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Nike Company as a Globalized Brand Name Case Study

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Updated: Jul 21st, 2021

Introduction

The modern world could be characterized by the significant changes in the structure of the market and the main approaches towards management and development of business. These changes result from the evolution of technologies and the implementation of innovations in numerous activities. It also conditions the increased interchange between various states and the growth of the commodity circulation (Kobayashi, 2011). In these regards, the modern world market could be characterized by the great significance of international relations and globalization trends which could guarantee new outlets and customers (Locke, 2002). The functioning of numerous companies is reconsidered to guarantee their further evolution and spread to other countries.

When speaking about the attempts of various companies to achieve the next level of their evolution and go global, it is crucial to highlight the major concerns related to the given issue. First. great international companies like Nike have to look for the new outlets constantly as the increased rivalry conditions the increased importance of stable revenues and of a certain targeted audience that will use the goods provided by a company (Das, 2010).

For this reason, globalization of a certain trend could be taken as a response to the growth of rivalry and the appearance of new opportunities for the companys growth. Corporations like Nike tend to guarantee their further evolution by means of new customers attracted by the companys entry into the new market (Deng, 2009). That is why Nike and a number of other corporations are now globalized brands that could be found in any state.

The great popularity of globalization and the companies adherence to the given practice is conditioned by a number of advantages provided by the entry into the new market. For instance, the international character of the company guarantees Nike the annual revenue of about $30.6 billion, while the North American region generated a revenue of approximately $13,74 billion (Statistics and facts on Nike, n.d.). It becomes obvious that the bigger part of incomes comes from various international departments (Dalton, 2009). This fact conditions the advantageous character of the practice. Yet, there are also some problematic issues resulting from the globalization like the decreased quality of goods, problems with local workers, etc. That is why it is crucial to investigate the given question.

Peculiarities of the modern market

The drift of people across areas was the chief feature of the globalization progression. In the second half of the 19th century, over 20 million people moved from Europe to North and South America, Australia, and New Zealand. The period between the World Wars saw harshly limited movement flows to these zones of European settlement, but the status quo began to change again in the 1950s (Grinin, 2013).

It is worth reminding that this period was characterized by extraordinary populace growth. In many unindustrialized regions, predominantly Africa, populace growth rates still keep on being very high by historical canons. Many former net-emigration states in western Europe have turned out to be immigration countries, with the outcome that a group of West European countries has seen net immigration ratios since the mid- 1990’s comparable to those spotted in the “traditional” immigration countries in the 1960s and 1970s.

Globalization trends

The main driver of globalization has been the economic strategy, which gave rise to the decrease or abolition of limitations on transnational trade and financial connections. Fundamentally, globalization is a simplification of borders, making them less significant as countries become reliant on each other to prosper. Some say that governments are becoming less powerful in the face of a progressive economic world. Others challenge this, claiming that governments are becoming more significant because of the necessity for directive and order in such a multifaceted world organization (Jobber & Chadwick, 2013).

The main aspects of globalization and opportunities provided

The key to understanding the core of globalization is in the motives of why product flows and separations of production arise. This is vital because economic interactions very seldom take place between nations or groups of nations: they occur between companies (Blossfeld, Kilpi, Vilhena, & Buchholz, 2014). The globalization has encouraged some analysts to propose that the nation-state as a player in the commercial part of economics has all but vanished. Consequently, there are two key points here. Firstly, globalization is not about producing and selling products in all areas of the world. And secondly, globalization is not limited to marketing and trade. Globalization is an authoritative techno-economic wonder with deep implications for vendors.

Nike. General companys overview

Founded in 1964 by Phil Knight and Bill Bowerman, Nike has grown from being a distributor and provider of Japanese running shoes to becoming the world leader in the design, distribution, and advertising of athletic footwear.

History

The rapid evolution of the brand and the main trends peculiar to its development. The main aspects of its formation and the values are appreciated in the company.

Nike’s business model in 1964 is principally the same as its model today: Nike grows by financing the design, progress, marketing, and sales and then bonds with other corporations to manufacture their goods (Frisch, 2013). Consistent with the company legend, Nike’s commercial model was established by Knight while attending Stanford Business School in the early 1960s. By subcontracting shoe manufacturing to lower-cost Japanese fabricators, Knight believed that Nike could underrepresent its opponents and break into this market. By the early 1980s, Nike shut its US factories and sourced nearly all of its production from Asia. Nike was able to help its lead retailers establish an all-embracing network of footwear sweatshops all over Southeast Asia.

Current state

Nowadays, Nike’s products are mass-produced in more than 700 factories, by more than half a million employees in 51 countries. As time has passed, Nike has extended its product assortment. Nike wholesaled more and more diverse styles of shoes with every decade, offering more than 1500 shoe styles in the 21st century. Nike has also stimulated other segments (attire and sports gear) and prolonged its sales outside the United States into European and Asian countries. Last year, the corporation made about the US $10 billion in profits, of which 60% came from footwear sales and 30% from the attire.

