Case Study- Nike

INTRODUCTION

Case Study- Nike

Nike is an exceptional company where researchers and observers can gain valuable insights into what it takes for a company to achieve sustainable competitive advantage.

This American multinational corporation that employ more than 33.000 people and have managed to continually succeed in a competitive market; being the largest seller of athletic apparel and footwear worldwide.

This graphic shows vigorous competition among sportswear-makers. Nike, based in Oregon, is the world’s leader, by dint of sales, visibility, high-profile athletes and its dominance in America. But Adidas, based in the southern German town of Herzogenaurach, is a strong number two.

In this context a case study of Nike is presented and analyzed using the theoretical framework.

Purpose

A common objective of companies is to have long-term success, which can be achieved by having sustainable competitive advantage. The purpose of this essay is to study Nike sustainable competitive advantage by seeking to answer the research question, which is as follows:

Drawing on the Resources and Capabilities theory, how does Nike generate sustainable competitive advantage?

Furthermore, this will be done by exploring this topic through a case study that is focused on Nike.

About Nike

Although the sports footwear industry has become one of the most competitive markets in recent years, Nike has been on top of its league.

It is clear that this company, which billed $ 24.1 in 2012 (its two largest competitors, Adidas and Puma, reported sales of $14 and $3 billion respectively.), has a range of capabilities that have been essential in the performance of their sustainable competitive advantage and that lie ahead of other companies in the same industry. We discuss which are the most important skills that have made Nike one of the world’s most prominent sustainable corporations today.

THEORETICAL FRAMEWORK

A description and explanation of the established ‘resources and capabilitites’ theory is provided in this section to guide the researcher of Nike case.

Sustainable Competitive Advantage

The topic of sustainable competitive advantage has been the dominant theme in the study of successful businesses for several years.

In order to fully understand the business term ‘sustainable competitive advantage’ it must first be broken down into its parts ‘competitive advantage’ and ‘sustainable’.

First the term ‘competitive advantage’ is used when a firm is implementing a value creating strategy which is not simultaneously being implemented by any current or potential competitors. The concept simply describes the advantage a company has over other companies competing in the same market (Burn, 2008). This can refer to any innovation, product, service, patent, or anything else that differentiates the company in a positive way from the rest of the competition (Rijamampianina et al., 2003).

The term competitive advantage is a static concept and has no time component associated with it (Chaharbaghi & Lynch, 1999). Businesses do operate in a dynamic environment, not a static one (Burns, 2008). Therefore, it is vital to introduce sustainability, which is a time component, to competitive advantage.

Adding the word ‘sustainable’ in front of competitive advantage is a way to describe a firm’s lasting success in the market (Kandampully & Duddy, 1999).

As Barney (1991) said:

“A firm is said to have sustained competitive advantage when it is implementing a value-creating strategy not simultaneously being implemented by any or potential competitors and when these other firms are unable to duplicate the befetis of this strategy.. a competitive advantage is sustained only if it continues to exist after efforts to duplicate that advantage have ceased. ( p. 102 ) “

Resources and Capabiliy theory

The theory of Resources and Capabilities allows us to explain the sustained competitive advantage and business growth. This theory has two principles.

First, it mainly assumes that firms are heterogeneous because they have unique resources and capabilities and makes clear that the fact that some companies achieve higher economic benefits is that they have and control critical resources and special capabilities that allow them to differentiate themselves from other competing companies.

Second, the other principle claims that this heterogeneity of resource endowments can be maintained over time, becoming a source of sustained competitive advantage. Any firm must ensure obtaining competitive advantage over time because otherwise the income generated will be transitory. Hence, the second principle is of great interest to this research project.

From the two assumptions that assumes the Theory of Resources and Capabilities, we can say it is not enough that the company is in an industrial sector to achieve a profit, it is necessary to have a number of attributes that allows producing goods and services effectively. Once located, there is a distinction between resources and capabilities:

Resources are inputs into the production process and are constituted by: machinery and equipment, skills and abilities of individual employees, intangible assets such as patents, trademarks, and know-how. Those are controlled by a company, which allows to conceive and implement strategies that increase their efficiency and effectiveness (Barney, 1991, 101).

A capability is the ability that allows a set of resources to collectively perform an activity. Meanwhile, resources are the source of the company's capabilities and capabilities are the most important source of competitive advantage. Skills and abilities, on the other hand, enable a firm by administrative, coordinating, and other resources to achieve the proposed objectives.

This theory makes it clear that not all resources and capabilities are a source of sustainable competitive advantage. To achieve this, they must have the following attributes: valuable, rare or scarce,

imperfectly imitable and non-substitutable.

In 1991, Jay Barney established four criterias (called VRIN) that determine a firm's

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