The main aim of the report is to examine the activities of a Multinational enterprise (MNE), in my case Nike. The purpose of the report is to include an explanation of its size, the nature of its business interest, the competitors and its current global performance. The second part should include, country and product factors, Nike should consider before deciding where to locate certain aspects of its operations. Also, how Nike sell their products abroad. Examine, what category of ethical issues and how successful or unsuccessful these measures have been. The last section of my report will outline and summarise the key findings and what I have learnt over the course of research.
2: Nike, my chosen company is the world’s largest supplier of athletic shoes and is also one of the finest in manufacturing all different types of equipment. The revenue is in excess of $24.1 billion in its fiscal year of 2012 (BBC, 2018). The chosen MNE previously owned a number of high profile brands such as, Umbro and Nike Bauer. This shows just how big of a brand Nike actually is. The main headquarters of the company is in Beaverton, which is a city in Washington County. In 2017 the revenue figures reached a company high of $34.35 billion and in the same year, the number of employees equalled 74,400 across all departments (BBC, 2018). Thousands of sportsmen and sportswomen are sponsored by Nike, which helps them create a wider range of customers from all sectors; the ‘just do it’ slogan is a worldwide well known phrase which sticks into customers minds when they decide which products to purchase. Nike also has the world’s leading sports footwear. Competing with the likes of Adidas and Reebok (Warner, 2005). All three brands are very well known for their way of customer connections. Adidas has a worldwide revenue figure of $16 billion, with the brand value standing at $7 billion; whereas, Reebok has a brand value of $1 billion and a worldwide revenue figure of $3billion. With Nike having amazing ties with all sorts of different sports, there are no surprises it is one of the world’s leading multinational enterprises.
3: Companies need to consider the following before changing countries of production. Firstly there is a need to consider which country they will be entering, when is the best time to enter the market, what scale to enter the market and finally what entry mode to employ. Nike, looks at the above but also takes into consideration the long-run revenue potential (Hill, 1992).
Economic, political and local competitors must all be considered beforehand. Economic equals the market size and growth development project (GDP). Furthermore the country a brand is trying to enter must be politically stable, and the need to consider ‘free market’ (Christopher, 2000). Competition is a massive thing to look out for as local firms in the intended country to market may already be selling products that are similar, therefore it may not be beneficial to Nike to market in that country. Nike also need to consider factor costs, tariff barriers, political risks, the overall will to minimise costs and maximise value of the business. Nike must be careful not to fully put their focus on one specific country because it could possibly become unstable, which would result in losses of finance and time consumption. Nike, have a very clever way of becoming less redundant to this by spreading out over numerous countries. If they notice a gap in a country they will maximise their efforts to gain full profits from it. On the other hand, if they realise a certain country is becoming politically unstable they may look to move elsewhere to avoid disappointment.
Cost is one of the most important considerations Nike looks at, and is possibly the most considered issue before Nike looks to invest abroad. Outsourcing is the practice of transferring portions of work to outside suppliers rather than the company completing it internally. (Madhok, 2000). Outsourcing is also one of the most talked about topics. Nike, look to outsource its production to entities outside its countries borders but on the other hand they also use domestic operations to stay competitive and to infuse their supply chain. Offshoring, is simply transfer of jobs abroad. Few advantages of offshoring are; making use of existing capacity overseas, access lower manufacturing costs, taking advantage of free trade and avoid protectionism. The disadvantages of offshoring are, longer lead times for supply and risks of poor quality, additional management costs, impact of exchange rates. Reshoring, is the opposite of offshoring. Regulations affecting FDI and trade can significantly affect the appropriateness of specific countries (Hill, 2018). Nike, must also consider product factors and the value-to-weight ratio. If the Value-to-weight is too high, Nike must produce their products in a single location and export it. If the value-to-weight is too low, Nike must manufacture the products in multiple locations across the world.
My chosen MNE, Nike has product places all across the world; most notably in China. Statistics indicate there are approximately 124 production places in China, 73 in Thailand, 35 in South Korea and 34 in Vietnam (BBC, 2018). The market for sportswear is very competitive. High value products, manufactured at a low cost is now commonly used. Competitors are developing alternatives to take away Nike’s market share, as a consequence, the retail sector is becoming more and more difficult as customers are always looking for the best deals. This could be a potential external threat to Nike.
