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QSO 690: Topics in Operations Management

Final Paper: Nike Inc.

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Southern New Hampshire University

Natalie Williams


Nike Inc.

Nike is a leading global manufacturing company that offers footwear, apparel, sporting equipment and accessories. Founded in 1964, by Bill Bowerman and Phil Knight, Nike was originally called Blue-Ribbon Sports. Blue-Ribbon Sports operated as the distributor for Onitsuka Tiger (Now known as Asics) a Japanese shoemaker. In 1978, Blue-Ribbon Sports became Nike and became public two years later.

From the late 1980s Nike steadily expanded its business and diversified its product line through numerous acquisitions, including the shoe companies Cole Haan and Converse, Inc. By the early 21st century, Nike had retail outlets and distributors in more than 170 countries, began selling sports-technology accessories, including portable heart-rate monitors and high-altitude wrist compasses. and its logo—a curved check mark called the “swoosh”—was recognized throughout the world. Endorsements to athletics such as Michael Jordan, Mia Hamm, Roger Federer and Tiger Woods have also aided in the success of Nike. Also, their chain store Nike Town offer customer a full range of Nike products while paying homage to their endorsed athletes and other spokes persons.

Aligning Resources to Market Opportunities

Internal Capabilities and Limitations

Nike’s strength lies in its brand name and reputation for a high-quality products and innovation (Essays, UK, 2018). Sports icons such as Michael Jordan and Tiger Woods helped Nike gain worldwide recognition thanks to their high-quality products, innovative marketing and internal capabilities. Nike Inc.’s organizational culture supports business resilience and capability. Organizational culture is the combination of traditions, habits, values, and behavioral expectations among employees. Nike’s workers are given a set of instructions, rules and expectations on how to do their jobs, with consideration for their relations with customers and other employees. This approach ensures that the company maintains its corporate culture, which partly contributes to the success of the business

Nike’s limitations involve not embracing the culture of diversity. The company’s revenue mostly comes from and depends on the sport wear market share which leaves them at risk to the quickly changing market. During the 1990’s they faced major criticism over concerns of unsafe labor conditions in countries such as Pakistan which was damaging to Nike’s image. Managerial efficiency is another limitation that Nike faces, due to their organizational structure. Increased employee involvement increases the workload and responsibilities of their management.

Business Development Opportunities

Nike’s good reputation and global recognition opens Nike up for new ventures in different markets. Developing other sports related products such as sunglasses, jewelry and sportswear could increase profits and revenue. Another opportunity Is marketing Nike as a fashion brand. Owners consistently defend that Nike is not a fashion brand however, many of their consumers by their product for reasons other than sports, this presents an opportunity for Nike to rebrand. The business could also be developed internationally building upon its strong global brand recognition. For example, countries such as China and India offer a new wave of customers. Opportunities to market their brand through events such as the Olympics and the World Cup are also possible.

Cost-Savings Opportunities

Nike’s dedication to innovation opens opportunity for cost-savings. These innovation processes are a core factor to how they create cutting-edge footwear. One example is the new Flyknit technology. Flyknit is a material that fits like socks and it reduces labor costs for Nike dramatically. According to Peterson, H. 2014, “The Flyknit technology reduces labor costs by up to 50% and cuts material usage by up to 20%, resulting in .25% higher margins”. Another cost-saving opportunity Nike can take advantage of is being ISO-9001:2015 certified. Using lean quality control processes under ISO 9001 guidelines ensures that Nike’s operations are functioning in the best way possible.

External Threat Factors

The current external threats Nike is facing are economic and currency fluctuations. It is challenging for Nike for its products to reach price standardization in the global economic environment because many regions because of their economic instabilities, this reduces Nike’s overall profit margins. Another threat Nike must consider is the Adidas-Reebok merger. By signing contracts with the NFL and NHL for appeal business places Adidas-Reebok in a position to takeover the competitive advantage that Nike current has. Finally, Nike needs to be attentive to how they are pricing their products as the retail industry has become increasing competitive. Rival companies are reducing their prices to attract a larger customer base, this poses a threat to Nike as it can lower their profitability.

