Nike: Organizational Analysis Of Company

Executive Summary

The following report is about Nike. Nike was established in 1968 and went public in 1980. Nike is an athletics wear producer that develops and designs its own products for many different sports. Some of the sports that they produce products for include gold, hockey, skateboarding, baseball, bicycling, tennis, and many others.

Their main sales are in shoes which they had managed a 50% market share in the United States just 8 years after the formation of the company. They have grown into a huge company with product lines for many different sports, including golf, hockey, skateboarding, baseball, bicycling, tennis, and many others. Currently, they are located globally with the majority of their stores being located in the U. S. Among Nike stores, Nike also has purchased the bands Converse, Hurley, and Cole Haans and has multiple stores for these brands located mainly in the U. S.

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Looking at Nike’s financials we have determined that they are financially strong and have a strong cash flow. We also should note that the majority of their revenues are from shoe sales which we have determined as a possible threat if they are unable to predict future customer needs in this area. Nike has established a good organizational environment where they support innovation from within (their employee) and establish good working teams that promote collaboration and a strong work ethic. Nike prides itself in being able to hire strong staff members that are able to exceed in the task at hand.

Throughout the report, we compare Nike to some of its main competitors in comparing how well they are competing in the market. The key benchmarking competitor that we use is the Adidas Group since they are one of the most comparable companies to Nike in today's market.

Overview and History

As the world’s leading athletic footwear, apparel, and equipment company, Nike is dedicated to inspiring every athlete to reach peak performance. They are the largest seller of athletic footwear and apparel in the world.

Nike was incorporated in 1968 and went public in 1980. Nike is still based out of Beaverton, Oregon, where the company was started by a University of Oregon track coach and one of his track and field athletes. They currently employ over 38, 000 people worldwide and recorded revenues of $24. 1 billion in 2012 Their seven product focuses are running, basketball, football, athletic training, woman’s training, action sports, and sportswear. Their largest competitors are Reebok, Adidas, and New Balance. Nike began as a distributor of Japanese track and field shoes.

Nike started manufacturing their own line of running shoes in 1972 and gained notoriety with their innovative “waffle” design. By the time they went public in 1980, just 8 years after they started manufacturing their own shoes, they had a 50% market share in the United States. They have grown into a huge company with product lines for many different sports, including golf, hockey, skateboarding, baseball, bicycling, tennis, and many others. Nike’s main focus is growing the Nike brand. Nike’s trademark ‘swoosh’ logo is recognizable worldwide and can be seen advertised at a wide variety of sporting events.

Nike focuses on promoting their brand through advertising and athlete endorsements, including popular athletes like Rory McIlroy and LeBron James. Nike’s other focus is on product development and innovation. They pursue growth through an ever-expanding product line. This not only includes the in-house development of new products, but also the purchase of subsidiary companies. Nike hires out the production of their goods to independent contractors for the majority of their inventory. The majority of their manufacturers are located outside the US.

China, Vietnam, Indonesia, and Thailand are the largest producers of Nike goods. Nike sells to retail accounts in 170 different countries. They also have a chain of retail stores that sell Nike products direct to consumers. In addition to its core business, Nike has a number of wholly-owned subsidiaries, including Jordan, Converse, and Hurley. Previous subsidiaries have also included Umbro and Cole Haan. Nike recently announced that they have reorganized the company into six geographic regions to better serve the different needs of the various regions.

The new breakdown of Nike in North America, Western Europe, Eastern Europe, China, Japan, and Emerging Markets. The changes were made to address Nike’s changing customer base. China has grown to Nike’s second-largest market and they have also seen a huge growth in Eastern Europe. Their new geographic layout allows them to focus their efforts on specific regions. Nike continues to grow revenues through a clear strategy of brand recognition through marketing in existing markets, innovation of new products, and a focus on emerging world markets. Their dedication to growth looks to keep them on top of their industry for the foreseeable future.

