Nike is the world's largest supplier of athletic footwear and among the most successful consumer-products companies to have emerged in the past 20 years. Part of that success has come about by paying rock-bottom wages to the workers who make the shoes. All but l% of the 90 million shoes Nike makes each year are manufactured in Asia.
Nike is as American as Coca-Cola. Part of its appeal to the millions of people around the world who buy its athletic shoes is that Nike is selling a sense of freedom.“Just do it!" exult Nike's advertisements.
But there is a rough side to this dream:the ruthlessness with which Nike pares its costs. The company is forever on the look-out for cheap production sites. If costs in a particular country or factory move too far-out of line,productivity will have to rise to compensate,or Nike will take its business elsewhere. The firm uses about 40 factories;20 have closed in the past five years or so and another 35 have opened.
Nike may look like an all-American enterprise,but its success relies on its ability to harness Asia's spectacular manufacturing expertise. "We're always looking for new manufacturing sources," says Nike's vice-president for production. " People ask why we don't produce more in Eastern Europe, but we've concluded that the most capable manufacturers are in Asia.
The organization of Nike is simple and effective. All the production risk is taken by contractors.“We don't know the first thing about manufacturing," says Nike' s vice-president for Asia Pacific.“We are marketers and designers. " There are the areas on which it concentrates its resources. Yet it retains the advantages of firms which produce in-house,namely a high degree of control over quality and the ability to respond rapidly to changing tastes.
Until recently,almost all Nike' s shoes were made in South Korea and Taiwan,but as labor costs there have soared,the firm's contractors in these two areas have moved much of their production to cheaper sites in Indonesia and Thailand.
To keep costs low,Nike's most important strategy is to produce in countries where labor costs are still low. ( )