Nikes Competitive Advantages: Strategies in China

Nikes Competitive Advantages Strategies in ChinaWith widely globoseization movement, managers in MNCs stool to be continu totallyy involved into the disputes that mainly include combative and collaborative challenge. Facing the challenges, Nike has always been a stretch forthing sports merchandise organization. Thus, it is meaningful to analyze Nikes globose success which will benefit from obtaining relevant inter issue management issues.The mien of this project is to reveal Nikes hawkish receiptss in world(prenominal) trade and especially focus on participation strategies in Chinese commercialize. In fix to achieve practical guidance, some theoretical tools will be adopted.The project will firstly introduce a literature review which provides the underpinning and explanation of these analysis tools. In the following, Nike company analysis will be discussed into four aspects. The first aspect will examine the theme furrow surroundings of Nike in the USA by using ost iarys diamond. In the second and third section, bartlett and Ghoshals theory will be used to analyze both the agonistical challenge and the collaborative challenge of Nike in China. Hofstede culture dimensions will be adopted to analyze the cultural challenge Nike is confronted. Finally, it comes to the conclusion.1.2 Company overview by an investiture of $500 each by Phil Knight and Bill Bowerman, the company ( whence called Blue Ribbon SportsBLS) was founded in 1964. It has evolved from an biter and distributor of running lieu to the world biggest leader of gymnastic footwear.Our business regulate today is fundamentally the same as our model in 1964.It is that we invest our m oney in design, developing, marting and sales and then contract with some other companies to manufacture our products. Knight genuine Nikes business model when he was at drop deading Stanford avocation School in the early 1960s.He realized that most leading footwear companieswere still producing t heir own horseshoes in high-cost countries wish well the United States and Ger oft while he US consumer appliance and electronic markets, were starting to be taken over by lower-cost, high-quality Japanese producers. Knight debated that Blue Ribbon Sports could sell in a lower wrong by distributing its production to Japanese producers to break into this market. So Blue Ribbon Sports began to import high-tech sports shoes from Onitsuka Tiger of Japan. BLS began to have its own branches of shoes, as sales increased to close $2 million in the early 1970s. The company officially changed its name to Nike, Inc. in 1978.At the beginning time Nike developed a strong working relationship with two Japanese shoe manufacturers, Nippon Rubber and Nihon-Koyo, but as a combination of a tighter labor market, the strike of the first Oil. Crisis on Japans economy, and a shift in the dollar/yen shift rate in the 1970s, Nike began to search for other producers. Nike bringed its own shoe fact ories in Maine and New Hampshire to develop a reliable and high-quality production to supply its growing domestic market during these same years. The company befaces began to contact potential suppliers in Korea, Thailand, China and Taiwan. As costs act to increase in both Japan and the United States, by the early 1980s, and the Korean government created many incentives to develop Koreas footwear industry, Nike closed its US factories and sourced almost all of its production from Asia.In 1982, 86% of Nikes athletic footwear came from Korea and Taiwan.However, costs as well began to increase in the two countries. Nike had to urge its suppliers to re-locate search for other owner-cost countries to relocate their ope rations. Then the company opened up their factories in Indonesia, China and Vietnam. Nike was able to help its lead vendors establish an extensive network of footwear factories through proscribed S emergeheast Asia by guaranteeing a number of important orders and by pla cing Nike employees at these new factories.At the present, Nikes products be manufactured in more(prenominal) than 700 factories, employing over 500,000 workers in 51 countries of which wholly 22658 ar directs employees, the majority working in the United States. Over the years, Nike has broadened its product range. Whereas in 1980, Nike exchange 175 polar directions of shoes, it offered many various styles in its spring collection. The company has also focused on app arel and sports equipment and expanded its sales to Europe, Latin America and Asia. Last year, Nike made intimately $9.5 billion in revenues, of which 59% came from footwear sales and 29% from apparel.2 Literature Review2.1 Porters national competitive expediencyMichael Porter (1990) meticulously introduced a model that intended to answer the questions, why do some nations keep an eye on and others fail in international competition? and why some industries within nations are more competitive than others are in his book The Competitive Advantage of Nations. Porter (1990) states that the sources of competitive proceeds can be found in the national diamond, comprising four major economic attributes factors conditions, demand conditions, patronageing industries and firm dodge and structure. Porter believed that the four elements have bilateral impacts, hammering a diamond system. Besides, at that place are two variables the presidential condition place and opportunities. The opportunity is beyond control, and the impact of government policies can non be ignored. All the determinants lie in a diagram as follow.Factor conditionsFactor conditions can be categorized into two forms Home-Grown resources and extremely specialized resources. The first one referred