Organizational Strategies and Innovation

When it comes to classifying Nike using Miles and Snow’s model it can be said that Nike is a prospector organization in that it thrives in an ever-changing business environment that has an element of unpredictability and they have succeeded by constantly examining the market in a quest for new opportunities. This is further indicated by their broad product lines and not being reliant on any one technology.

They prioritize new product developments and innovation to meet new and changing customer needs. If we look at how they would be viewed in Porter’s Five Forces model it is clear that they have been able to manage all the forces in a way that there is no negative impact on their business. The threat of new competition has been minimized by the fact that the barriers to entry are quite high. This is due in part to the number of patents held by Nike and their existing competitors and also the capital requirements to enter the market are just too large for there to be any immediate threat.

As with any company in this industry, there is the threat of substitute products but Nike has been good at ensuring that their products are of a much higher quality than the ‘knock-offs” and that they have been able to maintain a solid, loyal customer base. They have not had too many problems with the bargaining power of suppliers due to the fact that they are such a large corporation and have been able to have their products made offshore in places where labor is much cheaper and less regulated.

They also buy in such large quantities that they have been able to secure the best deals using the economies of scale principles. The bargaining power of their customers is one area in which they have to be very diligent in that there are other established brands that the customers could choose. They have to make sure to price and market their product correctly. They also need to rely on the uniqueness of their innovations and patents to help reinforce to the customer that their product is the superior one. Nike has had to work very hard to deal with the competitive rivalry within the industry and they have tackled this issue by making sure they are constantly innovating and coming out with new products. They also have a large advertising budget and sponsor many of the world’s most famous athletes. Nike is a growth company and this is therefore its primary objective. In 2010 Nike unveiled its strategy and primary initiatives to achieve sustainable, long-term growth across its global portfolio of brands and businesses. By the end of 2015, they hope to achieve a revenue target of $27 billion.

They also believe that they can generate over $12 billion of cumulative free cash flow from operations. At the heart of this growth strategy is innovation and Nike has made this a top objective within the company. They believe that innovation can take on many forms, whether it is innovation to serve the customer, innovation to grow the company, or innovation to inspire the world. At Nike, innovation is not just coming up with new products but also innovating the way that they do business.

From the raw materials they use, the way they interact with consumers, to the way they design and sell their products When it comes to this growth-through-innovation strategy that Nike has chosen to focus their efforts on, they have also realized that they need to use the size of their company to help make the world a better place. Today they have a greater awareness of their corporate responsibility and realize the need to have innovation that is sustainable, by which they mean that it brings people, the planet, and profits into balance for lasting success. In order to meet the sustainability goals they have chosen to improve their environmental and social impacts across their value chain while minimizing costs by reducing waste, energy, and water expenditures. In addition to these strategies, they have also created new business units called Sustainable Business & Innovation, as well as Sustainable Manufacturing and Sourcing. One example of how they have been able to make a greater impact using their sustainability initiatives is in the jerseys they supplied for the 2010 FIFA World Cup.

The fabric was sourced from discarded plastic bottles in Japanese and Taiwanese landfill sites and then melted down to produce the yarn that was converted to fabric for the jerseys. This process reduced their energy consumption by up to 30 percent compared to the methods they had been using in the past. In order to be able to say whether or not Nike has been effective in implementing and managing these strategies for the betterment of the business, and if they will still be on target to meet their goals we should need to look at the financial reporting of the company.

In 2010 when they set out their strategy and initiatives they had revenues of $19 billion. With 2012 revenues of $24 billion they are strongly positioned to meet their growth goal of $27 billion by the end of 2015.

Organizational Design and Effectiveness

The goal that Nike is pursuing is to be the most innovative active ware supplier in the world. They are always looking at innovative ways to better serve athletes (the customers), to grow the company, and inspire the world. (Business Overview 2012). This strong innovative strategy that Nike has introduced has provided them with an advantage over competitors.

It has allowed them to be one step ahead in developing new products and introducing them to the market. Providing these levels of innovation through its products has also allowed Nike to create a sustainable competitive advantage. This is because their strategy has offered the buyers a lasting reason to prefer their products, by keeping them interested through new innovative products. In doing so, Nike differentiates itself from rivals by outcompeting on the basis of differentiating features, such as higher quality, wider product selection, added performance, value-added services, and more attractive styling.

