Nike is a large and successful firm in the design of athletic shoes. It could easily decide to forward-integrate and manufacture the shoes it designs. Thus, the firm has a credible threat over its current outsourced manufacturers. If Nike has no intention of actually entering the manufacturing arena, is it ethical for the Nike supply chain management to bring up this credible threat during annual pricing negotiations? What are some reasons Nike may want to consider such a vertical integration more seriously?
Nike is a large and successful firm in the design of athletic shoes. It could easily decide to forward-integrate and manufacture the shoes it designs. Thus, the firm has a credible threat over its current outsourced manufacturers. If Nike has no intention of actually entering the manufacturing arena, is it ethical for the Nike supply chain management to bring up this credible threat during annual pricing negotiations? What are some reasons Nike may want to consider such a vertical integration more seriously?
By raising the plausible threat of competition to their manufacturers, Nike Inc. is not acting ethically. As their existing fabricators become aware of their production and process efforts due to the mention of a potential supply chain and manufacturing change, they may artificially lower the price they offer Nike Inc. for the supplied goods. Overall, this will decrease the manufacturers' revenue because they may feel pressured to reduce prices and sacrifice their earnings to maintain their current clientele. This could be seen as a bullying tactic to deal with supplier prices.
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