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Management Strategy

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Michael Porter, 1985 introduced value chain which provides a process of activities within an organisation. Porter classified value chain into two main groups: supported activities and primary activities. (See appendix)

Primary activities directly contribute to business's production or service. One of its main part, inbound logistics are the keeping of raw materials and their distribution to manufacturing when necessary. When Nike operated in Asia, the inbound logistics could be enhanced by minimizing shipping costs to store and reducing the response time. Whilst there were few resources available in US during that time, the industries of textile and tanneries are plentiful in Asia. Apart from that, Nike outbound logistic activities were much concerned by the increase of subcontractor factories in more countries. It makes the distribution of products are easier and cheaper.

The supported activities linked to business infrastructure, human resource management, technology development and procurement. Before starting to do the business in Asia, Nike found some shoes factories in Taiwanese and South Korea with wealthy families. Once the new manufacturing was opened here, they will bring new managerial expertise with high production technology and design. Therefore, the technology development activity of Nike would be extremely developed from these countries. By using potential sources of materials in Asia, Nike will get benefits in procurement activities. For example, they could bring these materials as soon as possible for "Just- In- Time" strategy to avoid redundancy of stocks in hand and shipping to wholesalers whenever they need. Moreover, the labour wages in developing countries like Asia often lower than others. Daily wage per worker in Indonesia is around 1$ per days in 1990s. It seems that the human resource management is much easier in these countries with low debate of money or higher position. In short, Nike resources remained unlimitedly and potentially so Knight made a decision to expand the firm's market to Asia in the late 1990s.

In next part of report, five-force framework will be applied to Nike case in order to find out its opportunities and threats from the period from 1990 to 2000.



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