Nike has developed their company’s design and operational procedures in an organic fashion, to increase teamwork and collaboration. By having a more organic structure Nike has increased employee evolvement through decentralization. Nike feels that this high involvement helps to improve product development, and company growth by encouraging employees to get involved in the innovation process. Between the years 2004 and 2009, Nike conducted three global employee surveys so that they could receive insights from their employees to determine if their organizational structure was producing the results that were wanted.

In all the surveys it was consistently reported that Nike employees, globally, are highly engaged in the workplace. This showed Nike that they were on track with their company design in decentralization and organic structure. The goods (footwear, apparel, and equipment) that Nike produce are from supply chains that are located around the world such as America, and European countries; but the large majority of their products come from factories located in Brazil, Mexico, Indonesia, China, Sri Lanka, and Vietnam.

Doing so has allowed Nike to receive a larger profit on their goods due to the cheaper production costs in these countries. This organizational design has been effective in increasing Nike’s competitive advantage on price; allowing them to make higher quality products for less. However, this design has negatively impacted the company, and they have now realized that full transparency and good public relations are just as important to stakeholders. To reduce this negative impact Nike has now looked into changing their supply chain design slightly by trying to improve workplace environments in these factories.

Over the last 15 years. they have looked to improve working conditions for these factory workers by reducing all of the top issues of labor noncompliance that have been witnessed in these supply chains.

Competitors

In regards to Nike’s competitors, Adidas and Reebok (which is owned by the Adidas group), Nike offers many more products for many different markets in comparison to them. Nike has been able to penetrate these markets by staying innovative and continuing to come out with new and improved products to sustain a competitive advantage over its competitors.

This, along with staying close to the customers and employees has allowed them to continually develop products that compete aggressively and in many cases outperform the competitors.

Organizational Structure

Nike is organized in a matrix organizational structure also known as a flat structure. The matrix structure is divided into two categories by functional area and by-product. It consists of supervisors who oversee the employees in such areas as engineering, marketing, as well as projects.

Nike has adopted this structure which includes CEO Mark Parker and a Board of Directors chaired by Phil Knight with the division of departments such as Human Resources, Marketing and Sales, Accounting, Production, Design, and Development. Within each department, employees report to the department manager as well as the product manager who are able to make decisions independently. This structure allows Nike to adapt to marketplace changes and meet demand and supply much more quicker as managers are readily available in the production line.

The Matrix structure is currently working for Nike as it allows it to keep up with demands and adapt to changes in the business environment. This structure has proven to be reliable for companies in a fast pace industry which is why it is beneficial for companies who face competition in different markets of the world. Nike may also choose to use this structure due to several other advantages. The structure distributes employees in areas in which they can specialize and focus on a particular field but also provides opportunities for growth by allowing them to venture off into other areas and develop more skills.

Nike’s organization allows its department managers to focus on achieving goals in their specific departments and allows employees to focus on specific tasks. Such ability allows members of a department to enhance their specific skills.

External Environment

Opportunities

Looking at Nike’s external environment we can see areas for opportunities. Nike’s current market is very well developed due to the length of its establishment and its great marketing over the years.

However, when looking at the number of Adidas stores which is approximately 2,400 this is more than twice the stores that Nike currently has, approx 800. This allows us to witness the opportunity for Nike to expand its market by pushing new stores into new demographics that they are currently tapping. This especially goes for Nike’s brands Hurley and Converse which have no stores outside of the U. S. Another recently increasing opportunity for Nike is a greater health-conscious society in most of Nike’s markets.

This has increased their opportunity to develop new products and/or new product lines to sell in order to meet these customers’ needs. It has also increased its market base as more people become increasingly health-conscious the more people there will be in the market for athletic wear; Nike’s largest product sector. In the most recent years, Nike has also begun to show greater social responsibility by increasing working standards for employees in the factories that they use to make their products.

