Nike is one of the biggest players in manufacturing sports equipment field, such as shoes, clothes, etc. It has been one of the biggest names on the market since its establishment in 1964 and one of the most recognizable brands worldwide (Hsieh et al.). One of the most significant distinguishing features of the company is that it outsourced its production practices, leading to savings in labor costs. Since it does not have its manufacturing outlet, Nike can solely focus on developing its products’ design, features, and improvement.
Nowadays, Nike faces several challenges that can undermine its credibility and reliance on the global market. Some of them are related to supply chain issues, and some are to the broad appeal of the company’s human rights concern and general perception. Improving the suppliers’ capabilities, meeting the required standards, and responding to consumer demands are challenges related to the supply chains of the company (Hsieh et al.). The primary issue outside the supply and distribution sector is accusations of terrible working conditions in Nike manufacturing outlets worldwide.
Nike demands from its suppliers that they have to address the environmental impact and improve their workflow concerning the issues above. Regarding the development of the suppliers’ capabilities, Nike demands a more initiative approach from the factories, that have resulted in an improved approach to management and production of the goods (Hsieh et al.). Facing critique and reluctance to cooperate from some of the suppliers (especially in terms of incorporating workers’ engagement in product development), Nike is struggling to promote their vision on all of them. Another problem for Nike is balancing cost and flexibility, which is crucial in the global sourcing equation. When comparing the costs of local and worldwide suppliers, this is especially true. Strengthening Nike’s North American business becomes even more vital in this scenario.
Responding to the growing consumer demand is also challenging for Nike since suppliers’ capacities mostly lie far from the leading consumer base in North America (Hsieh et al.). Attempts of locating or relocating some of the additional capabilities to meet the peoples’ demands contain many risks and require serious considerations. Nike’s supply chain issues give the company the green light to accelerate its direct-to-consumer approach, a key profit generator.
However, the most severe challenge comes from human rights activists and organizations, who are accusing Nike of not meeting the labor working standards. It is a severe issue that can severely undermine a company’s credibility and image, especially in times of popularity of the so-called ‘cancel culture. Even though Nike is struggling to ensure working standards on the suppliers’ facilities and manufacturers, it does not have direct control over them, thus, not being able to ensure complete overseeing of the implementing standards. It is indicative that the issue first appeared in the 1990s and has been a constant topic when talking about Nike’s challenges.
The strategic recommendation for the company regarding its suppliers’ challenges should be viewed in the light that Nike has all the possibilities to support its leadership in sports equipment manufacturing. The strategies in several areas – such as labor practices, suppliers’ selection, and development – can be adapted (Hsieh et al.). The most significant here is the improvement of suppliers’ manufacturing working conditions since this issue has been prevalent since the 1990s and is still relevant. Nike can ensure the provision of average working conditions, established wages, and the end of the exploitation of unpaid workers. This must be implemented in cooperation with facilities’ directors, suppliers’ management, and different human rights organizations. In light of current developments and the desire of the company to meet the consumers’ demands, this issue should be resolved.
Nike stakeholders will be impacted if such policies start to take shape. It will be needed to ensure stricter control on the suppliers, and while some of them will be reluctant to engage in such developments, the company has to ensure the provision of the strategy. This can result in opposition to local management and increasing costs, but in general, it will be beneficial in the long term. Moreover, Nike will have to be considerably more strategic with its product storage. Instead of working with wholesalers, the company will most likely open its stores.
The potential downside of working out of such a strategy is the increasing attention to the suppliers’ manufacturers, which can divert the company’s strategy – to engage in development and innovation while leaving manufacturing on the outsource. This can also lead to stricter criteria when choosing suppliers and the prevalence of more developed countries, which can ensure development, working conditions, and human rights. In turn, Nike’s plans to enter new markets (for instance, the Middle East) can be limited due to difficulties in ensuring the needed conditions and potential public opinion backlash.
Thus, Nike requires its suppliers to address the environmental effect and enhance their workflow concerning the challenges to meet the current demand for quality requirements. Despite Nike’s efforts to ensure working standards at suppliers’ facilities and factories, it lacks direct control over them, making it difficult to provide complete supervision and management of the standards’ implementation.
Work Cited
Hsieh, Nien-hê, Michael W. Toffel, and Olivia Hull. “Global Sourcing at Nike.” Harvard (2019): 619-008.