Organizational Analysis of NIKE Company - Business Plan Example

Internal Analysis of Nike Nike is a United s based company that develops and supplies sportswear as well as apparel worldwide. Founded in 1962, the company has one of the comprehensively perceived management systems that have made it have an established and a maintained competitive advantage over the decades. The company had an initial primary goal of distributing a low-cost Japanese high-quality athletics shoes to the American customers. However, the company has grown to be one of the best and dominant companies in the world that produce, distribute, and manufactures shoes at every marketable price point to a global market. According to Schmitz (2005), Nike operates in over 160 countries in the world and employs over one million people from both direct and indirect perspectives. According to Carbasho (2010), Nike has a great zeal of promoting innovation and product improvements as stated in their missions and visions. In this way, the company has been at the forefront in creating business opportunities for itself thereby setting it apart from its competitors. Notably, the basic understandings of success in a company are directly attached to its internal function ability. This paper seeks to analysis the internal functions, through a comprehensive analysis of its value chain, organizational structure, culture, and VIRO analysis of Nike Company. The paper will also discuss some of the Nike’s key distinctive competences that make the company to have some of its professed competitive edge within this industry. Organizational structure of Nike Nike traces its management structure from its founders’ initiatives and management instincts. Bill Bowerman and Phil Knight, the founders of the company, became partners at the convenience of sport. Even through the company has operational points in over 160 countries in the world, Nike has a matrix organizational structure. In this case, it has multiple lines of authority as set up by the founders, and some individuals that report to at least to two managers. The company’s employees report to team managers who on the other hand take these reports to the department mangers. The brands of Nike have many divisions within the company, with apparel for Nike brand, Converse, and Jordan brands forming examples of the major divisions of Nike created for specific products and tastes. More than that, there are functional departments of Nike such as Nike design and investor relations as part of the organizational structure of Nike Company. According to Harper, (2010), each brand consists of its own department to whom the team managers report to. In the same way, each brand has separate department managers who are allowed to act independently of the chief executive Officer (CEO). In what is regarded as horizontal organizational structure, the team managers and the employees make decisions regarding specifications and production while the department managers focus primarily on the policy-related issues of the company. The vertical organizational structure of Nike comprises of the company’s Chief Executive Officer (CEO), currently Mark Parker, and a board of directors who are chaired by the co-founder of the company, Phil Knight. Notably, the company employees are entirely responsible to both of the managers at every managerial level. Basing on Nike’s global popularity, Wong (2013) argues that Nike uses a matrix structure which is on order to allow the company to make better decisions and react effectively to the emerging issues in the market (Goldman, & Papson, 2000). Moreover, this structure makes it react quickly that the average department heads that may at some point be removed from the decision making processes Carbasho (2010). Through Nike, it has also been proven that both the functional and provisional structures can be applied in any management structure and thus become successful. More than that, it has made it very possible in terms of producing endless possibilities in the short-run and long-run goals within the organization. Functional Analysis of Nike The supply chain of Nike has a vivid view of the company’s global nature. Although the company’s headquarter is in the United States, all its production takes place outside the United States. In addition, the company makes a lot of sales outside the U.S. than in the U.S. A critical analysis of the functionality of Nike reveals that Nike’s supply chain begins with materials that are used in the production of its products (Goldman, & Papson, 2000). They include rubbers, plastic compounds, foams, nylon, leather, canvas, polyurethane films, and cushioning materials. The company majorly gets these materials at the locational sports of their manufacturing place. Table 1: The Geographical Breakdown of Nike’s Footwear Sale Market % of Nike Footwear Revenues by Region (Fiscal 2012) Annual Growth in Footwear Revenue (excluding currency impact) Fiscal 2012 First nine months of 2013 North America 44% 15% 16% Western Europe 19% 5% 10% Greater China 11% 25% -4% Emerging Markets 18% 27% 15% Central and Eastern Europe 5% 13% 9% Japan 3% 3% 3% The company focuses more on designing, developing, and marketing globally its footwear. The company uses contract