Identify a current event or an issue (such as privacy or security) that contains many of the elements of risk we have discussed this quarter.

This five page final paper should represent a detailed analysis of the subject you choose as your final endeavor.  It cannot be the same subject as your first paper.

Identify a current event or an issue (such as privacy or security) that contains many of the elements of risk we have discussed this quarter. Describe its significance, including the risk exposure that such an event poses to the enterprise. Is there government oversight and/or government regulations that should have prevented the event from occurring? Where did things break down? What do you recommend happen to reduce the risk around such an event recurring?

Papers will be graded based on structure, analysis, style and originality of thought; and upon how you apply and reference  the work we’ve been doing in class. The paper will be graded according to the following criteria:

Response Content (60%)
Demonstrates significant mastery of core concepts in this course
Advances a clear and convincing line of argument
Shows comprehension of the readings, lectures and discussions
Presents original analysis

Presentation (40%)
Organizes argument logically with clear and well-considered structure
Uses correct grammar and punctuation
Writes in clear, concise sentences
Deploys appropriate professional vocabulary
Properly cites reading

Also, can you write a short pitch on this for a 5 minute presentation

Company Overview (Nike Inc.  Risk Management)

In 1964, Phil Knight and Bill Bowerman founded Nike, Inc[1]. Currently, Nike designs and markets athletic shoes, footwear, supplies, products, and services worldwide. Nike is one of the most significant sports apparel and clothing retailers in the country. The company operates both developed and Emerging Markets. Among its brands are Nike Brand, Hurley Brand, and Jordan Brand.

Nike Inc. provides its products to wholesale consumers across digital channels and distribution outlets operated by Nike and offers independent dealers and licensees to market products worldwide.1. Because of its design and promotion, great fans, particularly young people, belonged to it. The business’s strategic plan is to lead corporate customers by innovative strategies that honor the global culture of Nike, clients, and others that sponsor Nike’s products. The company will recognize the demand pattern and taste to please customers to achieve long-term growth through better risk control.

Challenges Faced

While Nike has extensive capital to achieve this vision, the way forward remains unclear. Nike has to take certain chances, like most profitable businesses, to earn future awards. Nike is not trying to minimize risk in general but is a more competitive strategy for the company. Nike is just subject to the best kind of risk to achieve its competitive goals. Such types of risks are more pressing for Nike than others. This paper will consider two primary potential control failures:

people and external events, precise consumer preferences, taxation laws and interest rates, and counterfeit products.

Customer Preferences

Changes in consumer preferences and aspirations constitute Nike’s most immediate risk. Like other brands, Nike depends on the precarious ground since customer preferences and perceptions are quickly changing. This applies particularly to the footwear market, which accounted for 65% of Nike’s revenue in 2018[2]. In the clothing business, numerous trends could influence Nike’s presence in this industry. The introduction of 3D printing, apps, and internet shopping, for instance, is a rapid revolution in footwear demand, as prices have been lowered and more adapted. Consumers become increasingly conscious that they can take their purchases to political and social statements that might harm Nike owing to its labor disputes2. And there are tons of options for customers. However, Nike is the world market leader in sportswear, firms including Adidas report more significant revenue development and increased rivalry in China, the second-largest market.

Nike should invest in a variety of areas to minimize these threats. It also acquired several startups specializing in 3D printing and artificial intelligence technologies and automation of its activities. The company needs to withdraw from some of its contentious production contracts and focused mostly on contract production. In addition, there is a need for the firm to work on and changed its communication approach to include influencer marketing to distinguish itself from rivalry.

Nike should develop innovative brands beyond Nike’s core image that meet customer preferences. For instance, an alliance with premium labels or the development of a low-cost alternative. The company should focus on pursuing high potential acquisitions or partnerships that will build its brand internationally. Creating a competent priced brand will reduce customer’s purchases of counterfeit goods.

Taxation Laws and Interest Rates

Nike would also aim to offset losses from taxation, tariffs, interest rates, and exchange rates, in addition to shifting customer tastes. Nike, Inc.’s major problem lies in its financial status. Although they are not in financial difficulty, they should realize that improving the company’s economic well-being will only help the company on a short and long-term basis. The companies continued performance in many ways challenges us, for example, raising its profitability and improving our cash, accounts receivable, and debt management. Nike has experienced a distribution and income blow sparked by the poor press regarding our overseas employment policies.[3]. As a result, the company is moving to set labor policies and standards for workers in foreign factories. Though this a great move, Nike has to ensure that workers are motivated by introducing incentives and favorable working conditions. Additionally, the company needs to make strategies for several improvements to its products and reduced costs profoundly. In addition to stabilizing the financial situation, these measures combine to fuel the turnaround Nike expects in the immediate future.