Managing the Quality Imperative for Global Competition

Total Quality Management (TQM)

According to Essays, UK (2018), “In order to implement the Total quality Management, eight important aspects must be given due consideration, which includes: Principles, Integrity, Trust, Training, Recognition, Teamwork, Leadership and Communication. Nike incorporates the TQM practices used by Toyota which is based on the quality measures focused on active participation of every employee in the quality-based practices to achieve long term success”. Focusing on improving labor relation and factory conditions and improving quality measures should be a priority for Nike. For TQM to be successful at Nike, from top management down to employees must be fully committed to executing TQM practices. There should be a level of accountability that all employees must adhere to ensure the successful implementation of TQM systems.

ISO 9000 Series

ISO 9000 is a ‘family’ of standards that relate to quality management systems. Companies can apply for certification to be become “ISO 9001 certified”. ISO 9001 is a certification that certain formal processes are being used within a company for their management of Quality Control. This includes monitoring processes, maintaining complete and accurate records, checking for defective output, acting to correct defects, and continual internal reviews for effectiveness (Swenson,P. 2017). In September 2018, Nike received the Certification of compliance to ISO 9001:2015 standard for the following fields related to ICT services (Nikeconsulting.com, n.d.):

  • Design, Production, Delivery, Support and Maintenance of Software Products, IT Systems and Portals
  • Design, Production and Support Services Delivery to the users for using Software Products
  • Technique and Operation Management of IT Systems and Networks
  • Provision of specialized IT consulting services
  • Design and Provision of Professional Training Courses

Having the ISO 9001 certification provides Nike with a set of benchmarks to compare itself to their competitors. It also provides their customers and clients the confidence that Nike are implementing the proper quality control processes.

Global Best Practices

In response to the criticisms from Nike’s labor practices in their factories overseas in the 1990’s, Nike took responsibility and developed a Code of Conduct for their manufacturing partners as well as forming a CR (Corporate Responsibility) committee as a part of the Board of Directors. The CR Committee has oversight of environmental impact and sustainability issues, labor practices and corporate responsibility issues in major business decisions including sharing information about what is expected, disclosing all factory locations and shows their dedication in upholding progress against strict operational guidelines (Vogel,L., Garcia, A.R., 2012).


Nike requires a lot of mobility at the production and marketing levels of the company, mainly because they outsource 100% of their production of footwear. Maximum value is created by concentrating on pre and post postproduction activities by using an on-site program that organizes their foreign-based suppliers. Nike’s general strategy for competitive advantage is based on Porter’s Model and focuses on product mix diversity, cost leadership and differentiation strategy. Nike maintains cost leadership because of their outsourcing strategy. Outsourcing allows Nike to sell their products at a lower price from their competitors. Nike’s competitive advantage also comes from the differentiation of their products, they are unique, and their brand strength stands out.

Nike’s inventory management has run into a few challenges in terms of forecasting. Accurate demand forecasting is pivotal to efficient inventory management. Nike bases their forecasts on historical data and market growth estimates. To ensure forecasts become more accurate with time, constant monitoring is necessary of optimal inventory levels and market trends and readjustments if necessary.

. “Sustainability at Nike means being laser-focused on evolving our business model to deliver profitable growth while leveraging the efficiencies of lean manufacturing, minimizing our environmental effect and using the tools available to us to bring about positive change across our entire supply chain,” Nike CEO and President Mark Parker said in a statement (The Lean Accountants, n.d.). Nike’s ongoing goal is to become more sustainable. They have been exploring reimaging waste and renewable energy solutions. Nike also plans on using innovation to create a new generation of products that are more environmentally friendly while keeping the competitive advantage. According to Meyers, K. (2016), Nike has shared the following goals to be in place by 2020:

  • To source 100% of products from contract factories meeting the company’s definition of sustainable.
  • To have zero waste from contracted footwear manufacturing sent to landfill or incineration without energy recovery.
  • To create products that deliver maximum performance with minimum impact, seeking a 10% reduction in the average environmental footprint and an increased use of more sustainable materials overall.
  • To reach 100% renewable energy in owned or operated facilities by the end of 2025.

