Inventory Problems at Nike

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Case Details:

Case Code : OPER030
Case Length : 10 Pages
Period : 1991 - 2003
Organization : Nike
Pub Date : 2004
Teaching Note : Available
Countries : USA
Industry : Sports & Apparel

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Nike's Profits Fall Contd...

One of the leading sports goods companies in the world, Nike manufactured high quality athletic shoes for a variety of sports including baseball, athletics, golf, tennis, volleyball and wrestling. In addition to footwear (which accounted for almost 60 percent of the company's sales), Nike also manufactured fitness equipment, apparel and accessory products. The company's products were sold in over 140 countries around the world. Headquartered in Beaverton, in the state of Oregon, Nike had production facilities scattered around the world and had a complicated supply chain system that extended from Nike factories in developing countries in Asia to uptown stores in the US and other parts of the developed world.

Operations Management Case Studies | Case Study in Management, Operations, Strategies, Marketing Management, Case Studies

Background Note

The future co-founders of Nike met in 1957, when Knight was an undergraduate student and middle-distance athlete at the University of Oregon (which was known for having the best track program in the country) and Bill Bowerman (Bowerman), the athletics coach.

In the early 1960s, when Knight was doing his MBA at Stanford University, he submitted his marketing research dissertation on the US shoe manufacturing industry. His assertion was that low cost, high quality running shoes could be imported from labor-rich Asian countries like Japan and sold in the US to end Germany's domination in the industry.

In 1962, while on a world tour, Knight met the management of the Onitsuka Company (Onitsuka) of Japan, which manufactured high quality athletic shoes under the brand name 'Tiger'. He arranged for these shoes to be imported to the US for sale under the name 'Blue Ribbon Shoes' (BRS).

(When the management of Onitsuka asked him about which company he represented, he thought up this name. BRS became the forerunner of Nike). In late 1963, Knight received his first shipment of 200 Tiger shoes. In 1964, Knight and Bowerman formed a partnership, with each of them contributing $500, and BRS formally came into being.

The first shoes were sold from the basement of Knight's house and the backs of trucks and cars at local track events. The athletes who wore the shoes were asked for feedback to improve future shoe designs. By the end of 1964, BRS had sold 1300 pairs of shoes and generated $8000 in revenues...

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