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COST OF PRODUCTION AND MARKET SHARE 1
COST OF PRODUCTION AND MARKET SHARE 7
Cost of Production and Market Share
Ayanna Marshall
Southern New Hampshire
June 13, 2018
Cost of Production
Cost of production takes into consideration the varying inputs that an organization puts in place to achieve the intended production taking into consideration the important role the existing preferences among customers and quality. Cost of production takes into focus important elements that need to be addressed in order to have a successful production process. The cost of production must be equivalent to the price at which the company is selling a commodity. Nike is a highly engage company that provides a greater influence within the Sports and Apparel industry and thus they have integrated important measures, which are essential in having a successful production process. Nike Company produces different products and thus each product has a different cost of production. Effectively understanding key concepts in cost of production, a key consideration involves focus on the production of a pair of shoes, which provides a better picture on the overall cost of production producing large quantity (Hoang & Pham, 2016).
The various costs Nike faces
The different costs that the firm’s faces include fixed costs, direct and indirect costs and operating costs. These different costs of production play an integral role in improving the quality of understanding on important concepts, which define the underlying need to ensure that there is a higher need to achieve a better consideration on important concepts, which define positive operational wellbeing within organizational context. In order for the company to make profit, the cost of production must be shared with the consumers. On average Nike, spend approximately $30 to produce a pair of shows. The key costs that are integrated in this case include production labor, materials, rent, and suppliers operating cost, duties and shipping (Jacobs, 2015).
The company’s cost of production have been gradually increasing over time where it is possible to integrate important measures which provide a greater focus on important concepts which are developed creating a higher level of focus on key concepts which define important concepts which define positive change. Important elements that are being defined in this case develop a highly integrated setting where it is possible to integrate crucial measures, which define organizational commitment. The profitability of the company has been steady over the years due to the ability of the company to understand important concepts, which define the company cost of production. The fixed cost over time leads to stagnation while variable cost in the long run may affect the firm positively and play an integral role in helping the company attain profitability. Indirect cost within the company context are detrimental to the company development influencing the level of profitability (Fu et al., 2017).
Application of the concept
Fixed costs are the underlying costs such as rent, which do not change, based on the changing costs although they are influenced by the changing economic situations. Nike Company has strategic focus on its fixed costs since it focusses on creating a highly integrated setting where it is easier to develop an integral focus where it is possible to achieve a greater focus on cost effective measures. Fixed costs have a key influence on the final output since high fixed costs lead to increase in the price of products (Hoang & Pham, 2016).
Therefore, the variable and fixed costs affect the final output negatively. This is based on critical understanding on the fact that when the costs are high, they will lower the output when the output is lower, fixed and average costs have a positive influence on the final output. Thus, they are important in creating a critical focus and understanding on key aspects, which are important in determining positive change.
The market share
Nike Company plays is well engaged within the market plays a key role in creating a well-integrated setting where it is possible to achieve a greater level of organizational success. Market engagement within the sports and Apparel industry, depends on brand development, quality of products and the ability to satisfy market needs. Nike Company is one of the best companies within the industry and has a high control on the industry’s market share, which plays an integral role in improving its level of productivity. The competition is very stiff within the industry and thus there is need to ensure that better decisions are undertaken where it would be possible to achieve a higher level of organizational development. The development of Nike as a brand that is associated with quality products has been integral in its engagement within the industry. The strategic engagement within the industry has been able to create a highly differentiated setting where it is easier to achieve a greater level of organizational development.
The biggest competitor for Nike include Adidas, Reebok, Puma, Under Armor and converse. Nike is dominant force within the industry and thus its strategic development has been crucial in influencing the level of engagement. Nike boasts a 31% global market share, which is very high, compared to its nearest competitor, which Adidas is having a 16% global market share. A greater control of the global market is based on the ability to develop strategic measures where it is possible to achieve a greater level of organizational success (Burgelman, 2017).
The development of Nike Company has been based on its strong development process, which has created a highly competitive setting where it is easier to develop important concepts, which are essential in creating a highly developed knowledge on the changing customer preferences. The customer-centered strategy is based on critical focus on important elements, which are essential in achieving a positive organizational development. The company research and development concept has sought to develop a higher an improve focus on important concepts that define positive organizational development (Mann, 2018).
Barriers to entry
Major players within the industry such as Nike, Adidas and Puma who dominate the market. Therefore, the entry into the market has been restricted by key factors, which include government tax. The tax for new companies within the market is very high and thus has been essential in determining the ability to maintain a strong competitive nature among the companies that are operational within the market.
Customer preference in the market have been very specific. Most customers have already developed strong connections with their preferred companies who produce their preferred products and thus are satisfied. New companies thus are facing difficulties since the existing market is already linked to the companies that are already operating and thus makes it difficult to have a successful entry into the market (Reis et al., 2016).
The increasing prices might influence new competition and thus there is likelihood of creating a very difficult operational environment since it is likely to lead to losses. The high prices that are developed within the country have integrated important measures, which are essential in improving the underlying operational level.
Market structure
The market structure under which the firm operates in is a monopolistic market structure where there exist many competing firms and thus the level of development that is integrated within the market provide a greater focus on the need to develop strategic measures which can help in improving the existing competitive advantage (Mann, 2018).
References
Burgelman, R. A. (2017). 9. Complex strategic integration at Nike: Strategy process and strategy-as-practice. Handbook of Middle Management Strategy Process Research, 197.
Fu, Q., Gong, J., Lee, H. H., & Png, I. P. (2017). Responsible Sourcing–Production Scale and Monitoring: Theory and Evidence. History.
Hoang, T. P. L., & Pham, T. T. H. (2016). An Analysis of Vietnamese Footwear Manufacturers’ Participation in the Global Value Chain Where They Are and Where They Should Proceed.
Jacobs, D. G. (2015). Practical example of base source optimization: footwear profiling at Nike, Inc (Doctoral dissertation, Massachusetts Institute of Technology).
Mann, A. M. (2018). Building future first DNA into Etsy, Apple, and Nike. In Future First (Vol. 67, No. 79, pp. 67-79). ROUTLEDGE in association with GSE Research.
Reis, T. S. M., de Lima, A. M. R., & Cister, A. M. (2016). NIKE CORRE: Generation Y Moves the Running Market. Journal of Sports Science, 4, 300-310.
INSTRUTORS FEEDBACK
Thank you for submitting Milestone 3 assignment. Write for the milestone is incomplete. Add the following in your revisions:
Cost of Production
· Add a table and or chart presenting a cost of production, revenue and profit trend analysis for Nike over time (for example, 2013-2017) showing how the cost and revenue trends compare and impact Nike profitability overtime. You may choose a few of the costs such as costs goods and services (COGS), operating costs and then compare these with sales revenue, profits analyzing their trend movements and how they impact on Nike profitability overtime.
Overall Market
· Market Share – The write for the section is incomplete. Go beyond broad description of Nike’s market share to provide an overtime trend analysis of Nike’s market share describing the market share trends movement overtime (for example, 2013 - 2017) compared to its top competitors in the footwear market.
· Market Structure – Describe/justify why the monopolistic competition is the best market structure that represents Nike’s market and analyze how the monopolistic competition market structure affects Nike’s ability to influence the footwear market.
Recommendations
· Future Production – Develop detailed recommendation for how Nike can manage its future production by clearly synthesizing the data presented about Nike.
· Recommended Action: Suggest clearly how Nike position within the market and among its competitors will allow it to take your recommended action.
· Sustenance of Nike Success: Describe clearly how Nike can sustain its success going forward by evaluating the findings from demand trends and price elasticity.