This has opened up the opportunity to have better relationships with factories in these countries which greatly benefits Nike since this is where most of its products are assembled. This also helps to build better public relations with Nike stakeholders. Most stakeholders know of Nike’s past, where child labor has been used in some of their factories. By trying to increase standards in these factories society may view Nike as more ethical and may forgive them for some of their past mistakes.

Stakeholders will be more proud to own the product and be part of the Nike organization if they know that the products where being made in a more ethical manner

Threats

One external threat that Nike needs to consider is that most of its products are produced by contracted factories in third-world countries. This means that if any of the following changes:

• currencies prices
• import duties
• quotas
• safeguard measures
• trade restrictions
• political instability
• terrorism

They risk running into problems that could greatly harm the profitability of the company. These are some of the major issues that companies have to consider when doing business abroad. Another current threat is the U. S. market instability. This affects Nike more than some of its competitors because approximately half of Nike's stores are located in the U. S. Whereas, Adidas group has many more stores globally than Nike. That’s not saying that this would not be a threat to Adidas too as a lot of their sales are U. S. driven. Another possible threat to Nike is its competitor’s strategies. These strategies are a constant threat since Nike never knows what their competitor's move may be. There is also always the growing threat of reverse engineering, where another company takes your product apart and determines how to make it themselves. This is a threat because Nike’s products are sold in many different countries and patent laws aren’t always properly enforced. They also always have the threat that they are unable to anticipate consumer preferences when developing new products. This means that they may not be able to maintain their market share and profits. Nike’s competitors have these same threats.

Internal Environment

Strengths

Nike has some distinct competencies that they exploit to help gain a competitive advantage over competitors and add value for the customers. One of these competitive advantages is Nike’s ability to be innovative in the creation of athletic products and clothing. With the use of their extensive research and development, they are able to stay ahead of the competition. An example of this innovation is the new Nike Free; they are running shoes that enable you to let your feet move more freely and naturally, which helps to build muscles in your feet.

These are good examples of successful innovative ideas, so successful that many other companies that sell athletic shoes have introduced similar shoes to now compete. They have also in the recent year introduced technology into their products which have added to their competitive advantage. Another distinct competency is that Nike has been able to differentiate their product from their competitors through the use of their brand logo the classic Nike Swoosh. Nike has developed the brand so greatly through the use of marketing, that most people worldwide know the symbol as Nike.

On all Nike gear, the Swoosh is located in an easy-to-see location and sometimes in multiple areas. Nike has also introduced products with a distinct look that makes them easier to differentiate. An example of this is the Nike Shox. These are runners that they make every year and never change their style. This also helps to keep returning customers, since these customers have become dependent on these runners. New colors are introduced and slight modifications to keep interest but in general, they look the same. As talked about in class it is easier to sell to current customers than to sell to one that is not. Nike does superior work in acquiring, managing, and developing their team members. They offer the tools that are needed to help develop their team member's skills and reward the properly along the way. Nike performs what they call “Talent Reviews” where managers review the team member’s current performance and look for areas that they can help them improve in. Getting employees involved in the innovation process also helps to create better teams and increase employee compassion for the workplace.

Making them believe that they make a difference is important. Another, strength of Nike is their large increasing profits over the past years. This financial strength means that they can obtain capital for proposed projects. This means that they are generally more able to perform projects that need a large capital outlay. This is a great benefit to a company because some expensive projects may produce a large return on investment. And since Nike has strong financials they would be able to get the needed capital to act on these investments.

Also, most of the time the capital will come at a reduced cost if the company is finically strong since the bank would not require a high return because they are less risky. Another benefit that can be seen from the consolidated statements is that Nike has a large cash and cash equivalents on hand. This is a benefit because if there is a bad year they will still be able to pay for their expenses. It also benefits them in being able to invest their own capital in proposed projects versus issuing shares are bank debt to get the needed funds. This could reduce costs for the capital needed increasing the return on investment.