to the original resources from one nation. And the latter one pointed out that a outlandish creates its own important factors such as skilled resources and technological base. In the actual competition, Porter (1990) say that sufficient in natural resources or low cost factors often result in ineffective allocation of resources. By contraries, local insufficient in factors of production could lead to knowledgeableness. Also, resource constraints may embolden development of substitute capabilities. For example, Japans relative lack of raw materials has stimulated miniaturization and zero-defect manufacturing (Grant, 1991).Demand conditionsAccording to Porter (1990), demand conditions in the domestic market provide the primary driver of growth, inception and quality improvement. A strong domestic market could be seen as stimulation to the firm from being a startup to a slightly expanded and bigger organization. For example, the worlds famous automobile companies like Mercedes, BMW, and Porsche in the case of German have dominated the world when it comes to the high-performance segment of the world automobile industry. However, in German, automobiles with a cheaper price in the market have little com petitive advantage. The reasons could be attributed to the demand conditions in domestic market. The Germany market traditionally demanded a high level of engineering performance. Also, the transport infrastructure of Germany such as Autobahns does tend to favor high-performance automobiles.Related and supporting industriesThe third determinant of national advantage is the presence in the nation of related and supporting industries that are inter nationwide competitive. Based on Porters view, when local supporting industries are competitive, related company will enjoy more cost effective and innovative inputs. Secondly, this effect is beef up when the suppliers themselves are strong global competitors.Firm dodging, structure, and rivalryInevitably, the strategies and the structure of the firms play a key position to influence the national performance in grouchy sectors. Also, competition indeed has a great impact on driving innovation and the subsequent up gradation of competiti ve advantage. Obviously, domestic competition is more direct compared with the impact of irrelevant competitors. So the stimulus provided by home national competition is higher in terms of innovation and efficiency. As an example, in the Japanese electronic industry, at that place are many local competitors (Panasonic, Sony, Toshiba, Mitsubishi and so on) providing intense competition in the domestic market, as well as the foreign markets in which they compete.Governments roleDespite the impact from Government policies and regulations do non belongs to the major determinant of national advantage, to some extent, they play an important role on influencing the national system. Porter (1990) pointed out Governments proper role is as a catalyst and challenger. At first, government can provide a basic surroundings for industry development, since it could invest on infrastructure development, opening up neat channels, training information desegregation and so on. Also, governments c an create new opportunities and pressures through intervene activity. In addition, governmental sourcing could enlarge product demand. What is most important, the government could ensure that the domestic market is under lively competition, avoiding Trust status.OpportunitiesOpportunities can not be met rectifiable, and one opportunity could influence the four elements to change. Porter (1990) pointed out that, in terms of the opening development, at that place are several circumstances when chances are brought the basis of scientific and technological inventions, fault rising in traditional technologies, a sudden increase the cost of production caused by external factors (such as the oil crisis), financial markets or major changes in the exchange rate, market demand surge, the governments major polity decisions and war. In fact, the opportunity is a two-way. It is quite often that new competitors gain an advantage accompanying with an advantage concession of other competitors. And only when enterprise could continually meet the new needs of manufacturers, opportunities will be developed.Flaws in Porters diamondAlthough Porters model is widely used, it also has a number of critics. Firstly, Dunning (1993) pointed out that there is postcode new in Porters diamond analysis. Dunning commented that a countrys competitive advantages were under the impact of globalization of production and markets. He also pointed out that value generating assets of a country has been taking the form of created assets like human capital instead of the natural assets like land and untrained labor. Thus, Dunning considered that Porters diamond of national competitive advantages was required to be transnational since widespread globalization of the world economy. Secondly, Rugman and DCrusz (1993) stated that Porters diamond underestimated the importance of foreign investment. This model could not adequately explain the competitive advantages of developing countries which heavily depend on foreign direct investment. (Lee, 1998) And they also commented that this model is incomplete for small political economy which are not parts of the trial nations and is only applicable to triad nations. Thus, they thought Porter only thought over the exports and outward FDI of domestic industries and further pretermit the sales abroad by foreign subsidiaries. Whats more, Bosh and Proijen (1992) stated that Porter paid too much attention on the importance of culture while evaluating the international competitive advantages. Meanwhile, Ball