Why does nike operate in many countries

I talked about a company that was looking at Poland for manufacturing its baby strollers. They mentioned having looked into Poland for making shoes. I then talked about having worked with company that had its shoes made in Portugal and then eventually had some of its shoes made at a Portuguese-owned factory in Angola.

We talked about being surprised at how many companies still make clothes and shoes in China that probably should have moved that manufacturing out years ago. We discussed how Vietnam is bursting at the seam these days. They talked about how India is a great place for jewelry.

I talked about how we had clients that loved Pakistan for making baseball hats. We then talked about how China made manufacturing easy for SMEs small and medium-sized enterprises and no country even comes close to China on that count.

I gave example after example of companies that had come to one of the international manufacturing lawyers at my firm for legal help with their China manufacturing only to end up manufacturing in another country at lower cost and no tariffs. These country changes happened at our urgings and these discussions nearly always go like this:. Lawyer: Why China for X product? Did you consider Thailand or whatever other country seems to make better sense? Client: I actually wanted to have my X product made in Thailand but I could never figure out how to accomplish that.

But what about Nike? The US sportswear company Nike have had a sizeable number of factories based in China for many years. Although the headquarters is based in Oregon, USA, the company has over shops worldwide, offices across 45 countries and over contract factories with nearly 1 million workers across 50 countries. Nike has been working in China for over 30 years when they started to sub-contract production to overseas factories.

At present there are around factories in China employing , workers. We should not be afraid of other countries, in the long run, but robots.

Well detailed piece and an exciting dynamic in the apparel industry! When companies like Nike first brought manufacturing and supply operations overseas it was in an effort to lower labor costs to increase margins on final products. These elements of the design and supply process today essentially necessitate onshoring [2]. Coupled with the savings from tariffs at their current or elevated levels and the decreased speed to market, onshoring allows Nike to more effectively serve its customers while decreasing the risks associated with global transportation of raw materials, technology, or finished products.

For a company that has such a dubious reputation regarding labor practices to now be pressured to bring these same jobs back to the U. From a lobbying perspective, it will be interesting to see how various political groups shake out in terms of supporting U.

Thanks for such a thoughtful and provocative piece. Thanks for your engaging post on an important American company during interesting political times. Looking ahead, I think your question of whether or not protectionism will bring jobs back at scale is the right question, and I think that it will only be a sustainable movement if those driving the movement correctly incentivize companies to do so.

The potential corporate tax reduction would be a huge step in the direction of protectionist sustainability. This movement if it lasts also seems like an amazing opportunity for a major player like Nike to innovate around its automation and supply chain reinvention. Furthermore, this may also be an opportunity to take advantage of local incentives that may be offered for construction of new facilities like Tesla was able to capture for building its Gigafactory in NV.

Thanks for sharing this story! This fact on its own led me to question how significant an issue this actually is for Nike. While much of the strategy, marketing, and finance functions may be housed in the U. I am fascinated by the idea that companies are responding to isolationist political trends with increased automation, which drives their costs down and makes the tariff more bearable. I question whether these political trends will stand the test of time, or whether a two-party system at least in the top office of the US will always have enough turnover that any forceful isolationist legislation will be overturned within years and vice versa.

With this kind of turnover rate, are companies actually incentivized to invest capital in building manufacturing plants, in a geography in which as you point out they have no core competencies?

I agree with your proposed next steps for Nike — continue financing lobbyists, driving supply chain efficiencies.

American companies outsourced labor work to other countries not only because labor costs are cheaper there but also because many American people do not want to work at a low wage. Protectionism is not a sustainable way to bring jobs back to America. Forcing Nike to move production to onshore will incur large increase in labor cost and production cost for Nike.

There is no guarantee that the output and efficiency level in onshore facility can match that of facilities in other countries. Nike can increase automation work, which requires some capital investment, so that it will require less labor and thus lower labor costs.

However, if automation work goes up and labor work goes down, this defeats the purpose of bringing jobs back to the U. Maybe the facilities in emerging countries and in the U. I think there is no need to shut down the factories overseas as the consumer buying power in emerging markets is increasing. Great paper, as you discuss and present a very relative and important topic which is broad reaching through the business and political arenas.

Nike is one of the most well known global brands that is changing the way it operates due to changing isolationist views by parties both in and outside of the company. Additionally, I think the automation topic was initially separate and unique from the isolationist stance, but now that companies such as Nike are altering their business model in line with the isolationist view — they are concurrently taking advantage of this opportunity to implement improvements to the production process via automation.

I think this is an interesting subject that many companies are struggling with. I think one of the biggest questions is whether a company is willing to bet that the isolationist trend is a short-term or long-term one.

I like the fact that they are trying to combat the labor cost issue through automation rather than moving its workforce as this is a strategy that can be successful regardless of regulation or new tariffs.

I think Nike has to be careful to implement strategies that can be successful in both a global and isolationist environment since it is something that will constantly be evolving through time and different administrations. Thank you for the article, Isabel! For example, seasons are spread out year-round because of both sides of the hemisphere, so due to this Nike needs to be able to manufacture winter and summer gear literally days a year.

This is a lot of product that needs to be created just for Nike to accommodate all of the seasons year-round. When looking at material costs in North America, you'll see a high price for a minimal product. The best way to keep profit margins healthy is to move their significant factories to places like China and Vietnam, where Nike can outsource their factories and keep employees indirectly contracted through a third party.

When looking at a profit margin of Nike's running shoes are estimated to cost approximately USD 4. This leaves a considerable profit margin for the company, and to buffer in all of their other operational, marketing, and corporate expenses. Think about all of the multi-million dollar sports sponsorship deals, they need to be able to cover these somehow.

In Asian countries, the cost of living is comparatively low, and so in turn so is the minimum wage. This nearly cuts wages in half for Nike. Keeping the costs of producing low, ensuring quality across the range is high, and charging a considerably premium price, all combines to show exactly why Nike is the largest sports brand in the world.

When looking at China, you can find over a billion people residing in this country. Because of the relatively large population, you can fill more space in factories, and the competitive nature of jobs means that skill levels can be high.