Weaknesses

Some of the weaknesses in Nike’s internal environment are the bad public relations that they have received in relation to their factory conditions. An example of this is in 1996 it was exposed that Nike had been using child labor in their Pakistan factories. Even though in recent years they are trying to improve conditions in these factories to create better public relations. It will be a long time coming before the public sees Nike’s factory conditions as fair practices due to their past exposures.

Another weakness is that Nike is very dependent on their shoe sales. Nike’s shoe sales currently account for a large majority of their sales. This can be seen when looking at their revenues by product line. High shoe sales create a weakness for Nike because they are highly dependent on their sales in this department. If there was a decline in this department it would greatly affect their revenues. Another weakness is that Nike is an expensive brand. If price-adverse customers come to market, due to hard economic times this could greatly reduce their sales. This could hurt their revenues and further hurt their profits.

Competitors

Nike’s competitors such as the Adidas Group seem to be on the same page as Nike with their strengths in the internal company. With the Adidas Group, in the case of their innovation strategy, they also get all employees to evolve in the process. Looking at the strategies in place to get these employees involved they are even stronger than Nike’s. In the Adidas Group, each section of employees has to submit an idea every couple of years. As for weaknesses Adidas has many of the same.

The weakness of price-adverse customers not purchasing their product would also affect Adidas. This is because Adidas has competitive pricing that is very similar to Nike’s. The weakness that Nike has above involving their dependency on their footwear department for the majority of their sales is not the case for Adidas. Looking at Adida's financial statement it can be seen that their apparel department and their footwear department have very close sales. This means that Adidas is not as dependent on its footwear sales and would have a better chance of survival if sales in this industry declined.

Nike Products and Services

Nike Inc. first started off by selling track running shoes. Today they produce and sell an assortment of sports equipment throughout the world including footwear designed for specific athletic use, apparel, accessories, and services. Nike has seven main categories to which it offers products: running, basketball, football (soccer), men’s training, women’s training, Nike sportswear, and action sports. Products are offered in retail stores and internet sales in approximately 190 countries in the world. Nike also provides products designed for kids only and recreational uses.

These include; baseball, cricket, golf, lacrosse, outdoor activities, American football, tennis, volleyball, walking, and wrestling. Nike has introduced a product feature called NikeiD now available in the United States, Europe, Japan, and China. This allows customers to customize their Nike apparel, footwear, or gear. Personalizing features include different colors, materials personalized iD, and independent sizing on select shoe styles. In December 2012 Nike sold the Umbro brand and related assets to Iconix Brand Group Inc.

This company sells under the Nike brand name, a line of performance equipment, including bags, socks, sports balls, eyewear, timepieces, electronic devices, bats, gloves, protective equipment, golf clubs, and other equipment related to sports activities. Furthermore, Nike wholly owns five brands. Cole Haan offers high-quality men’s and women’s dresses and casual footwear appeal and accessories. It is one of America’s leading luxury brands operating in more than 180 retail locations throughout the United States, Canada, the Middle East, and Asia with a 2011 fiscal year ending sales of $518 million.

Nike also owns Converse Inc. which was established in 1908 and today is known to have a reputation as “America’s Original Sports Company. ” Converse provides a premium lifestyle for men’s and women’s footwear and apparel associated with Chuck Taylor, All-Star, One Star, Star Chevron, and Jack Purcell. Converse is sold globally by retailers in over 160 countries and through over 50 company-owned retail locations with reported revenue in the year 2011 of $1. 1 billion.

Hurley International LLC is a line of action sports apparel for surfing, skateboarding, and youth lifestyle apparel and footwear under the Hurley brand name. In 2011 Hurley had $252 million in reported revenue. Jordan Brand is built on the legacy and direct involvement of Michael Jordan. Making its debut in 1997 is now not only a lifestyle of performance but a collector’s item. Lastly, Nike Golf provides golf equipment, apparel, balls, footwear, bags, and accessories worldwide. Nike Golf had $623 million in reported revenue in the year 2011.

