Developing a Supply Chain Strategy - Assignment Example

1.Choose the two (2) segments of the general environment that would rank highest in their influence on the corporation you chose. Assess how these segments affect the corporation you chose and the industry in which it operates. This essay throws a light in the macro and micro environmental details of Nike, Inc; which is a publicly traded company based in the United States. The company is involved in the manufacturing and marketing of sports accessories and apparels. This essay focuses mainly on the business of accessories in Nike which majorly involves in the production of sports and lifestyle shoes. There are social, economic, political, legal etc factors that can effect a business environment. It can be analyzed that the two main segments that effect the business environment of Nike are the economic and social segments. Nike is a company based on U.S. which is the most technologically commanding nation in the world with a high level of GDP per capita of about $49800. As the level of income of people in U.S. high they have a good share of spendable income that they use in purchase of consumer goods like shoes. Nike is considered to have the largest market share of sports footwear business in U.S as estimated in 2012. The social environment of U.S. supports the business of sports shoes manufactured by Nike. United States has high rate of urbanization (82%) and an estimated growth of urbanization of about 1.2% from 2010 to 2015 (CIA, 2013). Most of the people in U.S. wear western dresses as casuals. Thus sports and lifestyle shoes of Nike are most commonly used by the people in U.S. 2. Considering the five (5) forces of competition, choose the two (2) that you estimate are the most significant for the corporation you chose. Evaluate how well the company has addressed these two (2) forces in the recent past. A company gets affected by various types of forces like threat of a new entrant, substitutes, existing rivalry in the industry, bargaining powers of buyers and suppliers. Among all, the most two important forces of competition that are likely to affect Nike are bargaining power of buyers and existing rivalry within the industry. The buyers of Nike shoes always demand for better quality of product but at lower prices. The bargaining power of the buyers of shoe industry in U.S is very high because there are various companies that produce shoes in U.S.(Iqbal, 2013). The company has to give various offers to attract more buyers for their products. Nike shoes are athletic shoes and various types of sports companies purchase bulk of their products. The company has to offer negotiable prices to these sports companies. It is observed that Nike shoes are rich fashionable shoes that exhibit the characteristics of luxurious products thus the degree of responsiveness of the buyers to change in prices are very high. The company has various rivals in the market. Companies like Reebok, Puma, and Adidas etc also produce lifestyle and sports shoes so if the prices of Nike shoes are increased to a very high level then it can drastically reduce the quantity demanded for Nike shoes. This signifies that the industry is highly competitive. Nike constantly upgrades their customized designs for lifestyle shoes so that they can pitch buyers on grounds of design and quality. In 2010 the company has introduced a new division known as Nike Digital Sports that has invented a special technology that can track the performance of a user in any type of sports. To lead in the progressing industry Nike has adopted low cost strategies like selling products online. 3. With the same two (2) forces in mind, predict what the company might do to improve its ability to address these forces in the near future. Nike as a firm can attract more potential consumers by making their shoes better in quality and fashion than the other companies. Nike may diversify the range of their lifestyle shoes so that apart from the people who participate in sports, Nike shoes are also purchased by general consumers. The company can always reach to a larger proportion of buyers by efficiently allocating their advertizing costs. If the company diversifies its products and make consumers realize a better quality then the quantity demanded will not change despite of rise in prices (Arslan & Altuna, 2006). In such a situation consumers will feel that prices of Nike products are high because of better quality of Nike shoes. Nike can always introduce loyalty programs among the buyers. This can be done by introducing special discounts among the existing buyers. The company may introduce customer usable cards that would give points to the buyers on every purchase; these points accumulated in the cards can also be redeemed by the consumers in future. Nike can promote more tie ups with sports companies. These companies will purchase sports shoes in bulk; helping Nike to enjoy economies of scale in production. It can also sponsor various types of sports tournaments that will help to attract new buyers. The company can think of producing some low priced products that will target on buyers with less purchasing power. In order to lead in this competitive industry Nike has adopted several low cost strategies for getting high share of profits. 4. Assess the external threats affecting this corporation and the opportunities available to the corporation. Give your opinions on how the corporation should deal with the most serious threat and the greatest opportunity. Justify your answer. There are various opportunities that helps Nike run a successful business in U.S. One such opportunity is product development. Although it is claimed by most of the owners of Nike that it is actually not a fashion brand; but all the consumers of Nike shoes does not participate in sports. Nike as a style brand is widely famous in the young generations. The consumers who purchase Nike shoes mostly recurs their expenditures because shoes are bound to wear out over time. This is an epoch of globalization; it will be the best opportunity for Nike to expand its business across national borders. This will help the brand by giving itself a worldwide acknowledgment. There are many emerging markets that have potential buyers with large disposable income spent on expensive sports items, for example the five BRICS with accelerated growth. Olympics, World Cups and many other global advertising events can largely help in giving a better recognition to the brand. The brand is open to the elements of international trade. In long run, the margins and overheads of Nike are not stable because Nike engages in trade with currencies; this is perhaps the biggest threat to the company. Thus Nike often may operate with losses. Many rivals in the market are inventing unconventional brands and thus they are taking away the market share of Nike. The vend sector is becoming price competitive so the buyers while shopping searches for rewarding deals (Info Entrepreneurs, n.d.). Thus price sensitivity among the buyers has become an impending threat for Nike. 5. Give your opinion on the corporation's greatest strengths and most significant weaknesses. Choose the strategy or tactic the