The Nike brand is one of the most recognizable in the billion-dollar footwear industry, and the company is commonly known for its outsourcing practices. Nike is known for their shoes, but they have also branched out into the sports and clothing industries. Nike has hundreds of factories and various subcontractors it uses to design and manufacture its products. Outsourcing has many possible advantages for the Nike Corp.
Decreasing overhead through outsourcing is a valuable resource for Nike. Cutting costs by employing workers at a reduced rate or paying less for plant operation allows Nike to invest the additional profits into other areas of the business such as advertising, thereby increasing the potential for company growth. In addition, decreased operational costs are more likely to attract and retain company investors because more money can go into increasing business profitability.
Because Nike is able to more efficiently produce its product and reduce costs due to outsourcing, it can more competitively price its products. This enables Nike to price its brand at a competitive rate with other companies that sell a similar product. Decreasing competition can help Nike corner the market for its particular products.
Finances and Risk Reduction
Outsourcing allows Nike to skirt some of the financial obligations it might face with the confines of tax laws in the United States. In addition, when it outsources to subcontractors, Nike assumes less risk associated with producing its product such as insurance liability.
- Ivanko_Brnjakovic/iStock/Getty Images