and McCulloch (1999) implied that this models evidence is anecdotal without empirical evidence. And it is an ex-post model and has no predictive powers since the number of variables lead to weaken any predictions, in particular inclusion of chance into the equation.To sum up, Porters diamond still is a useful tool to examine competitive advantages although it has insufficient application.2.2 Competitive challengeMNEs need to create and sustain competitive advantages to overwhelm the competitive challenges from the global competitors. at that place are a great many of varied prescriptions about selecting strategies to develop advantages.It is argued that one of the undefeated strategies is to produce products standardized and sell them passim the market via the same ways (Levitt 1983). On the contrary, some scholars notify that, rather than single product, a relatively broader product portfolio with products diversity can enable the share of investment (Hamel and Prahalad 1985). In addition, Porter et al (1982) indicted that, to implement global strategy effectively, it needs a number of approaches including work oning economics of shell via global volume and managing interdependently to achieve synergies across different activities. Two basic types of competitive advantage which are lower cost and differentiation are suggested by Porter (1990) as well. Porter points out that, to achieve competitive advantag e, it is necessary for a firm to provide customers with determine more efficiently (low cost) or to create greater values and charge a premium price in a more special way (differentiation) than its rivals.By contrary of the above statements, to build up competitive advantage sustainably, MNEs are suggested to achieve three strategic documentarys which are global efficiency, multinational flexibility and universal learning ( bartlett et al. 2008). However, it challenges almost all MNEs to achieve all of these objectives at the same time. Efficiency can be considered as the ratio of the value of a firms output to the value of its input while Flexibility inwardness the the ability of a company to manage the risks and exploit the opportunities that arise from the volatility of a global environment (Bartlett et al., 2008, p.200). The last objective refers to the ability of a firm to learn from its exposure and opportunities internationally, and to apply the learning in a global enviro nment.For the purpose of grammatical construction up global competitive advantage, it is suggested three fundamental tools exploiting differences in sources in sourcing and market potential across countries, exploiting economies of scope and exploiting economies of scale (Bartlett et al. 2008, p.201). Factors which may lead to competitive advantage are indicated by every goals-means intersection indicates (Bartlett et al., 2008). Table 1 shows the varied goals and means to achieve competitive advantage throughout the world.Table 1 Worldwide Advantage Goals and MeansStrategicObjectivesSources of Competitive AdvantageNational DifferencesScale Economies orbit EconomiesAchieving efficiency in current trading operationsBenefiting from differences in facto costs-wages and cost of capitalExpanding and exploiting potential scale economies in each activitySharing of investments and costs across markets and businessManaging risks through multinational flexibilityManaging different kinds of risks arising from market-or policy-induced changes in comparative advantages of different countriesBalancing scale with strategic and operational flexibilityPortfolio diversification of risks and beingness of options and side betsInnovation, teaming, and adaptationLearning from societal differences in organizational and managerial processes and systemsBenefiting from experience- cost reduction and innovationShared learning across organizational components in different products, markets, or businessesSource Bartlett et al. (2008), p203 at that place are four strategies which can enable exploiting competitive advantage through different goal-means combinations (Bartlett et al., 2008)Multinational strategy achieves most strategic goals by emphasizing national differences. The firms which have adopted this strategy tend to operate business based on local environment. They are flexible and responsive to local environment, but there is a lack of capability to learn globally within these firms owing to the fact that almost all national units operate independently.Based on the global environment, international companies apply all the approaches to create and exploit innovations. This approach is helpful to strengthen the ability of developing innovations and leveraging knowledge on a worldwide basis however it is challenged by the problem of deficiencies in both respects of efficiency and flexibility.All the means are applied by MNEs which adopt global strategy to realize global efficiency. However, flexibility and worldwide learning this kind of approach may be negatively influenced by this kind of approach. What is more, high sourcing risks may be resulted from the focus of activities of achieving scale economies.The three traditional strategies discussed above respectively possess unique assumptions about how to build up worldwide competitive advantage. Multinational companies emphasize differentiation, international companies focus on innovations, and global co mpanies concentrate on building the best-cost position. It is indicated that a global industry can be more prospered than a multinational one in some industries (Yip 1989). Additionally, Yip (1989) also suggested that a balance amongst overglobalizing and underglobalizing can be found in most successful strategies. Nevertheless, Bartlett