corporation should select to take maximum advantage of its strengths, and the strategy or tactic the corporation should select to fix its most significant weakness. Justify your choices. The biggest strength of Nike is that it is extremely competitive in the world market. The company has often sponsored famous athletes and gained valuable coverage from its business. It will be a good strategy for the company to incur celebrity endorsement; it can use the celebrities for its advertisements. It is likely that famous athletes are almost religiously copied by the common youth. Thus these advertisements can substantially increase the business of Nike shoes all over the world. The company does not invest money in large manufacturing plants; it is a lean business organization. The new innovative product ranges of Nike signify that the company spends a large amount in research and development. Nike produces shoes of high quality with low cost in production. Extensive research and development of new technologies help Nike to shift in different modes of production if there is a rise in the cost of the existing mode of production. Nike with all its strength has become a sports giant in the world, the logo of the company is famous among individuals in the market. The major weakness of the company is the fact that most of its share of profit comes from the market of footwear. The business of Nike can collapse drastically if there is sudden erosion in its profit for shoes. The best strategy to overcome this problem is to simply diversify the business of its other sports products. Rather most of Nikes income comes from the sales of its products to the retailers who constantly put price lowering pressures on the company. 6. Determine the company’s resources, capabilities, and core competencies In order to fulfil the basic objectives of business and operate with success all companies require resources like labour, raw materials, energy, technological knowhow, and capital. Earlier all the resources used in a company were managed by the company itself. In the recent scenario if the companies can get certain resources at a lower cost they outsource those resources. Nike is not the manufacturer of its own shoes as the producers in Asia are more proficient in this work. This is one of the prime factors for which Nike refers itself as a sports shoe ‘marketer’. Nike rather invests more in merchandising and innovating new designs for its shoes. The core competencies of a company help the company to fight with the other existing rivals in the market. One of the core competencies of Nike is that it manages its clients all over the world in an efficient pattern. This type of a competency is created by the company over time. The managers of Nike are extremely efficient and have considerable knowledge over the supply chain of the company. The biggest resource of the company is its innovation that helps it to produce quality products that makes the company more competent to the other firms (Zhexembayeve, 2010). Operating successfully Nike provides worth to its shareholders. 7. Analyze the company’s value chain to determine where they can create value using the resources, capabilities, and core competencies discussed above. Value chain is a system that helps to launch commodities in the market (Recklies, 2001). This is done by transferring raw materials from the owners of raw inputs to the retailers or others who delivers final products to the buyers (ACDI VOCA, 2013). The flow of final goods and information regarding it helps to add value at each stage of the value chain. The diagram below shows a value chain (Handfield, 2011). Inbound Logistics In inbound logistics it is observed that the cost of production of Nike products is low and the company outsource the noncore functions. The company concentrates on its core competences like designing their products, marketing and sales and Air sole technology. The supply chain of the company has substantially helped in reducing its investment risks (Sridharan, Caines, & Patterson, 2005; Supply Chain Innovation, 2011). Operations The primary IHM’s of the company are in St Louis, Portland and Oregon. The research and development is mainly established in Oregon. The company uses NSLR in its operations. The company is also trying to reduce its cost by using ribbed cardboard in packaging. Outbound Services Considering the companies outbound logistics it has a sturdy control over its distributional network. It is reducing its pay roll and running overheads. In order to successfully carry out their new supply chain projects, Nike is using HP consultancy and software forces (Dittmann, 2010). Marketing, sales and services The company has a good recognition for its brand. It allocates a large share of its budget for the purpose of marketing and has a wide consumer base (Pietrobelli, 2011). The companies ‘bottom line’ is benefited by ecommerce that involves low cost. Nike is good in its customer services by allowing them to buy customised shoes online. References ACDI VOCA, (2013). Value chains and value chain analysis. Retrieved from http://www.acdivoca.org/valuechains. Arslan, F. M., & Altuna, O. K. (2006). The effect of brand extensions on product brand image. Journal of Product & Brand Management. 19(3), 170-180. CIA, (2013). Europe :: germany. Retrieved from https://www.cia.gov/library/publications/the-world-factbook/geos/us.html. Dittmann, J. P. (2010). Developing a supply chain strategy. Retrieved from http://bus.utk.edu/supplychain/chain_lightning/oct_2010/documents/Supply_Chain_Strategy.pdf Handfield, R. (2011). What is supply chain management? Retrieved from http://scm.ncsu.edu/scm-articles/article/what-is-supply-chain-management. Info Entrepreneurs, (n.d.). Understanding your competitors. Retrieved from http://www.infoentrepreneurs.org/en/guides/understand-your-competitors/. Iqbal, M. (2013). Is eliminating the bargaining power of customers more important than working on the Customer Experience? Retrieved from http://thecustomerblog.co.uk/2012/05/14/is-eliminating-the-bargaining-power-of-customers-more-important-than-working-on-the-customer-experience. Pietrobelli, C. ( 2011). Power relationships along the value chain: multinational firms, global buyers, and local suppliers’ performance. Retrieved from http://www.merit.unu.edu/MEIDE/papers/2007/PIETROBELLI_SALIOLA_Power%20relationships%20along%20the%20value%20chain_multinational%20firms,%20global%20buyers,%20and%20local%20suppliers'%20perf.pdf. Recklies, D. (2001). The value chain. Retrieved from http://www.fao.org/fileadmin/user_upload/fisheries/docs/ValueChain.pdf. Sridharan, U. V., Caines, W. R., & Patterson, C. C. (2005). Supply Chain Management: An International Journal. Implementation of supply chain management and its impact on the value of firms. 10(4), 313-318. Supply Chain Innovation, (2011). Operationalizing innovation. Retrieved from http://supply-chain.org/f/18%20-%20Claes%20-%20Operationalising%20Innovation%20From%20Supply%20Chain%20Strategy%20to%20Execution.pdf. Zhexembayeve, N. (2010). A whole new value: driving innovation, sustainability,and prosperity through appreciative inquiry. (3rd ed.). Bingley: Emerald group publishing limited. Read More