Nike's Organizational Structure - Case Study Example

ORGANISATION STRUCTURE Student’s name Code & Course Professor’s name University City Date Organisation Structure 1. Introduction According to its founder, Phil Knight, business is typified by war without bullets as such; Nike is renowned for its ever expanding portfolio. In this respect, the products associated with the company offers significant brand value in the global arena. As a competitive company in the industry, Nike has championed its image in the sporting arena, and it has garnered myriad customer support and realization. As its signature strength, the brand name has gained global awareness in various sections attributed to its robust marketing and organizational approach. Much of its success is attributed in the way it structures its organization. As a bureaucratic centered organization, it has effectively maintained effective management processes. This paper, therefore, seeks to study Nike’s organizational structure with respect to Weber’s paradigm of bureaucracy. These feature its organizational matrix and various organizational attributes; where an in-depth analysis of Nike’s coordination and structural mechanisms will be highlighted, in line with theoretical concepts. 2. Bureaucratic Organization i. Purpose With its headquarters’ situated at Beaverton, Oregon, Nike Company majors in the sale of athletic footwear and apparel in the global market. With the majority of customer in the US, it has significantly gained global awareness. Its products are distributed under Nike Inc and Nike brand, as well as , affiliates brand such as Shaq, Dunkman, All Star, Jack Purcell , Cole Haan, Bauer Nike Hockey, Chuck Taylor , to name a few. The company’s brands include apparel, footwear, equipment and additional six different categories namely; women’s fitness, tennis, football, golf, running basketball and the men’s training and sporting gear. In this respect, its products are sold in Nike owned stores, in addition to independent manufacturers out of the U.S. In support of its product manufacturing, it works alongside 137 contract factories in Americas, 238 factories in South Asia, and 104 factories in EMEA. Nike’s Goal The company’s goal is aimed at extending its legacy of innovative thinking and developing a business opportunity that differentiates itself with other companies in gaining competitive advantage. Tentatively, Nike seeks to develop products that support athletes at all aspects in reaching their potential. Tentatively, one of its overarching goals is aimed at creating an impartial and empowered workforce through fostering innovation between the teams. This approach has been pioneered through divergent strategies that have positively influenced Nike’s supply chain. Tentatively, the company believes in the power of sports in utilizing the potential. In this respect, the company has invested over $ 315 million in product, grants and donations in support of the youth across various paradigms. Nike, on the other hand, is geared towards sustainability by working alongside other companies in the industry to devise meaningful and reliable approach to achieving zero discharge of hazardous waste by 2020. ii. Structure Organizational transformation and teamwork have been an imperative aspect of the company’s corporate structure. The organization structure at Nike was initially described by a matrix structure, compounded by multiple reporting lines and responsibilities. The company’s organizational structure was changed from a general manager’s orientation (governed by a marketing manager) into a matrix model that focused on functional oriented division (R&D, sales, marketing, operations and productions). Over the years however, communication and interaction was increasingly complicated preventing the lack of risk taking by team members and teams tasks. Presently, an additional layer of hierarchy was however introduced, wherein, a regional headquarters was established. In all operational levels, the functions and responsibilities of each department were formalized with respect to specific functions. Different tasks were assigned to different headquarters that ultimately attained the company’s desired goal. Bureaucracy follows a strict regulation of policies where the staffs are compelled to follow guidelines and discipline when conducting official functions (Olsen, 2006). Such regulations are enforced at all operational levels regardless of the positions. In this way, the company can achieve precision, unambiguity, speed, continuity, reduction of friction and discretion at all operational levels (Dodgson, Gann & Salter, 2008). At the very top of Nike’s hierarchy sits the chairman of the board of directors, Philip Knight. The CEO comes second, followed by Nike’s president. This position is subsequently followed by other senior positions in the firms that are broken down into regional managers – serving different countries. The factory workers are placed at the end of the hierarchy. Moreover, the workforce in the factories is divided into different areas of strength, which is commonly identified during the training process. Thus, men are tasked with operating heavy machinery while the women work on refining details like stitching. In this way, the factory attains efficiency in performance. The following levels describe the different functional approach. Global Headquarters The global headquarters is tasked with research and product development. Regional Headquarters The main reason for introducing this layer was to counter the need to reduce complexity and improve transparency throughout the company. Such grouping was essential in the deriving synergies from the grouping countries. Decentralized System Nike functions as a highly decentralized company. In this respect, it conducts its business in a flat organizational structure, in which, majority of the company’s ownership is vested in the employees, both as individuals and managers. Presently, the company operates under an organizational structure that focuses on the significance of different product category. This approach was subject to a shift from a complex web of innovation that underpinned interaction to a robust approach; utilizing the team’s identity, expertise, and stability. Nike’s transformation design has resulted in autonomous units controlled by one product type. In retrospect