Host countries will surely be affected in both positive and negative ways. A positive aspect is that Nike will be providing a lot more jobs to countries worldwide along with providing high quality products. This can be viewed as a highly constructive method which starts off the positive multiplier effect in causing new opportunities and sources of income. This develops the country as a whole as less people are going jobless because companies like Nike are providing these opportunities to enhance growth. Managing a global supply chain requires logistics. The negative thing is that people and companies already in the host countries will be left struggling as their businesses will be blown away by the superiority of Nike. As Nike powers through the host country, people will be left in amazement as it is very difficult to match a company like Nike on a world basis. A company that is known to be the number one in the whole world is very hard to surpass, so this means the local companies will suffer. The acquisition and physical transmission of material through the production network, from providers to clients. Activities important to get materials to a manufacturing facility, through the assembling procedure, and out through a dispersion framework to the end user. Complicated by distance, time, trade rates and traditions boundaries. Effective logistics can have a noteworthy effect upon an organisations primary concern (Carter, 1998). International organisations utilise production to bring down cost, increment quality, and oblige requests for nearby responsiveness and to react rapidly to shifts in customer requests.
4: A company technique can be characterised as the actions that directors make to accomplish the objectives of the firm. For most companies, including Nike, the overwhelming objective is to expand the estimation of the company for its proprietors and its investors. To boost the estimation of the company, supervisors of the facility must put in ways that expand the general gainfulness of the firm. Profitability is at the rate of restore that the firm makes its contributed capital, which is separating the net profits by general contributed capital. Profit growth is basically estimated by the rate increment in net profits over a period of time.
A company can create more value, by lowering production costs or by making the products more appealing through styling and making superior designs (BBC, 2018). The chosen company, Nike, use different styles for the production of their products such as, Air max, Jordan’s, and although these products fall under the same category, the styles are seen in a whole different way by customers. Nikes strategy is manly about keeping a reasonable cost and the company also tries to differentiate itself through the assimilation of different designs.
The operations of a firm can be thought of a value chain composed of a series of different value creation activities, which include production marketing, sales and the enterprises infrastructure. For companies that compete in the global stage, there are mainly two types of competitive pressure that shape company strategy. (Charles, 2018). Pressures for cost reduction, Nike attempts to minimise its unit’s costs when selling products in large quantities across national borders. Pressures for local responsiveness, Nike tried to differentiate its products to accommodate local market demands.
Strategic alliances is a cooperative agreement between potential or actual competitors, strategic alliances are between firms from different countries, to form a formal joint venture or short term agreement for a particular agreement. (McGraw, 2018). Nike promotes its products by sponsorship with celebrity athletes, professional teams and college athletic teams all by performing a mutual alliance. Many firms including Nike believe that if they are due to be successful in entering markets, they need local partners who understand the local business conditions and partners with global connections. There are quite a few concerns of strategic alliances on the grounds that they give competitors a low cost routes to technology markets.
Exporting licensing, joint ventures, and FDI are all types of market entry modes. Exporting is selling the product to foreign countries. The chosen MNE Nike does this very effectively as they supply their products globally. Licensing is the franchiser granting the rights of the use of brand name and business model to franchise. Joint venturing is two independent firms agreed to invest, to establish a new firm that is owned together. Philips electronics, UK’s largest maker of consumer electronics and Nike, the world’s leading maker of athletic shoes have agreed to develop audio sport products. (Boomerang, 2002). FDI is when a firm directly invests to build or purchase facilities to produce a good or service in foreign countries.
A firm can set up owned subsidiary in a nation by building a backup from the beginning, also called Greenfield system, or by procuring an undertaking in the target market. Acquisitions have three noteworthy focuses to support them. Firstly, they rush to execute. Also, firms make acquisitions to pre-empt their rivals. The requirement for pre-emption is especially extraordinary in business sectors that are quickly globalising, which for this situation Nike is, which makes it substantially simpler for endeavours to enter outside business sectors through acquisitions. Thirdly, administrators may trust acquisitions to be less dangerous than Greenfield ventures. Greenfield is basically constructing another business facility in the host nation starting with no outside help and to have add up to control over the enterprise operations. Brownfield is essentially getting a host nation business and increasing huge control over the business tasks. Nike utilise Greenfield FDI as they attempt to construct facilities in other countries, which they have total control over.