manufacturers to make its products. Generally, almost all shoe-manufacturing activities take place outside of the United States with the exception of the proprietary air bag. Apparel and equipment manufacturing take place in both the United States and around the world. Strengths Nike is known to be an industry leader in developing innovative new products. Nike draws its strength from its brand image globally. Nike has effectively marketed its products and in addition understands the importance of a quality product. They are continually improving their shoes through new technologies that are developed by their research teams (Wong, 2013). Nikes important sustainable competitive advantage is their intangible assets, such as brand image and organizational culture. The analysis different trends of research and development, services, merchandise, and the human resources are the basis of functional analysis since they form functional units of an organization. Through functional analysis, services, quality, innovation, as well as efficiency are easily rated. Nike, being the world’s largest sports and fitness Company is a clear demonstration and identity to understand the impact of better services, quality production, and efficiency. A functional analysis of Nike in this way is a fair analysis of the above mentioned departments in effort to make Nike to continue growing and maintain its share of the sports and fitness industry. R&D Research and development is the background of every successful company like Nike. Through R&D, an organization is able to make clear focus on the tastes and preferences of the targeted customers. One of the major roles of the research and development (R&D) department of Nike is identify some of the psychological needs of some of the athletes. Directly linked with the Nike’s design team, they analyze data pertaining to the emerging trends of tastes and preferences and make shoes that assign Value, quality, as well as comfort to sportsmen and women. Over the years, the efficiency and innovation levels of the research and development (R&D) department has been paramount, and as Goldman, & Papson, (2000) asserts, R&D is one of the pillars of Nike’s success in this competitive industry. The R&D department of Nike use important tools of measurement and analysis to design shoes, under what they terms as natural technology in the process of designing shoes. One aspect of the technology involves using an independent testing mechanism of the control group to test the abilities of the shoes in different areas in terms of speed, development coordination, and optimal speed. Generally, research and development (R&D) team makes the difference by inventing and developing quality products that are optimally giving improved athletic performance. Services The services that Nike offer to the market are directly linked to the company’s vision and mission which involves bringing inspiration and innovation to every sportsperson in the world. Through Nike’s global procurement team are very efficient in managing the company’s procurement processes like selecting and contacting the company’s suppliers and sporting clubs and teams for the right goods and services. Strategically, Nike’s initiatives are of great services and impacts and are focused on increasing the purchases of sustainable and quality products and services. Human Resource The human resource management of the company is one of the efficient departments owing to its growth and productivity level. The company’s culture f talents orientations, diverse and inclusive employee relationship are the engine of creativity of the brand image of Nike. The global strategy o the human resource is to accomplish the company’s potential in every area of business. HR enables the management team to make decisions that accrue to Nike’s global growth and evolution thus ensuring a fluent operational and functional workforce. Nike employed over 38,000 people globally by 2011 and this figure was increased by 5000 (5% increase) by the end of 2012. This team together with the management is responsible for the sustained profitability, growth, development, and brand image of the company as highly customers oriented footwear company. Marketing unit Although fashion trends have been a challenge to marketing department, Nike has been kept steady at the mindset of every sports personality with the current flow of marketing advancement. The global growth of technological advancement has increased the momentum of promotional efforts of the company and their continued use of the famous sports personalities like Michael Jordan among many others are such instances. The marketing strategies of Nike has undergone through major revolutions and initiatives that strengthens the company’s competitive position in the ever changing environment. This efficient marketing strategy has helped improve their sales. Adopting a global strategy owing to its global brand image the company takes a creative approach and yet very sustainable, to market its product and services to its global customers. Distinctive Competencies Core competencies are capabilities that serve as a source of competitive advantage for a firm over its rivals. These competencies emerge over time through an organizational