Motives and Implications of NIKE's Entry into the UK Economy

Impact of Globalization

Drawing On Specific Examples, Discuss The Possible Motives And Critically Evaluate The Potential Implications Of a Multinational Company Entering An Economy Of Your Choice.

The essay aims at a critical analysis of the sport brand NIKE, as it tries to make its mark and its presence felt in the market of UK. The entry of MNC’s in the UK economy has been caused by the liberation of the market economy with the influx of globalization. However, there are certain challenges that the foreign MNCs face as they try to make their mark in the UK economy. In contemporary global scenario the primary challenge that the MNCs face are from the Brexit. However, the scope of the essay will involve in conducting a discussion on the motives of the MNC, which in the concern of the essay is NIKE. The trend of globalization began in the country of US, which spread to other countries at an increased rate. The spread happened with a massive rapidity and allowed the companies to attain the status of being a multinational as they sought to spread globally. As a result of which the global phenomenon’s are impacting the MNCs in likewise manner as it can be seen in the case of MNC’s as well. The market of UK has been the target of most of the corporates from different corners of the globe, which in this case would involve the company NIKE, where the strategies of the company will be looked upon as it tried to establish itself in the leading economy (Ahmed 2016).

Globalization in a word has made its impact felt on a global level in an increased way. The corporates along with the managers and the leaders /in the companies succeeded in gathering massive profit from investing upon the emotional intelligence of the people. However, contemporary situation in the global economy has resulted in some notable changes in the global business scenario (Beck, 2018). Countries like UK and US has established itself as one of the leading economy in the globalized market and as an evident result had to endure the effects of the changes noted in the global market scenario. With the influx of globalization in the market scenario has instilled the urge in the corporates located several parts of the globes, especially in the Asian countries and in those of the European countries to enter the economy in UK. However, the globalization has affected the MNC’s in a negative way as they were forced to give up their efficiency as they sought to thrive in the global business. The degrading demand of the market along with the fall in the purchasing power of the potential customers have contributed in the loss. The globalization was thus marked by the economic disparity which followed by the incoming of several corporates in the UK market (Taylor and Thrift, 2013).

UK MNCs

Thus, the initial period of their entry into the globalized market has been marked by a considerable amount of loss for more of the companies. Despite of the fact that globalization is marked by considerable liberalization in the scenario of the trade, it was followed by changes in the pattern in which the consumers used to consume the product along with the changes in the preferences in the new customer groups as well as the modified preferences of the existing ones. The decline was increased by the degradation in the demand of the product and the high cost incurred by the companies trying to thrive in the changing global market. The impact was felt on the salaries of the employees leading to the notable changes in the organizational scenarios. Sustainability of the corporates have been sacrificed keeping in concern the issues related to the finance and economy to assist the company to thrive in the global market. However the companies were driven by the consciousness in order to bring forth the factors related to the sustainability (Hirst, Thompson and Bromley 2015).

The impact of the globalization was felt in the strategic scenario of the companies. It has been suggested that the lower MNCs were not affected by the changes as it was in the case of larger MNCs. The larger MNCs being affected in a considerable way tried to strategies their measures in order to integrate themselves in the economy of UK. Newer strategies have been developed by MNCs to build their competence to the newer market scenario. The strategies were aimed at overcoming the loss incurred by the MNCs in the process of globalization. The focus was on developing new strategies to market themselves in the global market. Such marketing strategies were joined by campaigns, advertisement, promotions and many others. NIKE too incurred considerable amount of loss as they tried to penetrate into the leading market of UK. The loss was in a considerable amount and in order to overcome the loss the company turned towards several marketing strategy. The company, which was placed primarily in the market of US had to bring about certain changes in their outlook in order to establish itself (Stokes, Clarence, Anderson and Rinne, 2014).

The aim of the MNCs thereby is to furnish a solution that would be cost effective for them. Nike has exhibited certain diversion in this case as it had planned to sponsor the Olympic games as a strategy to enhance their brand identity in the most effective way (Ahmed et al., 2016). The organizational structures have been reframed and the skills were developed in order to build the competence of the company in the global market scenario. Among the wide array of corporate strategies used by the companies comparative lesser amount of responsiveness along with a degrading integration were adopted by the companies. The globalization also experienced the MNCs deriving from the knowledge of the existing subsidiaries, however the disparity between the companies aim at integrating themselves and responding to the demand of the customers were huge and was widely felt. As a result, most of the MNCs diverted their attention from furnishing newer strategies before removing the challenges faced by them in the newer market. Outsourcing strategies have become popular among the MNCs as it allowed them to cut down the cost involved in the production and NIKE was no different as it outsourced its goods from several other countries where the cost of production were comparatively less. The aim was also at providing quality service to the customers in the most effective way possible.

Challenges for the MNCs in The Market of UK

Certain challenges that are inevitable to come forth in the way of the MNCs trying  to make its mark in the UK economy. The challenges are as follows which require the strategies of the MNCs entering to mitigate them. The challenges are the imperfection in the market, the competition of the tax, the changes in the culture, the withdrawal of the market, the power of the government, patents and lobbying.

It becomes difficult for the companies they try to begin their business processing in a country whose culture and values are unknown to them. Along with cultures the other factors that demand the consideration of the MNCs are the ones of business practices, laws and policies. In such a changed business scenario it was suggested that the companies carry on their production from the overseas integrating them with the localized factors. As such it was helpful for the corporates to carry out the process in a much lower cost than ‘it would have been involved in associating local bodies. Introducing MNE’s in such a scenario would have proved to be much effective in terms of cost as well as efficiency. Such a changed marketing scenario where most of the firms sought to merge in order to cut down the cost involved in the transportation of the product thereby allowing them to compete. The income of the companies were enhanced by the merging where by their competition declined in a considerable amount. According to Humyer the impact of globalization was perceived in its negativity as the tremendous unprecedented growth of the MNCs contributed in the diminishing nature of the competition that occurred between companies belonging from different countries (Tüselmann, Allen and McDonald 2015).

