Strategic Performance Management of Nike, Inc - Case Study Example

Strategic Performance Management of Nike, Inc.

Table of Contents

Introduction3

Literature Review4

Operations performance within the organisations4

Theories and Models related to operations performance5

Performance objectives that act as success factors7

Evidence of performance objectives by Nike, Inc.9

Identifying the most important performance objectives11

Weaknesses of Nike, Inc.12

Recommendations13

Conclusion13

Reference List14

• Introduction

Nike, Inc. is known to develop high quality footwear equipment, apparel as well as the accessory products for its customers across the world (Nike, Inc, 2016). The company is considered one of the largest seller of authentic footwear and sells its products with a combination of retail accounts, stores and e-commerce, where its goal is to deliver value to the shareholders by providing branded footwear, equipments and apparel (Nike, Inc, 2016). The strategies adopted by the company aims at having long-term revenue growth and developing a close relationship with the customers, it emphasises on the Nike brand and brand Jordan product offerings depending on different areas such as basketball, running, football, men’s training, women’s training (Nike, Inc, 2016), it also manufactures sports shoes for kids, based on different outdoor activities.

Further, study indicates that the company also sells small amounts of plastic products to other manufacturers. The company owns its subsidiary namely Converse Inc., which designs as well as distributes casual footwear, youth lifestyle footwear and accessories (Porteous and Rammohan, 2013). The company has acquired different apparel and footwear companies such as gain control over Starter in 2004 and Umbro in 2008 but later on it sold some of its subsidiaries in order to improve the quality of the brands manufactured by it (Boxall and Macky, 2009). The footwear industry is facing a huge competition among the manufacturers and the top competitors of Nike, Inc. are Adidas, Reebok, Puma etc (Boxall and Macky, 2009). The competitors produce domestically and benefit from the ease of monitoring and posses skilled workforce that also enhances their performance across the globe (Boxall and Macky, 2009).

The report aims at studying the strategic performance management of Nike, Inc. and focus on the potential challenges faced by the company.

• Literature Review
  • Operations performance within the organisations

According Nudurupati et al. (2011), a business strategy is considered as a plan or set of intensions that will lead to long-term direction of the actions in order to ensure future organisational success. Flynn, Huo and Zhao (2010), have argued that the operations within an organisation are strategically important in order to compete in the global market. The relationship between the strategies adopted by the managers of the organisations and its operations is the key determinant of the ability to achieve long-term success (Flynn, Huo and Zhao, 2010). Strategy, in case of a business organisation, is based on the way in which the organisation seeks to survive and prosper in the long-term. Bai and Sarkis (2010) have argued that there are five performance objectives that the organisations need to consider in order to enhance their performance in the global market such as cost, quality, speed, dependability and flexibility. The performance objectives are such that the organisations must have the ability to produce at low costs (Bai and Sarkis, 2010).

Green et al. (2012) argued that the speed at which the organisations are able to perform the tasks affects the growing demands in the global market. The target customers are likely to depend on the companies in order to obtain high quality products in the global market (Green, et al., 2012). Moreover, the team leaders within the company need to bring in change within the organisation. The employees are to be trained such that, they are accustomed to the changes that take place. Flexibility within the organisation comprises of various aspects such as the flexibility related to working hours as well as dress code (Kroes and Ghosh, 2010). The employees are provided with the flexibility in order to enhance their performance as the changes takes place. In case the employees excel in any of the performance objectives, it enables the organisation to pursue the business strategy formulated (Kroes and Ghosh, 2010). As per the study, it is not possible that a single organisation can excel in all fields and hence, the organisations need to focus in different fields (Gunday et al., 2011). According to Kroes and Ghosh (2010), the operations taking place within an organisation can be a ‘Formidable Competitive Weapon’ and it plays a strategic role in order to improve the performance of the employees.

• • Theories and Models related to operations performance

Hayes and Wheelwright indicated that, the overall capabilities of the employees drive success within the organisation and they developed a model in order to help the employees identify a strategic role (Kim, 2009). The different stages under the four stage model are discussed as follows.

Internal Neutrality

Kim (2009), argued that during this stage, the operations function is about to reach a certain minimum standard and it is considered as a barrier for other business practices. The focus of this stage is on avoiding mistakes and so the organisation has the tendency to be inward looking as well as reactive (Boxall and Macky, 2009). The publicity about the organisation due to its bad performance is let down by the operations and it is considered to be damaging (Boxall and Macky, 2009). This in turn, affects the reputation of the organisations in the global market.

External Neutrality

According to Molina-Azorín et al. (2009), under this stage the operations functions of an organisation is compared to its competitors in the global market. As per the study, the performance of the organisation is benchmarked against its competitors and they have the opportunity to copy. The operations function of a company is externally neutral in case it tries to match the benchmark (Molina-Azorín et al., 2009). As per Molina-Azorín et al. (2009), higher the benchmark, greater will be the performance initiatives of the managers and it would have a positive impact on the customers.