et al. (2008) believed that the best strategy should be consisted of syntheses of all these approaches. It suggests that MNEs should adopt the transnational strategies which focus on exploiting each and every goal-means combination to develop layers of competitive advantage by exploiting efficiency, flexibility, and learning simultaneously (Bartlett et al., 2008). Strategic orientation and configuration of assets and capabilities vary with the four types of companies, which is shown by table 2.Table 2 Strategic Orientation and Configuration of Assets and Capabilities in Multinational, outside(a), Global, and Transnational CompaniesMultinationalIn ternationalGlobalTransnationalStrategicorientationBuilding flexibility to respond to national differences through strong, resourceful, and entrepreneurial national operationsExploiting parent-company knowledge, capabilities through worldwide diffusion and adaptationBuilding cost advantages through centralized, global-scaleoperationsDeveloping global efficiency flexibility, worldwide learning capabilitysimultaneouslyConfigurationOf assets and capabilitiesDecentralized and nationally self-sufficientSources of core competencies centralized, others decentralizedCentralized and globally scaledDispersed, interdependent, and specializedSource Bartlett et al (2008), p2062.3 Collaborative challengeA number of organizations tend to cooperate with other parties such as their suppliers, distributors and competitors, when they believe that it is difficult to develop and enhance the global competitive advantages in the increasingly complex global environment (Bartlett et al. 2008). The strategic alliance is viewed as the most important collaborative strategy, which is to set the cooperative relationships between MNEs and their rivals (Bartlett et al. 2008). Bartlett (2008) stated that strategic alliances had become central components of most MNE strategiesThe strategic alliances is divided into two categories namely scale alliances and link alliances (Daniels et al., 2007). Moreover, Griffin and Pustay (2005) identified two broad types of the strategic alliance, which includes the comprehensive and functional alliance. The latter one includes production alliance, marketing alliances, financial alliances and RD alliances. The alliances assist of some types such as cooperation agreement, franchising and joint venture (Bartlett et al., 2008). There are some differences between the traditional joint venture and the new forms of strategic alliances. The traditional form seems to be used for a senior multinational firm in an industrialized country and a junior local partner in a less-developed or less-industrialized country. The new strategic alliances tend to servicing the organization in industrialized countries. At the same time, the modern alliances concentrate on the development and innovation of new products and technologies rather than the distribution of existing ones. What is more, the present-day strategic alliances seem not to survive for a long time to contribute for the companies.There are some main reasons that the companies need to set the collaborative arrangement. Daniels et al. (2007) identified two groups of motivations. In the first place, the companies need to consider the general reasons, which involve spread and nullify costs, specialize in competencies, avoid or counter competition, secure vertical and horizontal links, and learn from other companies. The second one is the specific reasons, including gain location-specific assets, overcome legal constraints, diversify geographically, and minimize exposure in risky environments. How ever, Bartlett et al. (2008) outlined that there are five significant motivated issues to support the building of strategic alliances technology exchange, global competition, industry convergence, economies of scale and reduction of risk, and alliances as an alternative to merger.Bartlett et al. (2008) also identified the risks and costs of quislingism. The collaborative alliances could create the opportunities for one or both cooperators to enhance the competitive advantages mitigate than other, and there is the risk that collaborating with a competitor might be a precursor to a takeover by one of the final (Bartlett et al. 2008). Therefore, the organizations need to have the capability to manage the cooperated relationship in order to reduce the collaborative risks. There are three dominating challenges namely managing the boundary, managing knowledge flows, and providing strategic directions. However, there are some principles set to estimate which companies benefit most from competitive collaborations. These principles include as collaboration is competition in a different form harmony is not the most important nib of success cooperation has limits learning from partners is paramount.2.4 Cultural challengeUnderstanding culture differences and diversifications is vital for MNCs managers in international business and foreign affairs. In this context, the major task for MNCs is to adapt different culture in different countries effectively and efficiently.2.4.1 Hofstedes cultural dimensionsHofstede (1980) created five dimensions to distinct countries with their respective culture backgrounds, which are individualism-Collectivism, Power distance, Uncertainty shunning, Masculinity-Femininity and Long term-Short term orientation.Power distancePower distance is the extent to which less powerful members of institutions and organizations accept that power distributed unevenly (Hofstede and Bond, 1984). leaders from high power distance countries, for example, B elgium and France, are more likely to enquire the low-level employees to obey their orders blindly. What