OffshoringOffshoring

Nike and the Footwear and Apparel Labor Market

iMBA 544 – HR ManagementTeam Ideation

OffshoringOffshoring

Production relocation across national boundaries to take advantage of cost savings and other benefits in countries where products or services can be produced more efficiently. (Cheung, Rossiter, Zheng, 2008)

Pros & ConsPros & Cons

Pros Reduced Labor Costs Improved Proximity to Materials Superior Cultural Work Ethic

Cons Cultural Differences Cost of Monitoring a Global Supply Chain

Key Outcome VariablesKey Outcome Variables

Labor CostRelative Labor SourcesLogistics CostRelative Socio-Political Risk Profiles

Potential Cost SavingsPotential Cost Savings

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Companies that globalize their cost structures to include low-cost countries can realize savings of 20-40% in the landed costs of their products. (Boston Consulting Group, 2004)

Relative Labor CostsRelative Labor Costs

NikeNike

Market Cap of $21.6 BB2008 Revenue $18.6 BB2008 EBIT $2.5 BB

Nike Labor BreakdownNike Labor Breakdown

Labor AvailabilityLabor Availability

Right HR CostsRight HR Costs

Huselid’s HR Scorecard– Benchmark industry labor force split

• Nike is a leader in apparel and footwear manufacturing

• To remain competitive, Nike must not trail the industry norms for labor cost

Potential Savings ErosionPotential Savings Erosion

RecommendationsRecommendations

No Cost advantage to move manufacturing to U.S

Nike can not afford to bring jobs home– Nike 2008 EBIT was $2.5 BB– US labor force = $6BB-$12BB increase– Huselid’s scorecard signals imbalance

RecommendationsRecommendationsStrong alignment with Huselid’s HR

Scorecard

- Policies in line with business strategies

- Assessment tools

- Tailored HR management programs

RecommendationsRecommendations

Stick to offshore labor for production activities

Nike can still employ in the US– New technology can reduce overtime in

offshore factories– Engineers, product development,

technological advances

Questions & AnswersQuestions & Answers

Thank you for your time this evening.

You are invited to present any questions at this time

References