Operations and supply-chain management perspective

Sample Solution

International Business Example: Nike

1. Countries of Operation: Nike operates in over 170 countries worldwide, with major markets including the United States, China, Europe, and Japan.

2. Outsourced Goods and Services:

• Manufacturing: Nike outsources most of its footwear and apparel manufacturing to factories in countries like Vietnam, China, Indonesia, and Bangladesh. This allows them to:

  • Reduce labor costs: Production costs are often lower in these countries due to factors like lower wages and government incentives.
  • Increase flexibility: Outsourcing enables Nike to adapt to fluctuating demand and production needs more readily.
  • Focus on core competencies: By outsourcing manufacturing, Nike can focus on its strengths in design, research, marketing, and brand development.

• Logistics: Nike often outsources logistics and transportation to third-party companies to manage the complex process of moving goods around the globe efficiently.

3. In-House Goods and Services:

• Research and Development: Nike invests heavily in research and development (R&D) to stay ahead of the competition in terms of innovation and design. This includes developing new materials, technologies, and footwear designs.
• Marketing and Branding: Nike maintains in-house control over its marketing and branding efforts to ensure consistency and effectiveness across all markets. This allows them to maintain a strong global brand image.
• Retail: While Nike operates some of its own retail stores, they also partner with franchisees and other retailers to sell their products. This allows them to reach a wider customer base and maintain a presence in key markets.

Full Answer Section

4. Major Production Facilities:

• The majority of Nike's production facilities are located globally, primarily in the aforementioned countries like Vietnam and China. However, they do maintain some in-house production facilities closer to their headquarters in the United States for specific purposes like prototyping and testing new designs.

Choosing Between In-House and Outsourced Production:

The choice between in-house and outsourced production depends on various factors, including:

• Cost: Outsourcing can offer significant cost advantages, especially for labor-intensive goods.
• Flexibility: Outsourcing often provides greater flexibility in scaling production up or down based on demand.
• Quality control: Maintaining consistent quality can be challenging when outsourcing, requiring robust quality control measures.
• Control: In-house production offers greater control over the entire production process, ensuring quality and brand consistency.
• Expertise: Certain specialized skills or technologies may be best kept in-house to maintain a competitive edge.

Nike's strategy demonstrates the complex balancing act of leveraging the advantages of both in-house and outsourced production to optimize efficiency, cost, and brand control across its global operations.