the units function as small, entrepreneurial companies that make decisions, develop visions and run business effectively. Simply put, autonomous units are similar to the divisional structure. However it lacks centralization. More often than not, high autonomous functions are realized in enabling structures. It is clear that enabling structures are created in such a manner that supports employee’s functions, as opposed to, bolstering authority. When bureaucratic organizations assume this approach, contrary to traditional practice, a higher bureaucratic structure is attained by the employees (Olsen, 2006). In turn, it compels the employees to perform better, contrary to weapons used by superiors against them. Nike has therefore achieved a proffered employee performance, attuned to Nike’s processes and objectives In decentralized systems, per se, decisions are placed close to the point of actions (Taylor & Levitt, 2007). Given that responsibilities are delegated downwards, it enables the employees to use personal preference in completing tasks. This approach is advantageous since its enables the services and products to be attuned to the consumer’s preferences (Daft, 1998). In this respect, Nike’s overall coordination product lines are communicated effectively in establishing general direction. iii. Coordination Mechanism In this regard, Nike has focused on a vertical integration approach. In this way, Nike has become one of the biggest companies in the world after being relatively obscure for 30 years ago. As an innovative centered company, the company’s learning and the experience are processed faster within integrated units which facilitates a cumulative learning process within the organization.  This approach consolidates different participants in its supply chain system who influence practices of pricing. The company involves transaction costs economics. Nike outsources various functions from capable manufacturers to provide their products at the lowest costs to the company and hence generating considerable profits for them. In the presence global market, outsourcing production is a viable production strategy. In so doing, a company avoids a central management of a large number of workforces that may at times be inefficient. Given the athletics textile market is highly dynamic, it was imperative that integrate such an approach in addressing customer value at a reduced cost. The integrated approach has enabled cross-pollination and feedback loops between the different autonomous units. However, vertical integration may limit accessibility to external research linked to a company’s innovation (Worthen, Tuna & Scheck, 2009). Through a resource-based approach to the company, its products are uniquely offered, compounded by consumer preferences. Nevertheless, shoes, apparel, and sporting gear are not valuable, rare, or costly-to-imitate. Tentatively, Nike uses an internal vertical integration approach within the company’s department which produces valuable, rare, or costly-to-imitate characteristics for the products. Their robust coordination mechanism has enabled it to be virtually unsurpassed, where its research and development teams are continuously developing newer and improved versions of the products. Keeping these processes within the firm's internal processes, draws a clear bifurcation with competing firms. It is evident, therefore that Nike has maintained a flexible operation, in attuning its objectives to the dynamic market. Maximizing strategy flexibility has enabled it significantly to address all areas that pertain to maintaining a proffered coordination mechanism – vertical integration (Smith, 2006). Customer satisfaction has been realized easily, at the same time, it has maintained its focus on developing appropriate integration approach. Incorporating a vertical integration approach is instrumental in the effective allocation of the resources in different functional units (Smith, 2006). Additionally, it enables an easier management of changing organizational issues and the liabilities within the organization. As highly decentralized systems, Nike can make adjustments, adaptations and the redistribution of the work to the workforce in a timely and efficient approach. Stable relationship can, therefore, thrive within different units, thus, reducing boundary strength and utilizing an efficient manufacturing process (Taylor & Levitt, 2007). 3. Conclusion Conclusively, as a bureaucratic company, Nike has tremendously achieved a vertical integration approach in product manufacturing. Its highly hierarchical structure included the pertinent policies and guidelines that oversee the effective operation of the company. Tentatively, through a flat organization structure, Nike has gained competitive advantage, in which, employees function as small entrepreneurial companies geared towards the attainment of the company’s goals. By employing vertical integration systems, the company, majorly outsources its productions to oversee countries gaining tremendous benefits in the form of reduced wages. Through forming alliances, Nike has maintained significant relationships with suppliers and managing its supply chain (Frisch, 2008). Its product success has contributed towards the company’s signature strength in various aspects. This approach has not only enabled Nike to achieve flexibility, but also maintain dynamism in consumer demographics. Evidently, in order to maximize flexibility, it is imperative to outsource various manufacturing process and maintain a corporate culture under a company’s practices. Reference List Daft, R.L. (1998) Organization Theory and Design. South-Western College, Publishing, Cincinnati, Ohio Dodgson, M., Gann, D. & Salter, A. (2008) The management of technological innovation. Oxford. UK: Oxford University Press. Frisch, A. (2008). The Story of Nike. Minnesota: Creative Education. Pp. 1-46. Taylor, J.E. & Levitt, R. (2007) Innovation alignment and project network dynamics: An integrative model for change. Project Management Journal, 38, pp. 22-35. Olsen, J.P. (2006) Maybe it is time to rediscover bureaucracy. Journal of Public Administration Research and Theory 16 (1): 1-24. Smith, D. (2006) Exploring innovation. Berkshire, UK: McGraw-Hill. Worthen, B., Tuna, C., & Scheck, J. (2009) Companies more prone to go ‘vertical’. The Wall Street Journal. Available at: . Read More