Essay on Case Study : Nike 's Core Busness Model

1046 Words Feb 6th, 2016 5 Pages
University of the People
Multinational Management
Unit 1 Written Assignment

Case study: Nike

Explain how Nike came to that situation through its expansion strategy.

Nike 's core busness model was developed by its founder Phil Knight who observing the market noticed that high tech low cost footwear may gain significant market share just as the Japaneese technical and automotive industry did. This observation proved to be right. The constant price/cost monitoring eventually led the company close its factories in USA and seek for more cost effective production sites. Third world countries seemed as the perfect place for the new fabrics due to very low work force costs. For example, a daily fee for a worker in Indonesia during 90 's was less than a dollar which means they might earn about 20 usd per month. This was a tempting opportunity for a footwear company. In the early 90 's Nike had six production sites in Indonesia employing approximately 25000 workers producing six million pair of shoes per year. (Locke, 2002) With a simple math it meant 1 usd cost of labor for one pair of sneakers. This business so called opportunity was not sustainable. Eventually it leaked and become international news and not a good news to Nike.

• Explain what the positive and negative impacts of this strategy were.

The positive side of the Nike 's international expansion was its market expansion and gaining significant market share. The Nike shareholders could note income record. Also the…

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