The Manufacturing Practices of the Footwear Industry: Nike vs. the Competition
The Manufacturing Practices of the Footwear Industry: Nike vs. the Competition
Steven Van Dusen
The current manufacturing practices of the sneaker industry, in particular companies such as Nike, Reebok, Adidas, Converse, and New Balance, takes place throughout the globe. With the industry experiencing severe competition, and the product requiring intensive labor, firms are facing extreme pressure to increase their profit margins through their sourcing practices. The following paper will analyze the sneaker industry, while examining the multitude of viable manufacturing options, and critiquing their current manufacturing structure.
Footwear Industry – Players, Revenues, Market Share
To properly review the manufacturing in the footwear industry, it is necessary to first gain an understanding of the dominant leaders in the marketplace. The industry is currently experiencing hypercompetition, led by six main firms – Nike, Reebok, Adidas, Fila, Converse, and New Balance (see exhibit 1), with nearly $7 billion in revenues domestically. Nike is the industry leader, with a 47% market share, followed by Reebok, a distant second at 16%, and Adidas at 6% (see exhibit 2). This category is facing decreasing demand and the rising popularity of alternative footwear, resulting in more pressure than ever before to achieve high gross margins through effective global sourcing practices.
Manufacturing options
Footwear companies have two basic options in the manufacturing of their products, they can both own and operate the factories that produce their products, or subcontract their products out to secondary manufacturers. These facilities can be located either domestically or internationally, and both present a myriad of positives and negatives. Firms that produce domestically benefit from ease of monitoring, skilled workforce, government stability, job creation, and well understood labor rules, while suffering from the relatively high wages required in the U.S. as
Steven Van Dusen
The current manufacturing practices of the sneaker industry, in particular companies such as Nike, Reebok, Adidas, Converse, and New Balance, takes place throughout the globe. With the industry experiencing severe competition, and the product requiring intensive labor, firms are facing extreme pressure to increase their profit margins through their sourcing practices. The following paper will analyze the sneaker industry, while examining the multitude of viable manufacturing options, and critiquing their current manufacturing structure.
Footwear Industry – Players, Revenues, Market Share
To properly review the manufacturing in the footwear industry, it is necessary to first gain an understanding of the dominant leaders in the marketplace. The industry is currently experiencing hypercompetition, led by six main firms – Nike, Reebok, Adidas, Fila, Converse, and New Balance (see exhibit 1), with nearly $7 billion in revenues domestically. Nike is the industry leader, with a 47% market share, followed by Reebok, a distant second at 16%, and Adidas at 6% (see exhibit 2). This category is facing decreasing demand and the rising popularity of alternative footwear, resulting in more pressure than ever before to achieve high gross margins through effective global sourcing practices.
Manufacturing options
Footwear companies have two basic options in the manufacturing of their products, they can both own and operate the factories that produce their products, or subcontract their products out to secondary manufacturers. These facilities can be located either domestically or internationally, and both present a myriad of positives and negatives. Firms that produce domestically benefit from ease of monitoring, skilled workforce, government stability, job creation, and well understood labor rules, while suffering from the relatively high wages required in the U.S. as