According to Hymer, the imperfection noted in the market was marked by its structural approach. The competition imbedded in the final production of the product was boosted by the imperfection in the market and the deviation of the MNCs from that. The attempt of the MNCs were to avoid the imperfections in the market of UK, where the NIKE even indulged in (ukessays 2018).

Globalization was facilitated by the MNC to a larger extent where the governing bodies both in the local as well as in the national level made attempts to facilitate the MNCs in their newer business venture. The aim behind such facilitation was embedded in the urge of these local as well as the national bodies to enhance the profit for these bodies in terms of economics, employment, tax revenue and several other factors. The bodies were motivated by their own success. Such luring of the MNCs were done in form of providing the MNCs with infrastructural as well as help from the government bodies in flourishing their business. The benefit was a multiple way venture adopted by the organization. The aim was attaining the autonomy of these organizations in the corporate sectors.

As a corporate is trying to enter the overseas market in order to attain an advantages in a competitive nature. Such quest have been facilitated by the dynamic differences of the corporates belonging from different companies. The options and factors that allowed the MNCs to flourish in the global market, the options available to the corporates varied from one corporate to another. Depending upon the risk, cost and the degree of control that is exercised by the MNCs. The functioning of the corporates become complex when the business venture is conducted in a joint manner. Along the intrinsic challenges of the globalization, other challenges that is involved in the situation are the ones posed by Brexit, tax impositions and the easy availability of the resources (ukessays 2018).

According to the report conducted by UNCTAD, the primary partners of the UK in the business scenario is joined by countries like Netherland, US, Japan, Luxemburg and several others. The incoming of the companies in the market of UK has braved the implication of Brexit. The companies like Nike are Making a mark in the economy of UK as there are ceratin motivating factors that are drawing the corporates to establish themselves sin the market of UK.

Fig: 1 Revenue Generated by Nike

The scenario of export in the market of UK are competitive in its functioning and at the same time, it has been made diversified as well. The unemployment rate of UK are comparatively less in number along with that the advantages of the corporates lie in the laxation that they receive from the lucid legal framework particularly in the business scenario. In terms of setting up the business the UK market facilitates the rapid growth, an attribute that has earned it the rank of one in the context of entire Europe (ukessays 2018).

Following the global fashion index of McKinsey, the companies in UK contribute about 97% of the revenue in the global economy from fashion industry sector. The companies who are making a mark in the run and are on the forefront, Nike, H&M and Adidas are the foremost. Another factor of crisis that precedes the one seeking to carry on business in the UK market is the cultural barrier that is precedent in the market of UK (Choi, Ko, Kim and Mattila, 2015). The reserved nature of the British people made them appear adverse toward the proceedings of the business in its every elements. As a result accommodating to the culture of Britain is a tedious task for the market in UK as the process of accommodation is time consuming as a result the procedures could have been slowed down in the decision-making endeavors. Nike had taken considerable efforts to mitigate the challenges of the cultures by adopting promotional campaigns involving indigenous sports of the nation. Such initiatives were taken in order to promote their brand as well as establish their brand image (Ward and Rhodes 2014).

Following the tremendous loss incurred by the company the managerial body of Nike felt the urge bring about notable changes in the activity of the company in order to establish their lost position (Brohi et al., 2016). Keeping in mind the cultural barrier and in order to enhance their customer base on the regional level the company has sought to formulate their strategies in that order. As a result the diversification has been done on the grass root level.  The diverse customer group in the market of UK acted as intrinsic factor that invoked the US based fashion brand to establish itself in the economy of UK.

The uncertainties introduced by the Brexit in the scenario is joined by the diminishing growth in the global economy. The growth decline in the year 2019. The weak growth of the GDP owing to Brexit have been contributed by the increased complexities of the Brexit and its related development. As a result, the capacity of Brexit has been kept subdued. As a leading economy, the current challenges it is facing because of the uncertainties.

Fig: Brexit Implications on NIKE

However, the economy has always lured the corporates from all over the world before the incoming of the Brexit. The liberation following the globalization had contributed upon making the market a strong ground for the corporates to venture. Thus in order to make its prominence felt in the global market the company had turned toward adopting a number of measures those were expected to boost the productivity of the company in such challenging scenario (Van Reenen 2016).

Conclusion

The aim of the report was thereby to conduct a critical evaluation of the factors that followed the company trying to make its mark in the market of UK. The concern of the factors have been evaluated from the perspective of the fashion brand named Nike. The fashion industry sector of UK is marked by the tremendous contribution that it has made in the revenue earned in the global level. The corporates from the Asian as well as European countries have been intrigued top make their investment in the country as it is considered to be one of the leading economy and one of the flag bearer in case of the influx of the globalized market with the globalization. Like most of the companies, Nike too resorted to outsourcing of their production in order to mitigate the high cost production in the newer country they have set their foot into. Such strategies resulted in the company decreasing the cost of production as well as the additional cost involved in the process. The companies entering the UK economy received additional support from the local as well as national bodies that facilitated them in establishing their brand in the globalized business scenario. Owing to the wide array of challenges the company was moved to mitigate the challenges intrinsic to the finance and economy. As such the concern for establishing the sustainability of the company was pushed back in the scenario. The aim of report was to conduct an evaluation of the scenario where the Nike and its presence in the global market has been mapped. The intrinsic facilities of the market particularly the aid in the legal framework as well as in the taxation lured the companies to step into  the economy, however the complexities in the scenario has been marked by the uncertainties propagated by Brexit.

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