process of learning how to position different resources and capabilities to a company’s advantage. Nike’s core competencies exist in their effective marketing strategies and their innovative product design (Goldman, & Papson, 2000). These two elements provide much value and benefits to Nike’s consumers and are unique that they can be leveraged widely to most of their products and markets. It is true that Nike does not manufacture any of its own shoes, but the company is still today’s leader in selling athletic shoes and apparel. Nikes marketing strategy is an important component of the companys success (Wong, 2013). Nike is located as a premium-brand, selling well-designed and costly products. Nike attracts many customers through their brand image, with distinct logo identity with a striking slogan advert of the ‘Just do it’ (Goldman, & Papson, 2000). Through its use of famous stars and athletes, the company has a great image in the world footwear industry. The company’s innovative and creative product designs are what truly set Nike apart from their competitors. Focusing one of its corporate values on technology and innovation, Nike has pioneered four shoe-cushioning systems that reduce shock, distribute pressure, protect from impact and offer comfort (Goldman, & Papson, 2000). These innovations has improved the product performance thus comfort to users. The R &D department of Nike also has an important role to play in terms of innovation. The result of the distinctive competencies will also be evaluated in the VRIO analysis. The VRIO analysis uses four criteria to evaluate distinctive competencies. The measures of criteria are the following: Is it valuable? Is it rare? Is it difficult to imitate? Does the organization use it well? The following table is the result of our VRIO analysis: Is it Valuable? (V) Is it difficult to Imitate? (I)) Is it Rare? (R) Does the Organization use it well? (O) R&D- extensive brands collection Yes Yes Yes Yes Marketing- effective channel; affiliate partners Yes Yes No Yes IT& Operation- service-oriented platform, proprietary technology, data handling Yes No Yes Yes Service- maintain and expand the relationships with suppliers and GDS partners Yes Yes Yes Yes Nike’s Organizational Culture Organization culture forms part of an organizational success factors and many companies rely on the organizational culture to determine their performance and the firm’s industrial competitive advantages. Nike is among the companies that effectively reap from its culture. With an innovative and design culture, Nike has a well adapted and suited culture that runs through generation to generation. Its employees have the company’s maxims at finger tips and enjoys in the company’s enviable brands which are known worldwide and are deeply appreciated by sportsmen and sportswomen all around the world. With a cultural origin and background of digital and design innovator, Nike products have increasingly found the interest and association with millions of customers around the world. The company’s reputation has been built on the extreme commitments of its workers who have maintained their zeal out of motivations and better working environment. The sense of value, history of quality, and customer satisfaction are the mysteries and secrets of Nike’s corporate culture. Value Chain analysis Many companies often use value chain as the actors and/or stages that are needed to bring their products or services to the market and thus to the final consumer of their products. Nike, just as these other companies use value chain as the means to bring their valued and inspiring sportswear to sportsmen and sportswomen. Not only does the company target sport personalities, but the company has a vast number of customers beyond sports people. According to Wong, (2013), Nike takes value chain as a direct connection and drive to decision making. It is like a web connection of all the company’s structural and functional connections between all the stakeholders of the firm. The quality of the planning department is responsible for the choices made for manufacturing, for instance (Carbasho, 2010). When manufacturing becomes more efficient and effective, little or no scrap is created and what remains are turned into materials an inputs for new products. According to Harper, (2010), recycling has worked effectively for Nike as the firm has majorly inclined to recycling as a way of reducing wastes as a means of improving, gaining and advancing on their technical design of products. This decision has increased the perceived company products values and quality. Schmitz (2005) also argues that working for the right manufacturers and partners is one of the positive expectations from value chain in the sense that there is better and improved insight and thus control f quality (Goldman, & Papson, 2000). The performance rates of the workers are improved as well through value chain. Notably, as argued earlier, choosing the right partner, according to Schmitz (2005), is among the best ways of moving Nike’s products and its capacity to track and gather relevant information on transportation issues and distributing the products to expected positions. More than that, each choice made at every point of the product