Nike Globalization - Essay Example

Over the years global economic environment has been remarkably impacting the business organizations and the decision making process of them. The impact of the global environment is more on those firms that have exposure to the global market as compared to those whose businesses are confined in the domestic market. Being the famous global sports brand, Nike is very much impacted by the changes that have been taking place in the global economic environment. This essay includes the discussion regarding the impact of globalization on Nike and its strategies.

Globalization is the key force that has changed the business scenario throughout the world significantly. Globalization which may be considered as the integrated internationalization of organizations as well as markets has impacted the corporations both positively and adversely. Today products are not manufactured for domestic customers only rather they are produced for the customers who are spread throughout the world. The world wide accessibility of internet, significant improvements in supply-chain logistics have led to a situation where companies can locate themselves anywhere in the world (Wheelen & Hunger, 2010). On the flip side, organizations have experienced the adverse effect of globalization as well. For instance, the mortgage crisis that took place in US became a global financial crisis due to the integration of the financial systems of various countries and this integration is actually the result of globalization (Wheelen & Hunger, 2010).

Global business environment – more precisely globalization has significantly influenced the strategic decision making processes of Nike. The company has set up number of production facilities in different countries that are located in Asia. Athletic shoes that are produced in these facilities are sold in every continent (Wheelen & Hunger, 2010). The main reason behind manufacturing products in the Asian countries is to use the resources that are available at a low cost so that economies of scale can be achieved. Nike has adopted another business strategy in order to use the globalised world in the best possible way. Due to heavy promotional campaigns Nike is one of the most renowned athletic shoe brands in the world. However, original products of Nike are not available everywhere, instead of that products that are actually produced by the company’s franchisees are sold by using the Nike’s logo and its brand equity (Businessteacher, n.d.). Nike has been adopting strategies that are in accordance with the changes in the global business scenario. The company’s initial strategy was to gain competitive advantage in US by selling premium quality athletic shoes that are available at low cost. The company developed its production facilities in Japan so that manufacturing cost remains low (Saloner, Shepard & Podolny, 2008). With its products that are manufactured at reasonably low cost while not disturbing the desired level of quality, the company has been successfully dominated its main target market i.e. US. Once, enough brand equity and competitive advantage are gained in US, the company started to shift its focus on the other markets like Europe and Asia. Furthermore, when the production cost in Japan started increasing Nike began production in countries like Korea, Thailand and Indonesia. In this way the company has successfully created an exclusive brand image in Asia as well (Saloner, Shepard & Podolny, 2008). Throughout its journey, Nike has properly identified and understood various aspects of globalisation and adopted strategies accordingly.

Globalization has both benefitted as well as affected the Nike’s brand image. Globalization has enabled the company to shift its production facilities from one country to another in search of ‘low cost resources’ and ‘economies of scale’. In other words, globalization has helped Nike to gain and sustain its competitive advantage in US by letting the company to produce high quality products at the lowest possible price. In the process it has been able to create significant brand equity throughout the world especially outside US. Furthermore, Nike has successfully invested its savings that are attained from low-cost production into innovation and marketing activities. So on one side Nike has been able to keep producing quality shoes at a low cost while on the other side it has been investing huge resources in order to create sustainable brand equity throughout the world. These are all actually the result of proper utilization of ‘global sourcing opportunities’ (Locke & Siteman, n.d.).

On the other hand, Nike’s brand image has been hit several times due to various activities which can be seen as the effect of working in a globalised world. In the process of producing products at low cost, Nike has often faced criticisms due to providing poor working conditions and low wages. The company was even accused of employing child labour in Pakistan and Cambodia. Such incidents have significantly affected the company’s image (Locke & Siteman, n.d.). Overall it can be said that globalization has both positive as well as negative effects on the Nike’s image. Such adverse effect on the company’s image has definitely affected its attempt to gain competitive advantage in the developing nations like China and India. In order to recover the affected the image, the company had to invest significant resources in promotional campaigns. This has certainly created pressure on the company’s financial health.