Lean Techniques

Nike Inc. implements a culture of improvement that engages in ongoing continuous improvement (CI) as a method of lean management. Employing CI offers the opportunity for Nike to deliver high-quality products, timely at a low cost. According to Industry Week the three types of standardized CI are:

  • Quality award programs: useful for providing a set of criteria and motivating employees for CI; focused on project-based quality.
  • Institute improvement programs: training focused on lean and Six Sigma to provide employees with the skills they need to integrate continuous improvement.
  • External benchmarking programs: provide an objective comparison for identifying improvement opportunities, pinpointing internal best practices, and establishing a performance-focused culture (How Nike Does Lean, 2015).

Being that employees at Nike are so important in the success of lean manufacturing, Human Resource Management (HRM) plays a vital role. HRM handles consistent gathering of information and employee views thru surveys on key issues they are experiencing. Using this data Nike can seek opportunities for positive change by using CI practices. Nike also uses Score Cards to analyze and measure current lean practices. Having over 1 million employees manufacturing their products, to ensure that everyone is performing according to Nike’s standards the company implements a scoring system at their contracted factories. According to How Nike Does Lean (2015), “The Manufacturing Index (MI) they utilize scores each factory in terms of lean, labor, health and safety, energy and carbon, and sustainability. This allows NIKE, Inc. to determine where they need to spend more attention and resources and where they can allow factories to operate autonomously”. As an incentive to strive for the best score, if any factory scores under the bronze level they are responsible for paying for their next 3rd-party audit. If the score is higher, then Nike pays for the audit.

By implementing lean manufacturing techniques, Nike’s material waste and productivity times have been reduced and their Supply Chain is able to run more efficiently. Some of Nike’s lean manufacturing milestones are illustrated in FY10-11 Sustainable Business Performance Summary. According to the report, Nike’s contracted factories that are using lean is seen a decrease of defects by 50%, new product release time was reduced by 30%, factory productivity increased by 10%, and delivery lead times were reported 40% shorter.

Just-In-Time (JIT) Practices

The main goal of JIT is to make the most out of a company’s Return on Investment (ROI) by reducing unnecessary costs. JIT lowers inventory costs, increases efficiency, cuts down on wastes by ordering inventory on an as-needed basis. To use JIT efficiently, forecasts need to be as accurate as possible to prevent over or under stocking of inventory. To streamline operations and cut costs, Nike began a global centralization project that combines their ERP, supply chain, and CRM software systems with the focus on lean inventory strategies and JIT. Nike saw great improvement in their operations. According to How Different Industries Use Just-In-Time Inventory Management for Success. (n.d.), “The company’s approach has had impressive results: lead times were reduced 40%, productivity increased by up to 20%, and new model introductions are 30% faster”.

Optimized Production Technology (OPT) and Theory of Constraints (TOC) Principles

Optimized Production Technology (OPT) is a production system that takes account of capacity constraints in the production process and does not attempt to continuously operate at full capacity. The aim is not to produce as many units as possible, but to raise throughput while keeping inventory and production costs low, thereby achieving an efficient, continuous workflow (The Law Dictionary, n.d.). The Theory of Constraints is a methodology for identifying the most important limiting factor (i.e. constraint) that stands in the way of achieving a goal and then systematically improving that constraint until it is no longer the limiting factor. In manufacturing, the constraint is often referred to as a bottleneck (Lean Production, n.d.). Both TOC and OPT cater to having a seamless production process and they have helped Nike improve their production processes and reduced production costs. Nike’s cost has been reported to be being the lowest in their market thus making it even more evident that the lean methods and practices has been the best strategy for Nike.

. Technology for Competitive Differentiation

Competitive differentiation is a principle normally used by companies to set them apart from competitors through the specific elements in the specific company. (Martin, 2014). This helps a consumers and customers to differentiate company products from those of competitors in the market. Differentiation is what makes a company stand out against its competitors through that unique aspect that the competitors do not have. Technology has played a significant role in the differentiation of companies making them have a competitive edge over their competitors.

Current business Operations

Nike Inc. has continuously used technology to differentiate its products and services from those of its competitors such as Adidas. Examples of technological application by Nike Inc. to differentiate it in the competitive market is innovation of products and the marketing strategies. Innovation of new and more comfortable sporting products have enabled Nike to have an advantage over its competitors. Although the introduction of a new product in the market is costly in terms of research and production, it results in a good payoff because the customers flock to be among the first to get the new product. Innovation always looks forward to bridging the gap in the market and satisfy the upcoming customer needs in a better and advanced manner. For instance, Nike Inc. has continually embraced new technologies for its brand like the development of the Hyper Adapt 1.0 a shoe that auto-laces itself once it is put on the heel. (Danziger, 2017). The international company has been constantly innovative with the development of their shoes which are always aimed to satisfy the upcoming needs and the achievement of better comfort by the players. Also, back in 2006 the company developed a shoe that could connect to an I-pod and track the pace and the distance covered by the walker or the runner. (Ballard, 2019).