production, distribution, and sales has a financial, environmental, and a social impact on the performance of Nike and thus are interconnected and dependent to each other. Based on Rothacher, (2004) assertions, value chain analysis plays an important role in allowing Nike to identify its value adding operations. In this case, through analysis of the activities of the company in terms of their contribution in value addition to the company, the company is able to determine its high return achievements and the cost incurred that are used in the process of creating value. Nike in the same way operates in many regions in the world and thus needs some critical examinations of its value chains in the global perspective. Through its well developed system, Nike has been able to be in a position of reconfiguring both modern and tradition shoe designs to suit different tastes and preference. Moreover, Nike has the capacity to manufacture value chain out of the contracted partners to produce valued and quality associated products. In this way therefore, Nike has a great focus of global interconnection and network that require an extensive value chain. This has been the background of Nike’s competitive advantage. As much as Nike focuses on marketing and designing elements of its value chain, the performance of the company and its competitive efforts has not been based only on the production and outsourcing strategies. It has also been supported by the creation of sustained profitability, value production, better pricing strategies and cost a minimization mechanism that works best over its competitors. This reputation of value chain has also been enhanced by Nike’s brand name, image, and its utilized tangible and intangible resources. The overview of Nike’s value chain is derived from many dimensions. Such dimensions are based on every product and partners, every decisions made, and every channel of distribution. According Rothacher, (2004), Nike, Inc, value chain involve also every stage of production and concepts that adds value and are thus increase an infinite ecosystem of cause and effects to the company. For clarity purposes and according to Harper, (2010), Nike’s system of value chain revolves around the following key factor; planning, designing, making, moving, selling, using, and reusing. Based on the current performance and positioning of the company in the industry, it is believed that these stages are more valuable in the chain of sustained profitability. It is also believed that these stages are critical in providing the best way to track, report, move, as well as measure the influence of the company when compared to the control of the company. They are also very important in determining how decisions are made and their impacts to the company in terms of energy, climate, labor, wastes, water, as well as to the community. Just like other sportswear companies like Reebok, Nike derives its success from the capabilities and efficiency of the company’s management. Nike’s top management, middle management and the employees have a well motivated zeal and focused culture to make the company world’s number one in footwear production (Wong, 2013). Through better resources allocation, data gathering clear and effective interpretation of the company’s goals and objectives, Nike has been at the outstanding edge of the industrial competition. Moreover, the company has focused management that utilizes its streghts and coordinates activities that are required in undertaking, developing, as well as deploying the organization’s capabilities. Numerous challenges may have been witnessed based on interest intersections. However, the Nike’s management plans have devised some balance between the relevant stakeholders within the scope of the company’s visions. The company has also employed some aspects of supply chain management techniques in which case managers have focused more on expansion of market and product niches, development of client management skills, as well as focusing on developing market oriented products. It has therefore in this case, remained among the top and leading suppliers of sports wears globally. References Bititci, U. S., & International Conference of the Manufacturing Value Chain (1998, Troon). (1998). Strategic management of the manufacturing value chain: Proceedings of the International Conference of the Manufacturing Value-Chain, August 98, Troon, Scotland, UK. Boston [u.a.: Kluwer Acad. Publ. Carbasho, T. (2010). Nike. Santa Barbara, Calif: Greenwood. Goldman, R., & Papson, S. (2000). Nike culture: The sign of the swoosh. London [u.a.: SAGE Publ. Harper, M. (2010). Inclusive value chains: A pathway out of poverty. Singapore: World Scientific. Hurd, A. R., Barcelona, R. J., & Meldrum, J. T. (2008). Leisure services management. Champaign, IL: Human Kinetics. Meier, A., & Stormer, H. (2009). EBusiness & eCommerce: Managing the digital value chain. Berlin: Springer. Rothacher, A. (2004). Corporate cultures and global brands. Singapore [u.a.: World Scientific. Schmitz, H. (2005). Value chain analysis for policy-makers and practitioners. Geneva: International labour office (ILO. Wong, G. M. (2013). The comprehensive guide to careers in sports. Burlington, MA: Jones & Bartlett Learning. Read More