In-class Test 1
This in-class test 1 will constitute 20% of the overall module mark
Instructions:
You must answer only ONE set of questions in total.
Exam paper timing
We recommend that you try and treat this, as far as possible, as a conventional
exam. This paper is designed so that students should be able to complete it in 2
hours. However, we accept that you may choose to spend longer.
Students for whom special exam arrangements apply may take additional time
and breaks as required.
You can submit your paper at any point during the 23-hour window available. We
strongly recommend that you do not leave it to the last minute to submit.
Word limits
Word limits are maximum word limits. Students are encouraged to write succinctly.
A high mark can be achieved without reaching the maximum word limit.
The marker is not obliged to read beyond the maximum word limit, and a mark will
be awarded based on the answer given up to the maximum word limit.
Word limits do not include text in tables, charts, diagrams, graphs, and references.
Please provide a statement of word count at the end of each answer.
Referencing
You can use external sources for further information to support your answers (i.e.,
not part of the reading material assigned in the syllabus). However, using external
sources is optional. Should you use external sources, these should be properly
referenced (e.g., with appropriate URLs where appropriate).
When referring to material from the textbook, lectures, or existing reading material,
there is no need to reference it.
Please note that references do not count towards the word count.
Please also note that repeating large pieces of factual information that are already in
the case should be avoided unless you are using them to justify a course of action.
Case study
Nike: Global Operation and Production Strategy
Nike’s principal business activity is the design, development, and worldwide
marketing and selling of athletic footwear, apparel, equipment, accessories, and
services. Nike is the largest seller of athletic footwear and apparel in the world. Nike
sells its products through Nike-owned retail stores and through digital platforms, to
retail accounts and a mix of independent distributors, licensees, and sales
representatives in virtually all countries around the world. Virtually all of its products
are manufactured by independent contractors. Nearly all footwear and apparel
products are produced outside the United States, while equipment products are
produced both in the United States and abroad.
One of the rules of international production strategy is: manufacture the highestquality product and the world is likely to beat a path to your door. A number of firms
help illustrate this rule. One is Nike, the sports shoe and clothing producer. Making a
wide variety of high-quality shoes, Nike catalogues more than 800 models for use in
approximately 25 sports. In 1999, it had 35 percent of the world’s market for training
shoes (and 45 percent in the United States) and these relative proportions have
surprisingly not changed much. In 2017, its sales were $34.35 billion, and it
employed 73,100 employees. In an effort to keep ahead of the competition, Nike
updates each shoe at least every six months. Most of these ideas are generated by
Nike’s Research and development (R&D) centre in Beaverton, near Portland,
Oregon, where physiologists and mechanical engineers study the stresses on an
athlete’s feet and collaborate with stylists on new shoe ideas.
Although Nike sells its products in over 140 countries and produces in more than 33
countries, it is really a triad multinational enterprise (MNE). In 2018, 43 percent of
Nike’s revenue was generated in the United States, 27 percent from Europe, Middle
East and Africa, and 30 percent from Asia Pacific and Latin America. Sales in the
United States including US sales of other businesses accounted for approximately
43 percent of total revenues, which is remarkably consistent compared to 43 percent
in 2008. It has maintained a steady share of the global market and has remained
focused on its core home market.
Technical innovation and quality control in the design and manufacturing process of
footwear, apparel, and athletic equipment is essential to the commercial success of
Nike’s products. R&D plays a key role in technical innovation. Nike relies upon
specialists in the fields of biomechanics, chemistry,
exercise physiology,
engineering, industrial design, sustainability, and related fields, as well as research
committees and advisory boards made up of athletes, coaches, trainers, equipment
managers, orthopedists, podiatrists, and other experts to develop and test cuttingedge performance products.
Nike’s high-quality production is matched by superb marketing skills. The world
might be beating a path to Nike’s door, but the company makes sure the world
knows where it is. It has been reported that Nike spends 11 percent of its revenue on
marketing, and its ‘swoosh’ brand is recognised the world over. The company
continues to use sports stars to endorse its products and is responsible for some of
the biggest athlete endorsement deals of all time, including sponsorship of Michael
Jordan and LeBron James. A deal for James in 2015 was worth an estimated $30
million but brought in over $340 million for Nike through the launch of a line of
branded sneakers. Besides American stars like Tiger Woods, it has used European
soccer players, such as Cristiano Ronaldo, and cricket players in India. The idea is: if
you can make the ‘cool’ guys wear your products, the rest will follow.
Perhaps the only thing Nike does not like to be remembered for is the bad publicity
around its labour practices in Asia. Nike has outsourced all of its production to lowwage areas. By 2018, Nike supplied their goods from 452 factories (124 footwear
factories and 328 apparel factories) and virtually all of Nike footwear was being
produced by contract factories in Vietnam, China, Indonesia, Thailand, and India.
Nike also had manufacturing agreements with independent factories in Argentina,
Brazil, Mexico, and India to manufacture footwear for sales within those countries. In
addition, all its apparel was produced in 33 host countries by independent contract
manufacturers. Most of the apparel production occurred in China, Thailand,
Indonesia, Malaysia, Vietnam, Sri Lanka, Turkey, Cambodia, El Salvador, Mexico,
and Taiwan. And NGOs have criticised the poor working conditions in some of its
Asian factories, from Pakistani children stitching Nike’s soccer balls, to Vietnamese
working in unsafe conditions. NGOs in the Western world started campaigns to
boycott Nike, and demonstrators protested in front of Nike’s stores. Allegations of
long working hours, bad ventilation, and physical abuse of a mostly young female
workforce have raised questions about Nike’s reputation.
Nike’s industry dominance was a main reason for its being severely targeted. Many
of its competitors were found to have the same labour practices but were not
subjected to the same level of criticism. More recently Nike has acknowledged its
corporate responsibility to improve working conditions in its own factories and help
influence its suppliers. However, while Nike requires its suppliers to operate in
compliance with applicable laws and regulations, Nike does not control their
practices. Negative publicity relating to a violation or an alleged violation of policies
or laws by such suppliers could damage its brand image. Social media, which
accelerates and potentially amplifies the scope of negative publicity, can increase
the challenges of responding to negative claims. Adverse publicity about regulatory
or legal action against Nike, or by Nike, could also damage its reputation and brand
image, undermine consumer confidence in Nike and reduce long-term demand for its
products, even if the regulatory or legal action is unfounded or not material to its
operations. If the reputation or image of any of its brands is tarnished or if Nike
receives negative publicity, then its sales, financial condition, and results of
operations could be materially and adversely affected.
Answer only ONE set of questions (Both part 1 and part 2 questions)
Please remember the following:
? Part 1 question (general/conceptual question): There is no need to refer to
the case to answer this question
? Part 2 question (application/integration question): Answers must be based on
the case.
? Think, and plan your answers before writing them. The better organised your
answer, the easier it is for you to demonstrate your understanding, and for us
to evaluate.
? Be clear and succinct. Underline and bold text as needed, and use headings
and sub-headings where necessary. This will also help us to read and
evaluate your answers more efficiently.