Nike Inc. has also used technology for its vibrant marketing strategy which gives it a competitive advantage over others. For a business to excel, the marketing strategies must be fine enough to create awareness of the products and services to attract customers. Since its foundation, the brand has always focused on the innovation of new designs to get a big market share. Technology have significantly helped in reaching a wider target market through online sales and marketing strategies. Its advertising strategy also makes it achieve an edge using celebrity endorsements and sports personalities. The company is also making the digital shopping experience a lifestyle on its own. There is the membership program which helps create more personalized connection with customers as well as rewarding loyal and active customers. Data analytics is utilized for the development of advanced algorithms to utilize demand-sensing technology which ensures availability of products upon demand. More tailored experiences through mobile phones have enabled the company to create more sales from the tailored customer experiences and products.

Performance Gaps

The objective of Nike Inc. is to satisfy its customer needs through information accuracy and product delivery. Nike products are produced based on the orders in the factories and after finishing they are supplied to the customer through the Nike customer service centers. In this segment of the company, there are performance gaps that should be addressed to increase production, reduce costs and also increase the efficiency of the delivery of the products and services to the customers.

In the supply and chain management, there occurs pile up of stock and at times shortage where the demand is higher than the supply. This normally occurs when the management of the demand and supply are not fully implemented. Such a case was occurred when the company had implemented a software that could keep track of the demand and supply by mapping out the production of the products at the manufacturing units. However, this i2 software failed and led to pile up of low selling products and shortage of highly selling products. This saw the company get less sales compared to previous years blaming the failure on the implementation of the software. The products resulted to overproduction of some products and under production of fast-moving products which led to chaos in the company.

In the supply sector, Nike has a gap in the delivery of products in time to their customers. (Nike Inc., 2019). The competitors utilize their weakness and supply their products in time to the customers. Nike tends to keep low stock of its products to create room for innovations and the advanced products to their customer. Although customers may want to test new products, the old stock which has already captured its market share gets inadequate in the market, yet the demand is still high. At this point, the company may make less income because more funds are used in research and the production of new products rather than first supplying the already established and developed product.

Another gap in the supply of the Nike products is the diversification of the products to meet the needs of the different customer needs in all different countries. The rule of ‘one size fits all’ do not apply when the market is global. The expectations of consumers differ based on their global location. There is need for customization of the products for customer satisfaction. There is also complexity in production which makes the retailing customers run out of stock which creates some conflict between cost and flexibility. (Ballard, 2019).

Opportunities that Would Benefits from Technological Enhancements

Technological enhancements can be of benefit to a company in utilizing the available business opportunities. Technology in most cases makes work easier, reduces the cost of production and improves the efficiency of the production and delivery of products. Wearable technology can be of benefit to the Nike Inc. in terms of the market share and product variety. Through innovation in the sportswear production industry the emerging markets can be utilized. There is gradual flourishing of sports in different countries which establishments of the sportswear suppliers have not been established. By having varieties of the products serving different needs of athletes and players, the market can be utilized because the customers are always yearning for products that will enhance their outcome in the field. Research and innovation in the wearable technology builds more opportunities due to the changing customer needs. (Shorten, 1999). When the primary company identifies the emerging markets, manufacturing stations can be established in the new countries where the products can be made from the country under the control of the company headquarter. This will ensure a low production cost because the transportation cost will be cut off. Also, the efficiency of the delivery of the products will be well addressed. Customers can get customized products at their convenience and in good time due to the reduced geographical distance.