Information Technology and Control Systems

Nike uses various software programs within its company. Nike adapted SAP which stands for systems, applications, and products in 1999 to help them understand their customers better and the ability to respond to market changes and trends. SAP is multinational software that helps manage business operations and customer relations. It is suitable for larger companies like Nike as it manages tasks from payroll, sales, and customer relations to warehouse management and product life cycles. Nike also worked with Siemens IT Solutions and Services to provide outsourcing services. This includes global program management and service desk, desk side support services, and asset management as well as others specialized for Nike. The main purpose of this IT service was to enhance their product availability. Another IT service Nike adopted is Affiliated Computer Services (ACS) which provides accounting, financing, and IT outsourcing such as human resource services and customer care.

Nike’s strategy was to provide users with the newest most exciting products and strengthen relations with customers. This IT service allowed Nike to organize support for their business worldwide, lower long-term costs, and strengthen connections with their customers. Nike had some difficulties in managing their inventory levels in the early 2000s. They faced a loss of around $100 million in sales. This led them to create their own inventory management software which allowed them to appropriately forecast outcomes.

Nike’s goal was to change the software, remove the bugs, and perfect how the software predicted demand for inventory. In 2005 Nike hired Roland Pannaker who holds the position of VP of Lean Business Solution/CIO with a background of 25 years of experience in IT and Business Management (13Ja). Ronald is in charge of the overall Information Systems of Nike Inc. worldwide. He believes that the SAP System, Siemens IT, and Affiliated Computer Services have an important value to Nike in reaching its goals based on information and control systems.

Competition

Adidas is one of Nike’s major competitors. Having supply chain issues and with the need to improve web enablement and application modernization, Adidas went with the technology of Magic Software Enterprises. Magic helped Adidas build strong integration capabilities and customer support, and most importantly instantly increased ROI now and in the long term.

Organization Size, Life Cycle, and Possible Decline

Nike currently employs approximately 38,000 employees worldwide; this includes retail and part-time staff members. The organization is much larger if you include all of its supply chains and factories that produce its goods. There are approximately 930 factories that employ 1,079,137 employees that are producing goods for Nike. Adidas currently has around 46,824 employees worldwide working in retail.

Looking at Nike, we believe that they are in the Growth to Maturity stage in the organizational life cycle. This is because Nike has a well-established customer base that is worldwide meaning that they are tapping into a lot of markets globally.

The reason why we say that they are still in the growth is that they are still a very innovative company that is constantly growing through new product lines and tapping into new markets as new consumer trends emerge. Nike also has other areas for possible growth through their other companies such as Cole Haan, Converse, and Hurley stores; which have very little market penetration globally in comparison to the number of stores located in the U. S. Even though they are a global company they do provide more products to the U. S. which means that there is also future possible growth in these areas. An example of this is NIKE I. D. NIKE I. D. is not currently offered in all of the countries that Nike sells to. This is an example of a product line that still has potential for growth. As for Adidas, we believe that they are in the mature stage because they have a greater market penetration due to they have almost twice as many stores globally as Nike. This means that there is less room for growth and Adidas should focus on staying strong in the mature stage and avoiding the downfall for as long as possible.

The only real concern that we saw for a possible decline is political difficulties. If there were changes affecting trade agreements or currency fluctuation, Nike may have a problem getting their goods from the factories to the stores and at a good price. This could result in a decreased profit margin which could threaten Nike’s sustainability in its worst case. Other than the above reason we don’t note any other real possibilities for decline other than for extreme conditions such as war, market depression, or natural disasters.

Organizational Culture

The culture that Nike tries to produce is an “open and creative environment that harnesses diversity and inclusion to inspire ideas and ignite innovation”. To help create this culture Nike has implemented a three-stage progress. The first stage is that they focus on the fundamentals. For this stage, Nike offers a resource center with different tools and exercises to help teams discover how diversity and inclusion drive creativity and innovation. For the next stage, they seek to empower inclusive cultures.