The level of income

Profits for the Nike product were $8 billion, up 16 percent, and not depending on the currency, determined by improvement in every location around the globe and nearly every crucial group. Estimated profits for Converse grew by 6 percent and hit $560 million, primarily due to the popularity and strong brand growth in the United States, which was to some extent counterbalanced by a deterioration in the United Kingdom.

The main sources of income

The progress was mostly attributable to higher regular vending prices and continuous growth in the upper echelon of the business, partly counterpoised by complex product input schemes and money spent on storerooms. Demanded development expense was $830 million, reflecting auspicious contrasts against larger investments in the opening quarter of the financial year 2015. Earnings per share increased 22 to $1.29, showing robust revenue growth, gross margin increase, selling and organizational expense control, a lower tax rate, and a cut in the typically weak common shares.

The companys current image and its popularity among customers

The acceptance of the Nike brand twigs from its advertising campaign that pairs effective and alluring athletes with high-quality good-looking merchandise. Striking mottos such as “Just do it” induce emotional answers from customers that become tied to the Nike brand. Social reception and respect for Nike products upsurge the desire for clients to get them. Nike develops pioneering products every year and encourages a large percentage of their customer base to come back. In addition to the snowballing lineup of athlete supporters, Nike adores further success of their brand with the impact of celebrities and performers who generate buzz for certain shoes or goods.

The main rivals and the strategies to guarantee a competitive advantage

Today, Nike’s main opponents in the current marketplace are Under Armour and Adidas. Other entrants are Puma, Skechers, and Li Ning. Nike is the worldwide market frontrunner, but it has to cope with the growing struggle in China and Europe. The brand is vigorously pursuing moneymaking U.S. sponsorship agreements analogous to Nike’s, guaranteeing it a bigger share of market profits. Adidas is developing new goods to contend equally with the giant on the European turf.

Perspectives

Even though the company has been continually calling prominent growth numbers in incomes and many of its other sectors, Nike has no plans of stopping or slowing down anytime soon. In a stockholder summit, Nike’s chief executive specified that the corporation’s primary goal is to obtain a yearly revenue worth of more than $50 billion by the third decade of the 21st century, which embodies a multipart annual growth rate of more than 9 percent. While even Nike’s CEO defined the goal as ambitious, it is not an unattainable goal for the sneaker giant.

Expected revenues and incomes

Nike is already used to setting and reaching high goals, and the company has a strategy on how it is going to do it. Three years ago, the company set a revenue goal for themselves – $36 billion by 2017, and the corporation is well on its way to going over and above that goal.

The tendency towards the companys further growth

Nike pays close attention to its e-commerce segment, as it is one of the parts that still has great development potential for the company. While the current e-commerce sales exceed $900 million, Nike is working hard to increase that number to around $7 billion by the next four years. The women’s sector, including shoes and apparel, is another major area that Nike considers a major prospect for more profits.

Opportunities for a world market entry

Even though Nike’s annual revenue records are most likely to be supplied by the e-commerce and women’s segments, the corporation definitely knows its way around the schemes designed to obtain its goal. Another factor that will most probably increase the corporation’s revenue numbers is considerable business growth in several geographic regions all over the globe. North American sales are likely to elevate up by $6 billion by 2020, currently being at the $14 billion levels.

The companys reorganization in terms of its globalization

The biggest of Nike’s incomes are expected to come from China. It is all possible to accomplish because of the growing love of sports by customers in the country and the quickly growing number of Chinese constituting in the mid-class. An extensive increase in more than a few of Nike’s smaller categories seems to be Nike’s wide-ranging plan that would comprise revenue growth in many of its key categories.

Creation of the new facilities in various states

Nike is presently one of the largest international corporations in the world. While Nike head office is located in Beaverton, Oregon, the three main merchandise lines of Nike’s brand (shoes, clothing, and gear) are mass-produced around the globe, far from Oregon.

Nike as a globalized brand

Nikes branches

At this time, Nike goods are manufactured in 600 contract sweatshops, situated in 46 different countries, that employ more than 800,000 workers.

Outsourcing and its main peculiarities

Nevertheless, with a commercial model based on outsourcing its trade, Nike became an early bull’s eye for anti­-globalization and anti­-sweatshop movements near the end of the 20th century. Explicitly, the ferocity initiated in the last decade of the 20th century when the press focused its attention on poor working conditions and tremendously low salaries in Indonesia and began issuing reports. At a nationwide question and answer session in May of 1998, Phil Knight proclaimed that it would begin fighting the labor complications out of the country by taking two primary steps: first, the working conditions were sworn to be enhanced, and second, the minimum age for workers in Asian plants would be raised. Since 1999, Nike has continued to take steps to contest the trials associated with globalization and now aims to practice their compound global supply chain as a chance for constructive economic, societal, and eco-friendly change.

Advantages of globalization

Nike was an initial target for the very motive it’s been so effective. The money the company saved on wide-scale marketing campaigns gave the base to its business model that was based on subcontracting its manufacturing. Nike had absolute success in turning around the people’s opinion about the company. No one can deny that the corporation has completed one of the greatest image revolutions in recent years, even knowing that Nike hasn’t been entirely successful in all that it has done throughout its history.