The combination of technology and sport wear is not fully explored, and the wearable technology ensures that a variety of products are developed. The technology that monitors physical activity rather than doing it manually like distance calculation and the time taken makes it more convenient for players and athletes to keep track of the physical activities they undertake. Although Nike Inc. has been in the frontline in the integration of technology and athletic wear, there technology is not yet fully explored and therefore there are still more chances for the development of new products. Though this integration, the cost of production may rise initially due to the development cost but after making sales, the payout can be as well good. The new products also tend to be of more quality because it is normally the enhancement of an already existing product through value addition or adding more features.

How technology can be used to mitigate performance gap

Technology plays a vital role in reducing the performance gaps in most organizations where technology can be incorporated. The establishment of manufacturing centers in different countries where there are emerging markets, the utilization rate can be high. This will ensure that there is significant stock of finished products so that the supply gets along with the demand of the products. (Keller, 2018). Although innovation also plays an important role in a business, it should balance with the sales of already established products which ensures a steady flow of finished products.

The innovation technology may also help in the reduction of the performance gap through customization of the products according to the customer needs. (Keller, 2018).The fact that different customers have different expectations can be addressed because a manufacturing unit in a country will have to do some research on the market needs so as to understand how to customize the products for customer satisfaction and in return more sales. (Buchanan & Cruz, 2009). This reduces the production cost in that what is produced will be suitable for the customers other than availing already manufactured products which may not get a market since the specifications are not in line with the needs of the customers present.

Technological enhancements can enable Nike Inc. to manage customer data though point of sale systems which lowers the uncertainty of supply and demand which boost the revenue. For customer satisfaction, there is need to collaborate with the manufacturers, distributors and logistics. With technology in place, most of the performance gaps can be easily mitigated. The differentiation is also achieved by the Nike Inc. through integration of athletic wear and technology.

Company Sustainability

Nike Inc. has strictly adhered to ensuring sustainability for profits, people, and the planet. The company has implemented measured to ensure that it remains at its peak of productivity over the years. The company is ambitious to double its business, but half the impact the company has on the environment. This has led to the establishment of the three main strategic goals by the company: to minimize the environmental footprint, to unleash human potential, and to transform the manufacturing industry (Nike Inc., n.d). This article, therefore, seeks to establish the sustainability strategies the company has, the alternative business practice to mitigate the risks to the operations of the company, and finally how the company will implement the alternative business practices without losing long-term viability.

Nike Inc. seeks to increase its sustainability in profits, just like any other company around the globe. To achieve this, the company has expanded its margins and mid-teens earnings per share growth averagely over the next couple of years. Nike Inc. ensures that its customers get premium experience with innovative products and services to meet the needs of individuals promptly (Merhout & O’Toole, 2015). The company has established the brand, products, and services, which it is now connecting them to consumers using the triple-double strategy. First, the company will double innovation to give the customers better choices, to increase the speed to the market through reduction of the product creation timeline by half to deliver faster and to double the direct connections to consumers which will ensure that the company has profit sustainability through the market created. This will ensure that the company continues to make profits for the couple of years to come.

The company also targets to transform the manufacturing industry and unleash human potential. This will create more sustainability in people as it has invested in contracting with factories that have a foundation of compliance to be green, lean, equitable, and empowering for its workers. The factories have shown a positive response, with around 86% of its factory base, demonstrating its value for the employees and striving to improve their working standards (Merhout & O’Toole, 2015). Nike Inc. targets to have all its contract factories reaching this level by the year 2020. There are also pilot programs established by the company to oversee how technology, services, and changes to compensation, and the benefits systems could impact the workers positively for the inside and the outside of their workplaces. Nike Inc. has strengthened its recruitment, promotion, and retention of diverse talent globally, with a focus on women and the people of color. This way, the company will ensure the sustainability of people.

To ensure the company achieves environmental sustainability and care for the planet, Nike Inc. has implemented various measures to conserve the environment (Barile et al., 2014). Firsts of all, Nike Inc., has established a low-carbon strategy in its operations. Nike Inc. knows the importance of low-carbon emissions and has tried its best to prevent the amount of carbon being released into the atmosphere from becoming overwhelming, which would increase the atmospheric temperatures contributing to global warming. The company has measures in place through the strategic goals established in its fiscal year business report to minimize environmental footprint. According to Mahdi et al. (2015), the company has implemented the Flyknit technology that was launched in 2012 to reduce the wastes from the company. Flyknit technology ensures that every stitch of a shoe upper delivers maximum performance for the athletes while at the same time produces 60% fewer wastes compared to the traditional cut-and-sew methods that were previously used in the company (Merhout & O’Toole, 2015). The company has, therefore managed to reduce millions of pounds of waste, ensuring the sustainability of the planet.