the subordinates think or achieve for the company is not important. So the authoritarian and paternalistic leadership style could be accepted in these countries. On the contrary, low power distance countries for instance, the US and UK, leaders from these countries should be resourceful democrat. And subordinates expect to be consulted and their advices to be taken seriously. They also consider hierarchy in organizations as exploitation (Yates, 2008). Therefore in these countries participative leadership style could be useful.Uncertainty AvoidanceUncertainty avoidance is the extent to which people feel threatened by ambiguous situations and have created beliefs and institutions that try to avoid this (Hofstede, 1980). In high uncertainty avoidance countries, such as Belgium and Japan, leaders generally do not like uncertainties. They trust on experts and their knowledge, institu te many rules to fulfill the high need for security and nearly have no tolerant for deviant ideas (Hodgetts, 2006). Thus, authoritarian and paternalistic leadership style could work in these countries.Conversely, in low uncertainty avoidance countries such as The United States and The United Kingdom, leaders are more of risk takers. fewer rules are set in the organizations and deviant ideas are to some extent welcomed by the leaders. Therefore, participative leadership style could be popular in these countries.MasculinityMasculinity is defined by Hofstede (1980) to force a situation in which the dominant values in society are success, money, and things. The other side versus the masculinity is femininity which is also defined by Hofstede (1980) as, a situation in which the dominant values in society are caring for others and the quality of life. Japan has a highly masculinity orientation. (Hodgetts et al, 2006). Leaders with this kind of cultural background are expected to be decis ive, firm, assertive, aggressive and competitive culture heroes. Few of them are female.On the contrary, Russia and most of the socialist nations scores low for this dimension, such as China and France (Brandley, 1999). To support the needs of the workers and their families is the most important role of the manager with in these countries. They are employees like others.IndividualismIndividualism is the tendency of people to look after themselves and their immediate family only. (Hodgetts et al, 2006) The opposite side versus individualism is socialism which is the tendency of people to belong to groups or corporals and to look after each other in exchange for loyalty (Hodgetts et al, 2006). Most high individualism countries are wealthy countries with high GNP. However, Japan is an exception, Leaders from fabianism countries pays more attention on work in a union. Japan is a typical collective country. For example, the president of Sony Corporation, Akio Morita once said his firm likes a ship each employee shares the same fate. All provide would suffer if one went wrong (Lee, 1982).In the job, individualism focuses on individuals. As an example, the USA leaders ordinarily appraise the performance of the substance individually, because it was found by Earleys study (1989) that, American performed well when they are told their performance would be measured individually.Long-term orientationLeaders from LTO countries are persistent, ordering relationships by status and discover this order, thrift and having a sense of shame. In the contrast, STO countries leaders are with personal steadiness and stability and give-and-take of greetings, favors, and gifts (Hofstede, 1991). Therefore, authoritarian and paternalistic leadership style could increase the efficiency of management in the LTO countries. On the contrast Participative leadership style could be efficacious in STO countries.In the background of global economics, multinational enterprises are growing rapidly. It has become a common phenomenon that a manager enter into a new countries to lead a group of people with diverse cultural background. Nike is one typical MNC among them. In the following parts, this prove will use the Nike case as an example which manifests that different countries with their respective culture backgrounds require different leadership styles.2.4.3 CriticismHofstede derived his data from questionnaires that were distributed among employees of IBM. However, this theory may hide certain dimensions, or values may be wrongly derived because of certain situational influences on the respondents. As a result, Hofstedes seek has been criticized by other theorists. Firstly, Tayeb (1996) pointed out that this research was based on attitude-survey questionnaire which could not effectively contrive underlying values of culture. Secondly, IBM as the only sample is not representative. (Robinson, 1983) This is because IBM mainly is comprised of middle-class employees and it has a powerful US-derived organization culture, namely, the respondents may not reflect local national cultures. Thirdly, Hofstede and his associates come from Europe and America and may have cultural bias. (Roberts and Boyacigiller, 1984) Fourthly, Mead (1994) stated that Hofstedes research has been outdated whose research was conducted between 1967 and 1973. Young people have being influenced deeply by the development of globalization and they tend to share a common set of values recently. Generally speaking, despite Hofstedes model has many limitations, it is still a simple and easily comprehensible model to research nations cultural differences.3 Company analysis3.1 Sports products Industry relate to American National Diamond3.1.1 Factor ConditionsFrom the factor conditions view, there is a good home base for sports products companies in US.Firstly,