Nike’s Business Profile
Nike is an American multinational that specializes in the manufacture of sports apparel and wear. Those items include shoes, jerseys, and sporting equipment. The company, which is headquartered in Oregon, is the largest manufacturer of sports apparel with its major competitors being Adidas and Under Amour. The company controls around 27% in sports apparel and has a workforce of around 70,000 people. In 2020, Nike generated 37.4 billion dollars, becoming the highest earning sports apparel manufacturer. Various factors present the company with opportunities it can explore to increase its global presence and revenue. They include innovative products, efficient integration and adopting digital business to reach more customers. Offshoring is also one of the major opportunities the company has adopted in reducing cost and increasing its global dominance. However, Nike faces various threats in maintaining its global dominance and revenue. They include increased competition from emerging sports apparel manufacturers, counterfeit products, patent disputes, and foreign currency instability.
Government Action - Trump’s Trade Policies on Nike Offshore Operations
Nike’s decision to offshore its operations came under threat from the Trump administration. During campaigns, Donald Trump, a Republican, promised to bring back jobs that had been lost due to offshoring. The policy, dubbed ‘America First’ involved encouraging organizations that rely on the country’s market to produce locally rather than shipping their operations (Ainsworth, 2016) . When Trump took over power, he introduced tariffs against certain countries as a way of encouraging local production. This policy has affected Nike in various ways, from its operations to revenue.
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First, the introduction of tariffs on imports to America has significantly increased the cost of production for Nike. Nike was one of the companies that had shipped their operations to China to enjoy cheap labor and raw materials. In turn, this decision helped the company to reduce the overall cost of production and thus having cheaper products (Sergei TRUSH, 2019) . However, the introduction of tariffs reduced gains made from offshoring and thus making Nike’s products more expensive to the American market. Tariffs have also made the production cost higher by making raw materials from China more expensive.
Secondly, the introduction of tariffs on foreign products was likely to reduce Nike’s global presence. Trump's administration encouraged American companies to produce locally as a way of creating more jobs for the country. However, it might be expensive to produce in the United States as there was limited labor and scarce raw materials as compared to China. Therefore, Nike was likely to produce fewer sports apparel and thus reducing its global dominance. The company’s foreign competitors were also likely to capitalize on its increased cost to introduce cheaper products and thus reducing Nike’s global market share.
The introduction of tariffs on foreign products was likely to trigger retaliatory measures by other countries on American countries. Trump’s ‘America First’ policy was likely to hurt other countries' imports and thus retaliate by introducing tariffs and other restrictive measures. Nike as a multinational was likely to suffer from such countermeasures in various ways (Evenett, 2019) . First, retaliatory tariffs on the American countries were likely to increase the cost of Nike’s products in the foreign market. Such factors are likely to reduce the company’s revenue and thus its profitability. Secondly, retaliatory tariffs from other countries would make Nike products more expensive and thus fewer sales in the global market. Those tariffs will also give Nike’s global competitors more leverage and thus cut the company’s significant market share. Nike responded to those policies by negotiating with the Trump administration on removing certain restrictions which directly hurt its revenue and operations. This action involved presenting a case on how tariffs affected their global presence due to countermeasures by foreign countries. Nike argued that retaliatory measures by foreign countries reduced the revenue the company repatriated to the United States. The company could also franchise its operations by uniting with apparel manufacturers in foreign countries and thus maintaining its global market share. This action could reduce shipping costs and trade restrictions by foreign countries.
References
Ainsworth, R. (2016). Trump & VAT: NAFTA, Trade Barriers & Retaliatory Tariffs. SSRN Electronic Journal . https://doi.org/10.2139/ssrn.2919058
Evenett, S. (2019). 'We Can Also Do Stupid': The EU's Response to America First Protectionism. SSRN Electronic Journal . https://doi.org/10.2139/ssrn.3424862
Sergei TRUSH. (2019). Donald Trump and China: Interim Results. Far Eastern Affairs , 47 (002), 72-79. https://doi.org/10.21557/fea.54073979
