Nike And What It Does To Third World Countries :: essays research papers

The Manufacturing Practices of the Footwear Industry Nike vs. the CompetitionThe current manufacturing practices of the sneak industry, in particular companies such as Nike, Reebok, Adidas, Converse, and New Balance, takes place throughout the globe. With the industry experiencing severe competition, and the product requiring intensive labour, firms atomic number 18 facing extreme pressure to add their profit margins through their sourcing practices. The following paper will analyse the sneaker industry, while examining the multitude of viable manufacturing options, and critiquing their current manufacturing structure.Footwear Industry Players, Revenues, Market theatrical roleTo properly review the manufacturing in the footwear industry, it is necessary to first gainan understanding of the dominant leaders in the marketplace. The industry is currentlyexperiencing hyper competition, led by six main firms Nike, Reebok, Adidas, Fila,Converse, and New Balance (see exhibit 1), with nearly $7 billion in revenuesdomestically. Nike is the industry leader, with a 47% market share, followed by Reebok,a distant second at 16%, and Adidas at 6% (see exhibit 2). This category is facingdecreasing demand and the rising popularity of alternative footwear, resulting in morepressure than ever before to achieve high gross margins through effective globalsourcing practices.Manufacturing options     Footwear companies have two basic options in the manufacturing of their products, they tidy sum twain own and operate the factories that produce their products, or subcontract their products out to secondary manufacturers. These facilities can be located either domestically or internationally, and both present a myriad of positives and negatives. Firms that produce domestically benefit from ease of monitoring, skilled workforce, government stability, job creation, and well understood labour rules, while scathe from the relatively high wages required in the U .S. as compared to developing countries. By manufacturing products overseas, in particular in third world economies, tremendous efficiencies are gained in the form of reduced wages, but are countered by the increased difficulty of monitoring the quality of their products and the actual working conditions in the factories. Companies that are vertically integrated, who own and operate the factories where their products are manufactured, are faced with largecapital expenditure requirements and the management of the factories themselves, resulting in lower profit margins. Strategic Outsourcing     In analysing the sneaker industry, we are faced with the question, "What are these firms core competencies?" If manufacturing falls under this umbrella, then firms should look to produce internally. However, the core skills that set these companies apart from thecompetition, are their marketing, distribution, and technological expertise.