What Sells a Swoosh?

One thing that sticks out to me about the Nike case is how it relates to globalization and business strategy. Nike has been very successful at maximizing profits through essentially becoming a brand manager. While Nike sells a product it does not own the assets to produce said product. From a business standpoint this makes sense in the fact that a dedicated manufacturing company can deliver the product at a lower cost than Nike could by itself. The flipside, as we can see in the case, is that the company loses a degree of oversight over the process, which can have serious consequences down the road.

The question about this strategy by extension is as follows: does the economic benefit outweigh the costs of a loss of synergy and oversight for the company? I believe that the manufacturing process, while important for Nike, does not create the value of the product. What creates the value of a Nike product is far and away its marketing and its technology. People buy a Nike product because of its design, its “coolness,” and its performance. I believe that in the case of Nike, they were not wrong to outsource manufacturing. I believe what they did wrong was not commit full due diligence in which factories made the shoes, and what working conditions there were like. Even if they had produced in the countries they chose, but followed the law they would not have this problem. I do not believe that there is anything morally wrong with a person in Indonesia making less than a worker in America, assuming that they are voluntarily doing the work. This simply means that there is a meeting of supply and demand in the marketplace for labor. In the end, if Nike had taken more steps to ensure factory conditions were acceptable then they would still have a competitive advantage, but would have been able to avoid the anti-Nike sentiment of the late 90’s.

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