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Nike's outsourcing strategy

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  1. Introduction
  2. Outsourcing at Nike
    1. Its business
    2. Characteristics of its outsourcing strategies
    3. How does Nike manage outsourcing?
  3. Outsourcing and its risks
    1. Advantages
    2. Limitations
  4. Conclusions

Many large companies and SME's are engaging in outsourcing and for various reasons like economies of scale, reduced costs, improved performance, focus on core activity etc. This economic strategy has been meeting with growing success. Outsourcing or externalization of the process means the transfer of all or part of a business function to an external partner. This strategy works exceedingly well for the flexibility and adaptability of enterprises.

One can also say that outsourcing is an agreement between an organization and another entity for the assumption of responsibility, operation, management and continuous improvement. A company can outsource entire functions like the organization (IT, accounting, marketing, etc.), infrastructure (information systems, security, telecommunications networks, etc.) and business processes (exploitation of raw materials, industrial production, storage, logistics, transport, etc).

In the area of production, the textile and garment industry was the first to experience this phenomenon in the 1970's. Nike was the first company in its field to outsource its activities. At present Nike sponsors the greatest athletes in the world and also covers major events.

Nike named after the Greek Goddess of Victory, was created by Phil Knight as a small business in Beaverton, Oregon in 1968. The company employs 22,700 workers and the production is done by sub contractors. Nike has around one million workers employed in 800 outsourced companies spread over 50 countries around the world.

Nike's success is based on an important strategic innovation, to subcontract the complete manufacturing from the start. This process of outsourcing led to the appearance of the first true network firm without factories.

Nike is a company that does not produce anything. The company mainly focuses on concept and advertising and brand management. The company is relatively small compared to its sales and worldwide volume of production.

This document will give you an insight into what benefits Nike from outsourcing, what is outsourced, how and where and its limitations.

Tags: Nike the brand; Nike's strategy in outsourcing; benefits and limitations of outsourcing

[...] The international business is also reflected in the establishment of centers for the management and coordination in Canada, Europe and Asia Pacific Characteristics of its outsourcing Regarding production, the corporate structure "without factories" should not be misled since it is based on mobilizing worldwide a very large network of sub-contracting firms that support material production. In fact it outsources its production in developing countries. Beyond the profits and the financial aspect, Nike is used worldwide and especially in Asia (approximately 90% of its production). [...]

[...] Finally, Nike's business model remains fragile because its success depends fundamentally on the prestige of a brand and the identification of millions of teenagers in the proposed model. This involves spending huge sums on advertising. In this context, the smallest grain of sand can be effective when the wild globalization of the textile industry for decades 1970-2000 was gradually challenged by the campaigns of NGOs and trade unions. Several campaigns against Nike on working conditions of its suppliers have been launched. [...]

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