An example of this is their “Culture as Offense” program where they invited a panel of young employees to share their own perspectives and experiences with senior leadership. The last stage that Nike uses to promote this culture is that they inspire to ignite innovation. They do this by designing new and creative models of engagement, that equip leaders and teams with the necessary tools to create a culture of openness and innovation, “where new perspectives and ideas are invited, heard, and considered”.

Nike addresses that there are many other factors that go into making a successful culture. Some of these items include team composition, manager excellence, education, and awareness programs. Nike also shows the importance of a strong culture by introducing a position called the Vice President of Diversity and Inclusion who reports directly to the CEO. The Vice President of Diversity and Inclusion helps coach the employees and looks for areas to develop the internal diversity assessment and measurements.

This is an important step that Nike has taken to get top management involved with the processes of developing and coaching because the tone at the top has been shown to greatly impact the implementation process. When top managers are on board and show interest, the implementation usually is improved. To help promote the culture, to further enhance a strong culture, successful employees receive a good rewards and benefits plan that provides employees with the opportunity to stay fit, and to ensure the wellness of their families, which will further help to create a positive working environment.

Nike also invests in their leaders, by providing learning and development opportunities that teach managers how to amplify their employees’ talent, energy, and capabilities. This education has allowed for more knowledgeable staff which has sanctioned for enhanced direction in their culture.

Competitor

Looking at the strategies that Nike has developed in order to promote their culture, it looks like they are implementing a strong culture pointed in the right direction. Looking at a close competitor to Nike, Adidas, it can be seen that they have a similar culture that they are trying to implement.

They promote innovation through the company, even so much so that everyone in the Adidas Group is responsible for driving innovation, requiring all areas of the Group to generate at least one new meaningful innovative improvement per year. From this is can be seen that Adidas is taking the innovation strategy one step further than Nike, not only encouraging team members to be innovative but actually requiring them to be. We see this as an improved strategy over Nike’s as this will help to get more employees involved and will help to build a more robust team.

Adidas' corporate culture is surrounded by “performance, passion, integrity, and diversity by creating a work environment that stimulates innovation, team spirit, and achievement based on strong leadership and employee engagement”. Adidas' culture is very similar to Nike’s; this would make it seem that Nike’s culture alone wouldn’t be able to create a competitive advantage over Adidas, at its current stature.

Ethical Values

In the past, Nike’s ethical values have been called into question by the decision to use “sweatshop labor” in third-world countries used to manufacture their products.

When Nike began working with suppliers in Asia they were driven by a desire to find the lowest cost and they believed that as long as they were providing jobs to people that they were doing enough to be socially responsible. However, this all changed in the late 1990s when the western world began to learn of the conditions by which the workers for forced to operate. Nike was operating in countries where workers’ basic rights were being denied and human rights violations were commonplace. Nike took no responsibility for the actions of their sub-contractors and claimed that the suppliers’ actions were none of their concern.

After some serious campaigning around the globe led to a direct hit to their bottom line and profits dropped by as much as 40%, they knew that they would have to make some sweeping changes in order to rebuild the brand and recapture the trust of their consumers. They now operate with an openness and transparency that would be unheard of 20 years ago. Today Nike has a code of ethics for all of its employees called ‘Inside the Lines. ’ This code sets out the standards that employees are expected to follow and includes a range of topics on employee activity, ethical behavior, product safety, and legal compliance.

They also have a Code of Conduct which addresses contractors that manufacture Nike-branded products. It directs them to respect the rights of their employees and to provide them with a safe and healthy workplace. After the international uproar over the way Nike and other companies were operating, some of Nike’s competitors took strides to also improve conditions both internally and externally within their own forms. Adidas, one of Nike’s main competitors, implemented a code of conduct in 2006 which has been applicable in all regions and business areas in which they operate.

Compliance with the law and legal system is the most important principle outlined in the code, and they also set out policies that aim to protect the human rights of all individuals.

Decision-Making Processes

An organization's decision-making abilities will determine its performance. Companies that can make better decisions and translate them into action faster will nearly always do better than their competitors. For a long time, Nike relied heavily on their matrix structure; one in which they had footwear, apparel, and equipment on one dimension, and geographic areas on the other.

