Challenges faced by Nike in China and Vietnam Case (Case Study Sample)

Customization and operational Challenges of Nike in China and Vietnam
Author’s Name:
Affiliate Institution:
1. Introduction (Origin of Nike, Brief Description of the company, market share and production capacity)
The company was first started in January 25th, 1964 as a Blue Ribbon Sports by Bill Bowerman and Phil Knight. It officially adopted the name Nike in the year 1971, May 30th. Nike is a global company that deals with footwear, apparel, equipment, and accessories and services. The firm is considered the leading company in footwear in the world (Reference for Business, 2015). Nike serves markets that include USA, Middle East, Europe, Asia Pacific, and Africa (Nike Inc., 2015). Between the September 2014 and September 2015, the revenue rose from $437 billion dollars to $447 billion dollars (CNBC, 2015). The firm dominates 60% of the US market. Despite the fact that Under Armour and Adidas are gaining ground in the market, Nike is still a dominant player in the footwear in all markets. The company has a production capacity of 20 million pairs of shoes per year. It is ranked 29th in the global top brands in the year 2016.
2. Challenges Nike faced in China
2.1 Failure to implement marketing strategy
The market is highly competitive and therefore it demands that the firm has to market its products in order to create awareness and position itself in the market. Given the presence of other competitors like Adidas, Nike should undertake a rigorous marketing in order to cut the rise of Adidas in the Chinese market. There is no doubt that marketing is critical in ensuring that the customers are kept updated about the availability of new products in the market. Inadequate market makes the firm lose touch with its customers.
2.2 Competition
The Chinese market has attracted other sportswear products like Adidas. Studies indicate that the market share for Adidas is steadily rising while that of Nike has slightly declined. Adidas is leveraging on fashion and youthful brands. This has helped the firm to attract its customers and gain advantage over Nike. In the year 2013, Under Armour also entered the market developing a high involving products and created interactive with the customers. This increases the levels of competition in the Chinese market.
2.3 Counterfeits
The presence of counterfeit goods in an industry is common. With a volatile industry such as this is common. Counterfeits is an elements that is eating on the market of Nike in China. This is an element that is affecting many industries in the market. The level of counterfeit products in the market affects the level of the sales revenue in the market.
2.4 Accumulated inventory
The high level of competition in the market slows down the amount of sales that are made by firm in the Chinese market. When the Adidas and Under Armour entered the market, it increased competition reducing rate of inventory turnover.
3. Challenges Nike faced in Vietnam
3.1 Labor safety and standard
There is a high concerns that Nike do not offer protective services to its employees. This is one of the major concerns. The law require that companies should ensure that the employees are not exposed to work-related hazards. Nike is accused of offering poor working conditions in Vietnam. The inspection indicated that the employees are exposed to carcinogens that exceed to local legal standards.
3.2 Violation of minimum wage law
The employees are forced to work 65 hours a week and they received a $10 per week. The number of hours that the employees work per week exceeds the number of hours that the Government allow workers to work. The amount of $10 paid to the employees per week is too little as compared to the number of the hours that the employees are working.
2.3 What was the outcome? What strategies Nike have implemented and why didn’t it work in china or Vietnam but worked in other countries?
The company has reacted by developing some strategies that sought to alleviate the challenges that affects the firm. In China, the firm set up an e-commerce website and took an approach of customer centric. This would help to improve inventory management levels. It also sharply cut overtime, improved safety and ventilation and reduced the use of toxic chemicals. This worked well with the firm.
4. Policy (FDI policy and trade policy of Nike in China and Vietnam)
China is known to be one of the countries that depressed its currency in order to ensure that it discourages imports while encouraging exports. However, there has been concerns that the China needed to change its FDI policy in order to encourage other firms to enter the market. The minister of commerce in China indicated that it would make ease trade restrictions in order to attract many foreign manufacturing companies into the high end manufacturing sector. The process of policy changes in Vietnam also sought to allow many foreign firms to invest in the country. The policy review on market expanded and removed the barriers that reduced the growth of FDI in the country. The level that China and Vietnam embraced FDI is one of the factors that enables many manufacturing firms to enter into these markets and expand operations just like what Nike and other firm have done.
5. Academic lesson (relating it with what kind of MNC is Nike, what business environment it operates in? what kind of FDI theory Nike followed? What were the trade barriers Nike faced?
5.1 The Academic Lessons Learnt
The business world is fast changing and it has many players in it. The level of competition continually increase as more players get entry into the market. Therefore, the dominant companies in the market lose part of its share to the new firms that enter into the market. This would affect the amount of the revenues that the various multinational companies makes in the end of their financial years.
The MCN are also exposed to many challenges in the market that they operate in. The challenges can be political, environmental or cultural. Nike faced many challenges in Vietnam and China. For example, it high competition in the market from other players...