NIKE - A Transnational Corporation (The benefits of Nike going global:…
NIKE - A Transnational Corporation
Sales - Nike shops are located mainly in southern and western Europe, also Asia and North America (very few in South America or Africa). Sales are highest in Canada, USA and Europe.
Headquarters - Oregon (USA).
Manufacturing - this takes place in 40 countries. The clothing is mainly made in the Asia Pacific area and footwear in China, Indonesia, Vietnam and Thailand (I% of footwear is made in Italy). No Nike clothing or footwear is made in the USA.
Nike has a huge market. Its advertising is everywhere and is designed to make people feel that they must get the brand. The number of shops selling Nike and the number of countries with shops selling Nike have therefore expanded.
Nike's manufacturing takes place in LEDCs for a number of reasons:
The workforce is more flexible.
Access can be gained to global markets.
Land is cheaper to buy.
Trade restrictions can be avoided.
Wages are lower.
Factories can be sub-contracted (new factories do not have to be built).
Nike has a huge number of customers, e.g. in the year 2000, 70% of 16-24 year olds in the UK bought at least one item of Nike clothing or footwear.
In 2004, Nike made $1.6 billion profit!
In 2004, Nike paid out $1.7 million to get athletes and teams to wear its gear, increasing its appeal to customers across the world.
It has a website and is therefore accessible worldwide.
It employs sports scientists.
Nike employs 25 000 people directly and one million others are involved in making, supplying and selling goods.
The benefits of Nike going global:
Revenue can be increased by increasing the size of the market.
Advertising can be wide.
Costs can be reduced by using cheaper labour in LEDCs.
Savings can be made by producing goods on a large scale (economies of scale).
Greater profit can be made by increasing revenue and reducing costs.
Countries with special expertise can be tapped into (e.g. Italy used for making high fashion shoes).
Trade barriers can be overcome.
Effects on LEDC's and MEDC's
Pays low wages (£4 for 12-hour day)
Encourages poor working conditions
Influences host country's government decisions
Slows down LEDCs developing their own industries
Can cause environmental damage and pollution
Often workers are sacked without any notice
Some sweatshops develop (factories where workers are crowded or confined or compelled to work unreasonable hours for low pay)
Increases country's wealth
Provides expert managers
Attracts others to set up TNCs
May provide healthcare benefits for workers
Uses latest technology
Consumers get cheaper products and greater choice
Spreads the MEDC's influence
Greater profit made through cheap labour costs
Loss of manufacturing jobs in the MEDC