Value Chain Analysis of Nike
Nike Value Chain Analysis
Nike is a celebrity brand of sports shoes, apparel and equipment. Around the world, it can be easily recognized by its Swoosh logo. Apart from these things, the brand is globally popular for its quality of products. Globally, Nike has a very large fan base. It is a highly competitive brand and its competitiveness is a result of its value chain management. A well managed value chain leads to higher productivity and therefore requires strategic focus. The value chain includes all the activities starting from the procurement of raw materials to sales and after sales service. It was Professor Michael E Porter of Harvard Business School who introduced the concept of value chain analysis. It is important for managers to know how each stage in the value chain adds value to the entire production process. Optimizing these steps helps create better results and increase productivity. Value chain includes both primary and support activities. This is an analysis of the value chain of Nike.
Nike has a global procurement team to manage the procurement part of its supply chain management. It includes selecting and contacting the right suppliers for the right goods and services. In the recent years, it has seriously focused on sustainability and in this regard is working to reduce its environmental impact. Its suppliers are now fewer in number and the ones who remain are committed to Nike’s standards of quality and sustainability. Its sourcing strategy gives priority to the suppliers who are willing to go beyond the minimum standards and can follow the rules related to sustainability strictly. At Nike, nearly all of its products are made by independent contractors. Currently, there are 567 factories across 42 countries where Nike products are manufactured. The focus throughout these manufacturing facilities remains on transparency, quality and sustainability and it is why only the most responsible ones get to be a part of its supply chain. Products sourced from these suppliers are sent to various markets through the regional offices and distribution centers of Nike.
Nike is headquartered at Oregon in North America. It is also the biggest office which boasts of the highest number of Nike employees. Apart from that, it has offices in Europe, Middle East, Africa, Greater China, Asia Pacific and Latin America. Nike is present globally and each of its office caters to large geographical areas of several countries. In North America alone, there are more than 2000 retail stores served by a single headquarter. It employed more than 70,700 workers in its offices in 2017. (Source: Fortune)
Outbound logistics are a very critical part of Nike’s value chain. There are more than 500 factories making Nike products in 42 countries. The products shipped from these manufacturers to the Nike Distribution centers have to be sent to the retail stores for sales. Nike has used a chain of regional distribution centers to cater to the needs of its retail stores so that customers do not have to wait long for a new product after its release. An efficient distribution system helps manage timely delivery and shipments too. In 2015, it opened its largest distribution center at Tennessee. The Memphis, Tennesee based distribution system holds footwear, apparel and equipment of Nike and Jordan brands which are distributed to the individual and wholesale customers as well as Nike’s own retail stores. Its European logistics campus is located at Belgium which enables the management of a faster and smarter supply chain.
Marketing and sales:
Apart from its great quality, Nike is also known globally for its excellent marketing strategy starting from its Swoosh logo and can be found on all Nike products. However, Nike also invests heavily in marketing and uses sportspeople like Football celebs for the marketing and promotion of its products and brand. Its video marketing strategy is especially appreciated by the Nike fans. The main sales channels for Nike are two – physical and online channels. Its own stores including in-line and factory retail stores and its websites and mobile sales channels sell to the customers directly. It also uses a mix of independent distributors, licensees and sales representatives globally for sales.
Technology and product quality both are important components of Nike’s production strategy. While the focus is on best quality, sustainability has also become an important focus for Nike. It is using best in class technologies to reuse the waste generated by the Nike factories and other technologies that specifically focus on creating material that is both user friendly and sustainable. It is using technological solutions to minimize its impact on the environment and continuously improve the quality of its products.
Management of a global organization is not possible without having a large and skilled staff. Globally, the brand employs more than 70,000 and has created a culture and environment that fosters diversity and inclusion. Nike was recognized for its great HR management and featured as one of the best employers and as one of America’s Best Employers for Diversity on Fortune’s list. Sound HR management is also an important focus down the supply chain of Nike and its suppliers also have to follow strict regulations related to labor and HR management.
Good quality products are manufactured from good quality raw materials. At Nike, quality is a very important focus and therefore, there is an entire procurement team dedicated to this task which analyzes and evaluates the eligible suppliers. It keeps only the ones who can guarantee more than the minimum quality requirements. Raw materials are procured from several countries.
Nike is a global firm and as such has a large and global infrastructure composed of its offices, retail stores and distribution and logistics centers. This large infrastructure also helps it manage its global presence well. It is headquartered in a state of art building with a lake and several other extraordinary facilities for its staff.
Nike Annual Report 2017