipment, apparel, and paraphernalia. The ever-present Swoosh graces everything from bumper stickers to sunglasses to high school sports uniforms. Nike products embody a love of sport, discipline, ambition, practice, and all other desirable traits of athleticism.

The company has cleverly kept its advertising agency nestled close to home, but has relied extensively on outsourcing many non-executive and back office responsibilities to reduce overhead. Nike is structured around its core competency in product design—not manufacturing. It has taken outsourcing to a new level, with sub-contractors producing all of its shoes.

Whoops

Although outsourcing production hasn’t hurt product quality, it has challenged Nike’s reputation for social responsibility, especially regarding work conditions and labor practices at some suppliers. In a move designed to turn critics into converts, Nike posts information on its website detailing every one of the hundreds of factories that it uses to make shoes, apparel, and other sporting goods. It released the data in conjunction with a comprehensive corporate responsibility report summarizing the environmental impact and the labor situations of its contract factories.

Nike also encourages designers to develop environmentally sustainable designs like the Nike Free, a lightweight running shoe that boosted sales dramatically. Nike’s Sustainable Business & Innovation Lab funds outside startups focused on alternative energies, more efficient approaches to manufacturing, and the promotion of healthy lifestyles.

Pesky Competition

Nike has so far balanced size and pressure to remain successful by leveraging a decentralized and networked organization structure. Individual business centers—such as research, production, and marketing—are free to focus on their core competencies without worrying about the effects of corporate bloat.

This company has found continued marketplace success by positioning itself not simply as a sneaker company but as a brand that fulfills the evolving needs of today’s athletes and athletes-at-heart. Will Nike continue to profit from its organization structure, or will it spread itself so thin that its competition has a chance to overtake it?

Source: Schermerhorn Jr., J.R., Bachrach, D.G. (2016) Nike: Spreading Out to Win the Race. In Exploring Management (Cases for Critical Thinking).

Case Analysis Questions

Answer the following in up to 350 words each.

1. Describe the factors that drive Nike’s decision to stick with some form of network organizational structure rather than own its manufacturing operations.
2. Assess why Nike’s choice of a decentralized and networked organization structure worked well for them.
3. Summarize the current state of competition in this industry. Assess if Nike continuing to pull away from rivals, or if they are catching up.
4. Assess whether Nike’s organizational structure is still a major strength that contributes to its success, or if it is creating problems that will call for organizational design changes in the future.
5. Determine whether a matrix structure could improve performance for Nike.

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