Internally Supportive

As per Bieak Kreidler and Joseph-Mathews (2009), in the third stage, the organisations have the interest to improve the level of operations and gain competitive strength as compared to the other organisations. The operation functions within the organisation are able to perform appropriate operations so as to make the company compete with the rivals (Bieak Kreidler and Joseph-Mathews, 2009). The internally supportive element that comes with the development of the organisations is based on the operations strategy in the global market. According to Dwyer (2009), the initiatives taken by managers must be according to the available resources and it should also be based on the potentiality of the employees.

Externally Supportive

As per Boxall and Macky (2009), the operations function within the organisation is related to making up strategies for its competitive success in future. The resources are obtained by the managers of the organisation externally and it helps in determining innovative ways in order to enhance the overall performance of the organisation (Dwyer, 2009). The resources have the capability of developing the future market conditions. Boxall and Macky (2009), argued that these resources are likely to enhance the performance of the organisations and satisfy the customers in the global market.

• • Performance objectives that act as success factors

As per Gunasekaran, Subramanian and Rahman (2015), the theory related to performance objectives indicates that the organisations usually focus on one or more of the performance objectives in order to gain competitive advantage in the global market. The different performance objectives are likely to have a positive impact on the organisation (Boxall and Macky, 2009). The performance objectives are considered to be strategic because the companies focus on these performance objectives have an impact on the purchase intentions of the customers and also affects their loyalty (Boxall and Macky, 2009). These objectives also raise the revenue earned by companies and set up a brand reputation in the world market.

Quality

As per Fulton and Lee (2013), the quality of a product involves the design, aesthetics and reliability of the product manufactured by the organisation such that it can compete in the global market. The purchase intensions of the customers depend on the satisfaction and dissatisfaction related to the products. Poor quality products as well as services, lead to a loss of future sales (Boxall and Macky, 2009).

Flexibility

Fulton and Lee (2013) argued that flexibility depends on the changes in the operations within the organisations. This usually takes place due to the changes in tastes and preferences of the customers and the organisation has to respond to the changes in order to stay competitive (Fulton and Lee, 2013). It is expected that the managers of an organisation needs to understand the requirements of the external stakeholders and design the strategies accordingly (Fulton and Lee, 2013).

Speed

As per Boxall and Macky (2009), this involves the rate at which the organisation carries out the production process and meets the demand in the global market. The speed of their production process affects the cycle time required to develop a new product (Boxall and Macky, 2009). Moreover, the managers of the organisation take care of the scheduling a well as the capacity planning and it also affects the cost advantage (Boxall and Macky, 2009).

Dependability

According to Park-Poaps and Rees (2010), the processes followed within the organisation have to meet the requirements of the customers and also has to meet the delivery time as promised to the customers. This raises the dependability among customers. Moreover, there is a need to identify the problems faced by the organisations such that, they are able to meet the demands on time (Park-Poaps and Rees, 2010). This in turn raises the loyalty amongst customers and they prefer to depend on the organisation in future.

Cost

According to Taylor (2009), lower the cost of production, lower will be the cost at which the goods can be offered to customers. Moreover, it is the best strategy in order to gain competitive advantage and it is also the mode of product differentiation that will lead to increase in the profit levels (Taylor, 2009). Furthermore, the organisations take care of the supply chain management, in order to reduce the cost of production and satisfy a large number of customers in the global market (Boxall and Macky, 2009). As per Boxall and Macky (2009), cost is dependent on other performance objectives and it can only be lowered based on the reduction in costs of other objectives. The priority of the performance objectives is determined on the basis of demand from customers and the actions of the competitors. In case if the target customers’ demand errors free products, it needs to focus on the quality performance (Mueller, Dos Santos and Seuring, 2009). In order to make relative business decisions, the managers of the organisations need to be able to judge the importance of such competitive factors (Mueller, Dos Santos and Seuring, 2009).

• Evidence of performance objectives by Nike, Inc.

As far as the flexibility objectives are concerned the “rewire” approach of Nike, Inc. involved supply chain sustainability and resulted in several changes in the company (Mueller, Dos Santos and Seuring, 2009). There is change in the organisation structure and lean manufacturing and training in order to build the efficiency and skills of the workers as well as develop incentives for the suppliers in the global market (Mueller, Dos Santos and Seuring, 2009). The company uses the matrix organisational structure; in which, managers are expected to report to various departments based on the goals of the organisation (Mueller, Dos Santos and Seuring, 2009). Moreover, the internal scorecards are used in order to judge the progress of the organisation and plan out strategies, so as to enhance the overall performance (Mueller, Dos Santos and Seuring, 2009).

