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International business unit 39
International business
Sources are all at the end of the task
P1
Nike, initially known as Blue Ribbon is one of the
biggest multinational companies this world has ever
seen. The American company manufactures and
designs sports products like shoes, accessories and
clothes. It was established in the year 1964 by a
track and field trainer at the University of Oregon
who goes by the name of Bill Bowerman and his
former student Phil Knight. The duo opened their
first store in the year 1966 with the name “Blue
Ribbon” at the time. Later however, during 1972, the
name was changed to Nike which is the name that
we know it by today. During the year 1974 is when
Nike got a huge head start by gaining a lot of
publicity and they went viral very quickly after that. Nikes mission has always been to do
whatever it takes in order to expand human potential. They execute this by their
amazing sports innovations by making all of their products much more sustainable than
any other company’s sports products.
Economies of scale
This is The cost advantage enjoyed by Nike because they are producing larger output
as fixed costs comes down with an increase in the number of units Nike produces ,this
can only happen if Nike has good operational efficiency for example good machines and
skilled labor . Nike also imports a lot of raw materials from all over the world and buys
them in bulk, so this is another way that Nike benefit from economies of scales.
Competition
Even though Nike is the market leader for the foot-wear business, however they still
have to keep an eye on what competitors are doing and come up with strategies in
order to remain at the no.1 position and maybe even increase market share. Some of
Nikes main competitors would be a few fashion brands like reebok and Adidas that also
sell sports products just like Nike. Speaking of numbers and statistics however, Adidas
, International business unit 39
is growing at a rate of 10.8% more than Nike every year even though Nikes revenue per
year only from footwear is $5 billion more than Adidas.
Nike ($20 billion)
Adidas ($15 billion)
Foreign investment
Foreign investment would be when an individual or a company from one country invests
in a company that is based in another country and not their home country. Nike
executed a foreign investment in 20l6 with a goal of expanding into the global market. In
the year 2016, Nike made a foreign investment of around $180 million by opening a new
factory in the USA in the city of Arizona and as per several articles, the opening of this
huge factory brought about many job opportunities for people living in that area and
other areas as well
Globalization
Globalization is basically when Nike would start operating on an international level as in
in multiple countries with multiple type of economies. One major effect of globalization
would be opening up of closed economies to businesses from other parts of the world
which means that Nike has access to larger markets with varying needs . Nike can use
production globalization to get its products made in countries with cheaper factors of
production like land and labor for example Nike has factories in Indonesia, china and
Vietnam. Nike also buys their raw materials for a cheaper price due to the reduction of
tariffs.
Imports
Imports would be the foreign goods and services bought by the residents of a country,
residents can be individuals, businesses or even the government. Nike for example
imports all of their raw materials like rubber, polyester and cotton
from countries like china, Vietnam, India, Bangladesh and Turkey
which china being the largest in the value of imports for Nike. Some
raw materials that Nike uses are organic and free of chemicals and
pesticides.
(Countries that Nike imports raw materials from)
, International business unit 39
Exports
Nike manufactures goods in countries with cheap
labor and land then they export it to countries
where they don’t produce anything. Nikes biggest
export country would be china as China has many
factories that manufacture many of Nikes iconic
and signature products and especially clothing.
This will help Nike to gain a competitive
advantage. Nike has many retail outlets across the
world hence
they would
export their finished goods which mainly
consist of foot-wear and clothing to their retail
outlets in the Middle Eastern and European
markets.
Balance of payment
This is basically the difference in Nike’s
imports and exports. If Nikes imports are
higher than the exports then then this means
that there is a deficit in the balance of payment
and this isn’t good for Nike’s long term
profitability as a business. If the exports are
more than the imports, then there would be a
surplus balance of payment which means that
profits are higher as more goods are sold.
Nikes exports have always been higher than
their imports. During this year (2019), Nikes
export to North America has shot up, however
Nikes export to other African and Asian
countries has dropped drastically and this
could lead to further issues like cash flow
problems for Nike.
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