Additionally, Nike Inc. has converted plastic bottles from being dumped into landfills and made them into very invaluable products like the Nike Vapor football kits using Aeroswift technology which is amazingly recyclable (Mahdi et al., 2015). The company also uses the ColorDry technology that dyes fabrics using zero water, saving millions of liters of water. Finally, the company has implemented a Re-use a Shoe Program that has also ensured the recycling more than 30 million pairs of shoes (Nike Inc., n.d). The company generally targets to use more sustainable materials to conserve the environment.

Challenges to Sustainability

However, Nike Inc. faces one of the most significant threats and challenges to sustainability: pollution. Pollution comes in nearly all aspects of the company’s operations (Mahdi et al., 2015). For example, the company has to monitor the way through which it transports its products without contributing to the current air pollution from emissions of carbon dioxide. Additionally, pollution might result from the carbon dioxide emitted during the manufacturing process for its products. Nike Inc., therefore, has to explore ways to come up with a plan and strategy to use to get its products delivered. The company has adopted to invest in innovation and clean energy. One of the most notable changes is the suggestion to use the more innovative hydrogen technology in the transportation of its products in select countries. This had been a significant hindrance due to the fewer recharge stations forcing the company to settle for alternative sources of energy and the use of the smart grids as the solution to meet sustainability.

Alternative Business Practices for Nike Inc.

The company has chosen to use clean energy to prevent further pollution of the environment. The use of plastic material to make recyclable products has further been a significant boost for the company to achieve sustainability. The company has also taken a fundamental interest in the economic performance of the employees by implementing the policies for the employees working in its contract factories to be valued and be issued with compensation plans at work. This helps to achieve stakeholder value and boost the economic performance of the company through its employees.

As part of the “triple bottom line” approach, the company can also embrace diversity to attain profit sustainability further. For instance, the company could embrace diversity to accommodate people of all races, color, and social status. This will make the people feel connected to the products and services from the company, which will increase the market base for the products and services from the company. This will enhance the open market opportunities which assure the company of profitable sustainability through the increased revenue from the sales of the company’s products and services to it now broaden the market base.

Ensuring Long-Term Viability

While implementing the alternative business processes, Nike Inc. should always ensure that the business has long-term viability in its plans. The “triple bottom line” approach will be used in providing that the alternative business processes are in line with the target market (Barnes et al., 2015). For instance, the company could plan its schedules to formulate the strategy to use. To prepare well for diversity, Nike Inc. could connect with the local communities where they target as their market base to get the local communities to know the company from the grass-root level. This will help the company be famous to the people, which will ensure that the company remains viable for the longest time possible. Besides, the company can ensure that it works on the profit and losses rather than concentrating on the revenue alone. This will enable the company to understand how much each dollar the company spends in production earns the company or generates a loss to the company. This is important in reducing expenses and increasing the profit margins for the long-term viability of the business.

All the efforts that the company has tried to implement are aimed at ensuring that the business attains long-term viability (Barnes et al., 2015). The corporate governance that the company has chosen as an alternative business practice to achieve sustainability will be very instrumental in the success of the organization. The corporate governance of Nike Inc. could try polling its customers rather than trying to guess what its customers want. This will enable the company to ensure it provides the services and products that are viable for long to the customers and the general community. Reviews could also be a better way for the company to prove its buying decisions through user reviews. This will help the company to stay up-to-date, knowing what the customers want and feel to produce products geared to meet their needs and wants of the people.

In conclusion, Nike Inc. has expanded its margins and mid-teens earnings per share growth averagely over the next couple of years, has transformed the manufacturing industry and unleash human potential, has implemented various measures to conserve the environment, and has converted dumped plastic bottles into very invaluable products. All these are efforts by the company to attain sustainability. The main challenge has been pollution. The company has adopted clean energy to prevent further pollution and embraced diversity to achieve profit sustainability further. In ensuring long-term viability, the company could connect with the local communities. Besides, polling its customers rather than trying to guess what its customers want and use of reviews is a better strategy to ensure long-term viability.


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