On Friday, March 20th, Nike announced that it is reorganizing its business into six geographic regions. This restructuring will also reduce some layers of management so business leaders in each region could react swiftly to changes in the market. Previously, there were four regions: US, Asia Pacific, Americas and EMEA (Europe, Middle East and Africa). Now, the six new areas consist of North America, Western Europe, Eastern/Central Europe, Greater China, Japan and Emerging Markets. “This new model sharpens our consumer focus and will allow us to make faster decisions, with fewer management layers,” said Charlie Denson, President of the Nike Brand.
The geographic restructuring is part of a wider plan that may include laying off up to 4% of the Nike workforce as announced on February 10th. In that company announcement, Nike, Inc. President and CEO, Mark Parker stated:
The power of the Nike brand and the diversity of the Nike portfolio continue to be a competitive strength. . . . In light of the current economic climate, it is more essential than ever to sharpen our focus on the consumer to maximize opportunities for product innovation and brand management in the marketplace. The decision to reduce our workforce is a difficult one, but it will put our business in the strongest position possible to continue to deliver long-term profitability and growth.
This is interesting for a few reasons. First, it’s an example of the struggles that many companies, including corporate giants, are facing. With consumer spending and unemployment at record lows, companies are forced to reevaluate their business structure. All aspects of the business are reviewed and the “fat is trimmed” for maximum efficiency. In a large company such as Nike, with a global reach, it’s imperative that business leaders in each respective geographic region act swiftly to react to consumer preferences and to engage in a dialogue with consumers. Shedding layers of corporate review will speed up responses and allow Nike to meet challenges in a timely fashion.
Another interesting aspect is the way that the geographic regions were split up because it tells you a bit about where Nike’s business is strongest, and where they are focusing their efforts. It appears that Nike is expecting continued growth from China, Japan and Europe. Before, all of Asia was grouped together in the “Asia Pacific” category. Now, China and Japan each have their own group, telling us that Nike is devoting additional resources to these countries. A similar restructuring happened in Europe, though possibly it’s more telling because the total geographical area is much smaller. Before, Europe was in a larger group called EMEA which covered Europe, the Middle East and Africa. Not only does Europe have it’s own category now – it has two: One for Western Europe, and another for Central/Eastern Europe. It appears that Nike must have had a need to meet consumer challenges in different ways.
The U.S. still has it’s own category, though now, it’s part of the larger “North America” so Canada and Mexico will now be included in those efforts. The last category, “emerging markets” is essenitally a catch-all for South America, the Middle East, Africa and the rest of Asia. That’s a lot of area to cover which leads me to one conclusion: The strategy in gaining market share in these “emerging markets” is so similar that they can be executed without needing separate geographical groups. I’m interested in seeing what new geographic categories will grow out of the “emerging markets.” As far as knowing exactly how many employees Nike, Inc. will let go, we’ll have to wait until the end of their fiscal year which ends in May. There’s also no word on how different product categories will be affected, if at all.
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