Moreover, Nike is a multinational, influenced by floating currencies, various tax laws, and interest rates. One example is the one-time international profit tax of about 2 billion dollars, raised under the Trump Tax Cut and Jobs Act, which significantly changed Nike’s net income in 2018[4]. The tariffs, in particular, the extra $267 billion in the additional tariffs imposed by the Trump Administration for China, cannot be overlooked. Trade patterns of the company have been greatly affected.  Nike needs to work to reduce the risks. In addition to the $2 billion one-time tax fee, the effective tax rate in Q4 2018 was 6.4% compared to 13.7% in FY 20174. Nike frequently uses legitimate means of tax avoidance to limit its vulnerability to further fiscal regulations. Regarding taxes, interest rates, and exchange rates, Nike should strategize on how to move its production into the end market, which would reduce its susceptibility to these risk factors. In expecting production growth in the US and Europe and in partnership with local labels to manufacture products without added operating costs, Nike can continue to address this challenge.

Counterfeit Products

Finally, Nike should minimize the counterfeit product chance. Nike faces some headwinds because apparel is the most falsified segment globally and because Nike is the world’s most falsified company. Business Insider reports that companies like Nike lose up to 10 percent of their income because of fraudulent products.[5]. China, a significant region for Nike, is the top counterfeiting suspect. China is the leading producer of counterfeit products, even though some developing or medium-sized countries make counterfeit items. Roughly 63.2% of the customs seizures came from China.[6]. It can be called ‘the world’s counterfeit capital.’ The counterfeiting industry is expected to account for about 8 percent of China’s GDP.

Another problem with counterfeiting is that not only are the initial Nike items replicated, but their signature logo, swoosh, appears on almost all, mainly because the logo is simple to print. These brands do not even have the innovations Nike utilizes for both cheaper and high costs of their goods and stores. This is also a problem for the corporation since these items are much harder to detect and penalize. Nike should recognize that the counterfeit product market is massive and set up a portal to report counterfeits goods on the US website. It further encourages the purchasing of Nike products only through Nike.com, Nike retail stores, or Nike licensed retailers.

Nike Company has to understand that this is a problem that threatens its future growth and expansion and fights it. For instance, the company can create a buyers’ website to track cases of counterfeits, work alongside Brand Registry service to avoid counterfeits from being marketed, filed concerns with the International Trade Commission, and cooperated with law enforcement across the world in favor of anti-counterfeit actions. To secure the brand, Nike should also work actively with customs and law enforcement authorities globally to reduce the risks of counterfeit goods hitting customers6. Thus, the business should move beyond these measures and begin a serious dialog with the foreign Governments to ensure that products produced and sold are licensed. Nike has the power to shift its production from completive markets to comparable alternatives where there exist market gaps in the shoe industry. The company should request the foreign governments to repress counterfeiting. This will prevent significant revenue losses and, at the same time, build their brand recognition.

Conclusion

While Nike faces significant challenges, it has mitigated several of them. Nike managers are doing a competent job, but further work needs to be done. Customers’ preference is on high-quality original brands and experiences. Nike has to set regulations and certification of their products to ensure that they counteract counterfeits to retain their customers. In particular, medium-income consumers worry less about advanced goods compared with costs, whereas high-income consumers opt for premium branded products. Ultimately, if Nike wishes to cater to these consumers, it cannot hold a vision. It must, however, look after its highly valuable brand. Juggling this fact and the above threats would be crucial to maintain the excellent historical development of the business.

 

[1] Mahdi, Hussain A. Ali, Mohammed Abbas, Taher Ilyas Mazar, and Shaju George. “A Comparative Analysis of Strategies and Business Models of Nike, Inc. and Adidas Group with special reference to Competitive Advantage in the context of a Dynamic and Competitive Environment.” International Journal of Business Management and Economic Research 6, no. 3 (2015): 167-177

[2] Stangl, Lukas JM. “Digital Transformation in the Sports Apparel Industry: The Case of Nike, Inc.”

[3] Clausing, Kimberly A. “Profit shifting before and after the Tax Cuts and Jobs Act.” National Tax Journal 73, no. 4 (2020): 1233-1266.

 

[4] Clausing, Kimberly A. “Profit shifting before and after the Tax Cuts and Jobs Act.” National Tax Journal 73, no. 4 (2020): 1233-1266.

 

[5] Astray, Tatiana V., Peter R. Darke, and Kevin Tasa. “Understanding the effects of counterfeit quality on consumer attitudes toward genuine brands: An associative judgment model.” Canadian Journal of Administrative Sciences/Revue Canadienne des Sciences de l’Administration.

 

[6] Astray, Tatiana V., Peter R. Darke, and Kevin Tasa. “Understanding the effects of counterfeit quality on consumer attitudes toward genuine brands: An associative judgment model.” Canadian Journal of Administrative Sciences/Revue Canadienne des Sciences de l’Administration.