Opportunities provided by the global character of the company

As can be seen from Nike’s example, globalization can create new opportunities, new ideas, and open new markets that a company may not have had in its home country. As a result, there are a number of general positives connected to globalization (Murray & Overton, 2014). Firstly, it gives greater chances for firms in less technologically advanced countries to tap into more and bigger markets around the globe. Secondly, this can lead to more admittance to capital currents, technology, human assets, low-priced imports, and greater export markets. Thirdly, it permits businesses in less developed countries to become part of intercontinental production nets and supply chains that are the main channels of trade.

Possible complications and problems appearing in the process of entering the world market

Today, one of Nike’s key issues that they are aiming at is to help expand the capacity of contractors to manage their human resources within contract amenities. Most of Nike’s workers employed are still low skilled in developing markets. Although it is cost-effective, the challenge with this organization is that administrative systems ratify policies that place a low value on employees.

The negative impact of globalization on the companys image and goods quality

The growth of worldwide trade is aggravating income disparities, both between and within developed and less developed nations. Global trade is progressively dominated by transcontinental corporations that seek out to make the most of the profits without respect for the development needs of distinct countries or the local people. Protective policies in manufacturing countries avert many producers in the Third World from retrieving export markets. The volume and instability of capital flows increase the risks of banking and currency crises, especially in countries with weak financial institutions.

The strategy to mitigate the aftermath of globalization and guarantee the companys further evolution

The aim for Nike is to apply “lean manufacturing”, which they define as an approach that brings high-­quality products, with little to no leftovers. Additionally, this tactic aims to sanction workers by giving them the skills required for managing the production process effectively and working to address and resolve issues more competently. Accordingly, decisions are found to be closer to the employees, and Nike’s intention is to give them the tools and provision from the organization that is essential to allow them to produce the best quality goods.

Conclusion

Comparison of positive and negative effects of globalization

As speaking of Nike, the company has been exposed to both positive and negative aspects of globalization throughout its relatively continuous history. It is worth noting that the sneaker giant did cope with the issue of globalization pretty well and got on the road to success, overturning its image and taking full advantage of the prospects that the outsourcing gives. On the other hand, regardless of all of its accomplishments and customers’ respect, Nike will always be remembered as the company that has been exploiting underage labor in its overseas branches.

Consideration of the perspectives provided by the process

The perspectives of the concern look pretty well. Nike keeps on stacking income as the popularity of the brand overcomes any other sports brand. It is evident that the management of the company is doing a great job, adjusting the strategy according to the community needs.

Perspectives

Its aggressive marketing and notable social media presence are a great advantage and a factor contributing to the overall image and perception of the brand. Without further ado, it is necessary to state that the company is in good standing and has done every necessary step to conquering the sports shoe and apparel market.

Recommendations

The only clear and obvious recommendation for Nike is that they should continue setting the trend in the sneaker world and manufacturing the quality product, not forgetting about their clientele. Remembering the 1990’s, it is essential that Nike maintains consumer confidence in the brand and encourage their loyalty. Nike has already proved itself as a company that manages conflicts professionally and does everything to content its clients, so it should not be a problem for the sportswear and sneaker guru.

Summary

This paper provided insight into what globalization is, how it should be looked at in the realities of the modern world, its main aspects, and why it is important to follow the current globalization trends. The paper also dwells on the history of Nike, helps to understand the peculiarities of its business model, discusses its levels and main sources of income, and Nike’s main rivals. The main aspects and opportunities of Nike’s globalization and outsourcing are also discussed. The final part of the paper speaks on Nike’s perspectives and compares the positive and negative effects of globalization when applied to the company.

References

Blossfeld, H., Kilpi, E., Vilhena, D. V., & Buchholz, S. (2014). Adult Learning in Modern Societies: An International Comparison from a Life-course Perspective. Cheltenham: Edward Elgar Publishing.

Dalton, K. (2009). Global Branding: Li Ning vs. Nike. Lehigh Preserve, 17, 1-6. Web.

Das, D. (2010). Contours of Deepening Financial Globalization in the Emerging Market Economies. Global Journal of Emerging Market Economies, 2(1), 45-67. Web.

Deng, T. (2009). “Just Done It” — Nike’s New Advertising Plan Facing Global Economic Crisis. International Journal of Business Management, 4(3), 102-105. Web.

Frisch, A. (2013). The Story of Nike. Mankato, MN: Creative Education.

Grinin, L. E. (2013). Macrohistory and Globalization. Volgograd: The Teacher Publishing.

Jobber, D., & Chadwick, F. E. (2013). Principles and Practice of Marketing. Maidenhead: McGraw-Hill Higher Education.

Kobayashi, K. (2011). Globalization, corporate nationalism, and Japanese cultural intermediaries: Representation of bukatsu through Nike advertising at the global–local nexus. International Review for the Sociology of Sport, 47(6), 724-742. Web.

Locke, R (2002). The Promise and Perils of Globalization: The Case of Nike. Web.

Murray, W. E., & Overton, J. (2014). Geographies of Globalization. London: Routledge.

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