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Nike in China

Presented by

Abida Khatun D4

Deepak Raj Chaudhary D19

Manisha Misra D30

Md Ziaul Haque Ansari D31

Rahul Singh D37

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Background

Before 1980 - South Korea (70%), Taiwan

(16%), Thailand and Hong Kong, supplied to

Nike

1980 Business proposal submitted to China

1981 Shoe production begun

1984 150,000 pair a month, expectationsnot met

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Market Shares (US Market - 1982)

0

10

20

30

40

50

60

70

80

90

Racquet (35%) Running (30%) Basketball (15%) Field (15%)

40

50

20

2010

20

30 30

366

15

10

Hyde

New BalanceTretr n

C nverse

Puma

Adidas

Nike

Market Segments All data in Percentage

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Operational Problems & Solutions

Technology transfer

Materials

Quality control Inventory control

Production flexibility

Worker and Managermotivation

Transportation

Pricing

Plant Location Expatriate staffing

Government

relations

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Technology transfer

Problem(s)

Chinese wanted design

of imported machines

Difficult to bring South

Korean or Taiwan

managers for

knowledge transfer Difficult to convince

Chinese to use Nike

process

Solution(s)

Developed a

communication system

to address on-site

problems

Used videotapes of

South Korean workersand managers

Made changes to

process

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Materials

Problem(s)

Lacked local materials

Domestic sellers notaccepting payment in

Dollars

South Korean and

Taiwanese reluctant tosupply to China

Fine on South Korean

goods

Solution(s)

Increased the trade viaHong Kong, Tokyo

Kept track of materials

needed for forthcoming

contracts

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Quality Control

Problem(s)

After 4 years only 80%of the goods were A

grade

Discount issue on 20% B

grade goods No brand concept

High level of dust in

cities and factories

Solution(s)

Educated factorymanagers aboutinternational standards

Offered 20% discounton B grade goods

Hired Chineseinspectors

Taught dust controlprocedures used in

Thailand plants

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Inventory control

Problem(s)

Inadequate inventoryrecords

Record keeper worked

more as a Door keeper

Solution(s)

Nike staff kept track ofmaterials required for

future orders

Taught material storage

to prevent damage

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Production flexibility

Problem(s)

Rigid in productionsystem

Suspicion on Nikes

commitment

No investment inadvance equipment

Solution(s)

Produce new modelsfrom patterns and

specifications

Encouraged them to

produce small tools

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Worker and Manager Motivation

Problem(s)

Planned economy :Quotas in all area

No motivation or

incentive

Inefficient managementof factory facilities

Lack of talent in

production scheduling

Solution(s)

Tried starting ownincentive program

based on

productivity, quality, del

ivery

Offered cash bonuses

that could satisfy the

demand

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Transportation

Problem(s)

Transported goods fromfactory to harbor thento Japan

Small streets, no properroad

A few factories hadaccess to containervehicles

Docks had problems in

rainy season

Solution(s)

Used factories inGuangzhou that had

enough space for trucks

Used factories in Fujian

that were on a wellmaintained road

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Pricing

Problem(s)

Tension in initial pricingnegotiations

Central planning system

Chinese felt that cost ofdoing business waslower than othercounties

Lack of cost accountingsystem

Solution(s)

O

ffered 20% discounton B grade goods

Compromised on initial

pricing

Compensated withextra dollars

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Plant Location

Problem(s)

Followed government

recommendations

because of less

knowledge of area

Less support from local

authorities False allegations on

Nike about

sincerity, commitment,

breach of agreement

Solution(s)

Diverted to areas havingless red tape

Areas with

decentralized authority

for decision making

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Expatriate Staffing

Problem(s)

No Western movies All Chinese programs

Staff resisted the move

to move from Shanghai

Solution(s)

Allowed staff to bring

their families to China

Paid living expenses and

30% salary supplements

for working abroad

A week vacation every 2month

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Government Relations

Problem(s)

Combination of decisionmakers kept on

changing

Officials failed to show

up on appointments Emphasis on joint

venture agreement

Solution(s)

Contributed to Chinesesports activities

Took Chinese officials to

US

Sent report to VicePremier Wan Li about

progress and issues in

1980-3 period

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Thank You