The lean manufacturing process of Nike, Inc. also improves the overall performance of the organisation, as the employees are dedicated towards delivering quality performance (Nike, Inc, 2016). The employees within the organisation are also trained in order to help them develop skills. The penalties and incentives within the company depend on the Manufacturing Index business model where the suppliers are rewarded for their quality and timely delivery of the products (Nike, Inc, 2016). This considered the two performance objectives, that is, maintaining quality as well as raising the dependability of the customers on the organisation. As per the study, majority of the sports academies and individual athletes are loyal customers of Nike, Inc. for the quality products that they manufacture (Nike, Inc, 2016). There are further innovations in their management process that is the company provides incentives to the suppliers to change their behaviour (Nike, Inc, 2016). The high performing suppliers are offered with the role of leadership in Nike, Inc. who deal with the implementation of the lean management practices (Nike, Inc, 2016).

Innovations adopted by Nike, Inc. are also linked to reduction of cost, as the company has focused on the environmental sustainability (Nike, Inc, 2016). The company’s Flyknit technology is used to manufacture lighter shoes for the runners that make use of fewer raw materials (Nike, Inc, 2016). Since, the one piece at the upper end does not use multiple cuts, the shoes reduce both wastage and cost. The customers find the shoes to be affordable and they are satisfied with the product designed by the company (Nike, Inc, 2016).

On the other hand the company also focuses on the process innovation as it invest on a Dutch technology firm in order to create the commercially available textile dyeing machines (Soroor, Tarokh and Shemshadi, 2009). It reduces the risk of effluent discharge and the cost of production such that, the customers of all age groups are able to purchase the products sold by the company (Soroor, Tarokh and Shemshadi, 2009). Furthermore, the training process followed by the managers of Nike, Inc. is such that, it accelerates the production process and the workers are able to deliver the products on time (Nike, Inc, 2016). Therefore, the speed of production process also increases the dependability of customers, as they are confident that the products will be delivered on time, even if there is a delay in the ordering process (Nike, Inc, 2016).

Figure 1: Nike, Inc. selling prices and Unit Sales Increases

(Source: Market Realist, 2015)

• Identifying the most important performance objectives

Based on the study, it is evident that the most important performance objectives are quality, flexibility and cost (Porteous and Rammohan, 2013). All the three factors raise the number of customers and help the organisation to create brand awareness in the global market. The waste management process of the company has helped it to achieve the zero waste supply chain and invest in the technologies that are linked to 100% renewable energy (Vurro, Russo and Perrini, 2009). The company’s focus on the upfront product design improving the products’ sustainability as well as material sourcing (Vurro, Russo and Perrini, 2009).

Furthermore, the sustainability measurements are the metrics that are likely to force the team to improve the efficiency patterns and decrease the number of materials used (Porteous and Rammohan, 2013). This reduces the cost of production of the company and raises the purchase intensions of the customers. This also emphasises on the flexibility of employees to adapt to the new technologies that are used by the companies in order to improve their performance (Porteous and Rammohan, 2013). The training process of the managers involve the introduction of the mission and vision to employees, that is the company would be subjected to a constant change process in order to compete in the global market (Porteous and Rammohan, 2013). Therefore, the flexibility among workers have a positive impact on the overall performance of the company.

• Weaknesses of Nike, Inc.

The study indicates that greater portion of the revenue earned by Nike, Inc. is dependent on the footwear manufacturing and the company has acquired large market share in the US (Porteous and Rammohan, 2013). However, the company may lose its revenue if the footwear market is eroded (Porteous and Rammohan, 2013). Alternatively, the retail sector is price sensitive and the price of the products fluctuates in case of booms and recessions within the economy (Vurro, Russo and Perrini, 2009). The company also has to control its cost of production that affects the quality and sustainability initiatives. Therefore, the retailers impose some low price competition pressures on Nike, Inc (Vurro, Russo and Perrini, 2009). The managers of the company are unable to negotiate with the suppliers in such cases and as a result, they have to remain satisfied with low quality raw materials (Vurro, Russo and Perrini, 2009).

• Recommendations

The managers of Nike, Inc. are expected to prepare a budget plan that would work the in case of adverse situations. Furthermore, separate inventory can be maintained for the raw materials such that the company is able to meet with the demands of the customers, even during periods of crisis. The dependability from customers can be ensured through better customer relationship management and adopting new technologies in order to manufacture the products as per the demand of the customers. Moreover, the prices of products are to be set as per the demand of products and product diversification is also another strategy that the managers of Nike, Inc. can adopt, in order to focus on other sectors apart from shoes.

• Conclusion

Nike, Inc. has delivered better performance in manufacturing quality shoes and other sports accessories for the athletes. The company has focused on different performance objectives in order to earn create a brand reputation in the global market. Quality, cost and flexibility are the main objectives that the company focuses in order to gain a competitive advantage in the global market. However, the company earns majority of its profit from the footwear sector, which is risky during economic crisis. Therefore, the company is recommended to diversify its product line and adopt new technology. Nonetheless, there are certain limitations that Nike, Inc. may face while product diversification that is it has to hire new set of skilled employees and train them which would in turn raise the cost. Therefore, Nike, Inc. would not be able to set the prices affordable to the customers.

• Reference List

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