5: In the global business setting the most widely recognised moral issues include, work rehearses, human rights, environmental regulations, corruption and the ethical commitment of multinational companies. At the point when conditions in host countries are plainly second rate compared to those in a multinational home country. Human rights is the following issue that could emerge in universal business. Essential human rights are as yet not regarded in a considerable measure of countries. (Thomas, 2014). Environmental pollution, the dumping of dangerous chemicals, the utilisation of lethal materials in the work put is another moral issue that should be considered. Contamination has been an issue in relatively every general society, there will dependably be corrupt government authorities around the globe.
Nike, the world's driving force in sportswear has conceded that its Indonesian specialists (workers) endure widespread verbal and physical abuse at its manufacturing factories. Indonesian labourers get a little as $1 a day for making Nike items. There have been numerous gossip stories about labourers being constrained and stroked by line chiefs. Human rights is the most discussed moral issue in global business content. Flexibility of association, the right to speak freely and opportunity of development are a portion of the issues Nike has been related with previously.
In 2005, Nike turned into the first in its industry to distribute an entire rundown of production lines it contracts with. It distributed a 108 page report uncovering conditions and pay in its production lines, especially in the south Asian sweatshops. Upon this day, Nike keeps on posting its responsibilities, guidelines, and review information as a component of its CSR reports. By turning into a leader, rather than denying each claim, Nike has for the most part figured out how to put its history behind it and different organisations who outsource could gain from Nikes turnaround (NISEN, 2013).
Nike says human rights are defined and addressed by Nike; INC’s sustainable manufacturing and sourcing teams. Nike management works closely with Nikes contacts which receive training on issues contained within the code of conduct (Surak, 2011).
Nike have improved their performances as a result of the measures now in place. They have been successful in doing so, although it has taken numerous years to rectify these ethical issues, Nike have defined and addressed their problems to overturn the company’s fortunes. Nike could improve the performance on human rights by allowing their employees to have freedom of speech and by offering a competitive pay to match their competitors. Further another good business strategy to obtain the best for itself, is allowing their employees to voice their opinions on improvements for the betterment of their growing business.
Strawmen is an argument which is invented in order to win or create an argument. The whole Strawmen idea came from business ethics scholars mainly for the idea of showing that inappropriate regulations for ethical decision making in a multinational enterprise. ‘There is only one social responsibility of business- to use its resources and engage in activities designed to increase its profits as long as it stays within the rules of the game and engages in open and free competition, without deception or fraud’ (Hill, 2018).
6: To conclude, my chosen multinational enterprise, Nike are leading the way for being the world’s number one in sports gear and using amazing strategies when considering certain markets. Wherever Nike invest, the outcome is massively impressive. The whole enterprise is huge and a worldwide brand which is continuously growing. Before entering different nations and markets, Nike are always prepared to go the extra mile for research. This is an amazing way of staying ahead of the game and keeping on top of the competitors. Factor costs, tariff barriers and political risks are all taken into consideration beforehand to make sure the entire plan is to become successful. With Nike already spreading out its production places around the world it is difficult to look elsewhere. One improvement that can be made is that they could look to have more places in each country to expand even further. With Nike being very clever in the places they intend to enter, they are taking advantage of the market opportunities available to them.
With Nike potentially selling its products to customers at a relatively decent price, there is competition out there which Nike must be careful about. Other companies will look to exploit the price gap and may even offer the same product at a cheaper price, this will mean customers finding the same quality product elsewhere, and it is likely they will purchase the product elsewhere. Nike Attempt to minimise its unit costs when selling its products in bulks as consumers are more likely to purchase if they are able to buy in deals which are suitable. Nike also attempt to stay on top of the fashion trend; by doing this they are keeping customers satisfied. If a customer sees something out of fashion, they are less likely to purchase from the store as they want to blend in with the latest fashion. In this way, Nike need to be smart and keep the ‘waste’ at the very minimum. As Nike looks to expand even further, they could look to join more companies to do joint venturing. As they have started with Philips Electronics, they could look to target a wider range of customers in the future by joining up with another worldwide brand. Whilst, Nike have enjoyed a recent upturn in fortunes with the rumours spreading about line managers fondling with staff members, they could go out there and show everyone what the company really is like. By allowing workers the chance to speak out and having a say on improvements, Nike could go a long way to being the very best.