Written by: Bella Dettlaff
Nike cuts 2% of workforce to improve operations
The American and worldwide corporation that produces and creates the design, development, manufacturing, and worldwide marketing and sales of certain footwear, athletic apparel, equipment and accessories has just recently announced a new form of business structure they are committing to. Nike will be changing many things to their business but among those changes includes the trimming of 2 percent of its workforce globally. At the end of fiscal 2016, Nike had about 70,000 employees. This means that due to the organizational changes, about 1,400 employees are expected to lose their jobs. The demand for a large workforce is not high as Nike is looking to revamp its operations. There’s an opportunity cost to releasing their experienced workforce but Nike is willing to do anything to update their business structure. The new business structure and the cutting of employees will supply more wanted products to customers more efficiently and faster because they are focusing on the “Consumer Direct Offense” which is formulated to be a faster service to fulfill shoppers with customization options.
Due to sportswear having a large competitive market, Nike is looking to change its way of business. There were many signs that the competitors, mainly Adidas and Under Armour were improving and advancing through their products more than Nike currently was. Adidas is showing revival, advancing in popularity along with the Under Armour having a new expansion into new athletic-gear categories. The image above shows that Nike’s growth rate has slowed down in recent years which is one of the main reasons why they are announcing the improved operations to this favored brand so that it’ll keep its 
According to USA today, “In the coming months there will be a big push toward mass customization, new products and more interesting digital experiences within the business,” Trevor Edwards, president of the Nike brand unit explains. For example, Nike's new Express Lane, which attains products from what the response is from consumers demand will launch in China. This will increase the economic growth and hopefully keep increase Nike’s popularity. The well-known brand, Nike is looking to get their products the customers in the most optimal way. According to a video on bloomberg.org, the Sam Poser, an analyst of research says, “This new structure aligns all of our teams toward our ultimate goal -- to deliver innovation, at speed, through more direct connections.” Showing that the demand to supply ratio will be constant and more customers will be wanting their products.
Works Cited
Hutchinson, Alex, et al. “NIKE Inc.” The New York Times, The New York Times, 2017, www.nytimes.com/topic/company/nike-inc.
Thomas, Lauren. “Nike to Cut about 2% of Its Global Workforce, Announces New Business Structure.” CNBC, CNBC, 2017, www.cnbc.com/2017/06/15/nike-to-cut-approximately-2-percent-of-its-global-workforce.html.
Turner, Nick. “Nike Cutting About 2% of Workforce as It Revamps Operations.” Bloomberg.com, Bloomberg, 2017, www.bloomberg.com/news/articles/2017-06-15/nike-cutting-about-2-of-workforce-as-it-revamps-operations.
Not only is Nike cutting the workforce down but also almost every other business that takes part in employees does as well. It's a tough decision for the higher ranked workers to decide when to let people go and how many people to let go. By cutting people from their jobs, it allows the company to partake in producing more product so the business can make more money. This works because by cutting down employees salary, the salary is then used towards the production to increase the quantity. By increasing the quantity, then there is more product to be sold which is an advantage to receiving more income.
ReplyDeleteIt is important for such a big company like Nike to stay caught up in the advances and stay caught up in the wants of their customers. It makes sense that they will do what is best for their company to improve sales and gain more customers. Being able to have a higher supply in products is important because the demand for their products is continually growing. I overall agree with what Nike is doing because they are one of the worlds top businesses and doing what they can to get better is always important. The opportunity cost of the jobs lost is not as great as the potential cost of not moving forward.
ReplyDeleteI agree with Kolton, it is really important for a company like Nike to make sure they are update about the customer's needs and wants. It's also really important for them to do that because they aren't the only big company in the market. Customers always are looking at Nike products making the demand increasing. It's also a big move for a big company like Nike to decrease their experience workforce to make things more efficient so they can supply more for customers. I agree or support Nike's decision when it comes to cutting the workforce to improve their operations. The opportunity cost of losing jobs isn't as important to Nike as it is to increase the efficiency of their operations.
ReplyDeleteIn the Sportswear market there are pretty much 3 main competitors with Nike, Adidas and Under Armor, Nike has controlled much of the market especially recently. But, as of last year Adidas has been making more and more of a push. This has a lot to do with there Ultra Boost technology shoe's that they released last year that have become very popular in today's society. You, could say that those were the so called "Next Big Thing." So with Adidas making there push it is now Nike's turn to come up with the "Next Big Thing" in order to maintain there lead in the sportswear market, although if I was a head of the company my goal would not be to maintain the lead it would be to enhance it.
ReplyDeleteSince Nike has pretty strong competition, will the mass customization of Nike and the changing cause customers turn to the competing companies? Since other companies like Adidas has come out with new technology like Jack said in his comment, I can see that Nike is now trying to bring more customers in, but will the mass customization help or hurt them?
ReplyDeleteI think that Nike is making a good decision releasing some of their employees. Although 1400 may seem like a lot on it's own, compared to the 70,000 total employees, this is just a small fraction. If the advancing and improvements the company make are truly beneficial, it will outweigh the cost of releasing these employees. I also think that even though it may seem like an opportunity cost to lose experienced staff, Nike is able to chose who they are laying off based on their importance to the company. Lastly, I agree with the previous comments because Nike has a high competition and making improvements with their technology will help them stay ahead and bring in more customers.
ReplyDeleteNike has seen a huge increases in market competition in the past 5 years, which helps make sense on why they are set to cut 2% of the workforce globally. Sports wear brands live off of celebrity sponsorship, where they can make shoes and appeal using that celebrities name. Now Nike has some big names such as Lebron James, Kyrie Irving, and others, but recently they have seen a drop in the amount of athletes signing with them. For example not only has Adidas won over the basketball signing recently, by signing James Harden, but they also have Kanye West under contract which has helped Adidas surpass Nike in the street wear business this past year. Now this cut in the workforce could help Nike free up some cap space, giving them the opportunity to go out and sign more celebrates for this marketing purpose to try and regain control on the competitive market their in and have recently fallen behind in. Nike needs to show their customers that they are committed to keep innovating, for if Nike's customers feel as if Nike is not providing the best of the best when it comes to products their not going to buy Nike's products. I really do think that Nike making these cuts will prove to be very good for the business in a marketing stand point.
ReplyDeleteThis is a problem that a lot of companies I foresee running into. Along the amount of employees being laid off may seem like a lot, it is just a small portion of Nike's overall workforce. Nike is taking the lower opportunity cost to them which will help them increase their overall revenue and allow them to produce more efficiently. With Nike having big competitors like Under Armor and Adidas they have to do everything in their power to compete.
ReplyDeleteI think that this topic is very interesting considering that Nike is a very successful company. If Nike is trying to change their way of business, you would think they would want to expand the company other than let people go. However, this could correlated to the fact that Nike came under so much scrutiny for under-paying workers overseas last year. It is understandable if Nike wants to let people go to improve the operations and efficiency, but one would think they would want to hire more people to continue the jobs and speed up the product production. Overall, this topic was interesting to read, however I think that Nike should not be cutting 2% of its workforce.
ReplyDeleteThis is important because Nike has been losing some of their control in the shoe industry. Other brands like Adidas and Under Armor are starting to catching up to Nike. Nike needs to stay ahead of their competition so they found that cutting 2% of their work staff helps them stay ahead. As Becca asks in her comment, I think mass customization will help Nike and more people will want Nike shoes because the demand to supply ratio will stay constant and more people will want Nike shoes.
ReplyDelete