Value Chain Analysis
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A. Value Chain Analysis
Nikes value chain contains seven primary activities. These activities are Technology Development, Product Design, Component Manufacturing, Assembly, Marketing, Distribution and Retail Sales. As stated in its annual report, Nike is primarily a design and marketing company. As such, Nike controls the functions related to design and marketing of its products.
1. Technology Development
Nikes shoes have been on the leading edge of technology development for nearly 40 years. Major advances in the technology Nike has used are the waffle tread pattern, now common on athletic shoes; the use of a single wrap-around toe piece, rather than multiple pieces stitched together; and, the use of an air cushion in the sole of the shoe.
2. Product Design
Nike takes full control over its design processes. Nikes products are known for including Nikes innovative technologies into innovative footwear designs. Nikes products are also known for both their form and function.
3. Component Manufacturing
The manufacturing of the components of Nikes shoes is a shared process. Nike, through a wholly owned subsidiary called Nike In House Manufacturing (Niked IHM) produces many of the specialized rubber, foam and plastic components used in its products. Most of the other components used in Nikes products are obtained in the countries in which the products are assembled. Nike IHMs primary facilities are located in Portland, Oregon and St. Louis, Missouri. Nike IHM also supplies products to companies in a number of other industries.
4. Assembly
A network of 900 independently contracted firms assembles Nikes products. The vast majority of these firms are located in China, where Nike has been operating since the mid 1980s. Outsourcing this part of its value chain gives Nike the flexibility required to produce large amounts