However, in 2007 Nike added a holistic focus to their seven core product focuses. Many people at Nike welcomed this change as they knew it would bring them closer to their customers but they also were unsure as to who would be making the key decisions now and who would be responsible for implementing them. To help answer these questions Nike used an approach where team members were involved and employees were empowered to come up with solutions to this problem. The team members identified 10 major decision areas, such as category selection, budgeting and targeting, and channel and sales strategy.

They then came up with 33 key decisions under the ten headings. Team members used surveys to get broad input into all 33 critical decisions, followed by detailed interviews to gain more insight into a few. Once these had been done the managers at Nike formed workshops where they clarified how specific decisions should be made in the new matrix. One of the changes they came up with was to co-locate teams, making it easier for them to collaborate and respond to opportunities that arise.

It is clear that for an organization such as Nike to be competitive and stay ahead of the game they have chosen to take on a structure where the team managers and players are given the authority to make key decisions that will allow them to quickly respond to the ever-changing landscape in which they operate. Under the guidance of the CEO, the team members in each of the categories use their specific knowledge and skill to contribute to the overall betterment of the company.

Nike Power conflicts and politics

Conflict

Nike has faced a major controversy related to poor working conditions for centuries in third-world countries such as China, Vietnam, South Korea, Taiwan, and even in the United States. These accusations lead to a drop in sales and portrayed Nike's reputation as a company that exploits their workers and does not provide basic wages in order to increase its own profits. In order to improve conditions laws were put in place for all factories worldwide to adhere to (Wilsey n. d. ). The first change they made was getting rid of a toxic adhesive called which was causing harmful effects to the health of the workers due to poisonous fumes it was releasing. Nike replaced this adhesive with a water-based one which causes no side effects. Nike increased the minimum age to work for footwear factories to 18 and the apparel and equipment factory age to 16. Education programs were being offered in the factories including middle and high school equivalency for all workers. These classes would be offered while workers had time off and the factories would then increase the wages of the workers if the programs are completed.

Power

The top three executives of Nike are the CEO Mark Parker, the Chairman of the Board of Directors Philip Knight, and the President of the Nike Brand Charlie Denson. Mark Parker is responsible for product research design and development, marketing, and brand management. Philip Knight is responsible for combining his ideas with others and has the power to implement such ideas in the best interest of the company and the shareholders. Charlie Denson has expertise in athletic consumer products which has allowed him to help develop Nike to become one of the world’s largest brands.

The top three executives have a lot of power and a major influence on the company. Since the company is set up In a matrix structure power has been divided among the different departments. Department managers have the power to make decisions with the independence of the CEO.

Politics

Nike has set up a political action committee that supports the Central American – Dominican Republic Free Trade Agreement. Nike believes that this agreement will boost the economies in which they operate. This is done by eliminating tariffs and loosening trade restrictions with Central American countries.

Summary of Key Findings

There are a number of key organizational variables that Nike utilizes to position itself to succeed going forward. The primary variable will be their ability to grow using innovation. In the past, Nike has shown that by using their superior innovative techniques and ideas it positions at the forefront of its industry. Nike has begun to focus on sustainability as a key variable in their innovation portfolio. They are an industry leader in defining new ways to source materials and using environmentally friendly practices in an efficient manner.

Nike currently holds a large market share which has allowed them to secure a strong financial portfolio. This portfolio will only help with their future growth, whether it is through acquisitions or product innovation. Conversely, they need to focus on some of their weaknesses. In the past, Nike has had issues with public relations in particular “Sweat-Shop” labor. Although they have taken great strides since the late 1990s such practices are still commonplace in the countries in which it operates. They need to be diligent and stay clear of suppliers using unethical practices.

Nike currently has a solid financial state but they still need to be cognizant of the current economic environment surrounding them. They need to make smart business decisions in order to maintain and expand their current market position. In summary, Nike appears to be a very well-positioned company for years to come. Utilizing their organizational design and the specialized teams that they have established with their staff members we do not foresee any difficulties which Nike could not face, ahead.

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