Nike Vertical Integration Strategies

Nike uses vertical integration strategy which is a form of a relationship oriented approach in coming up with effective and efficient ways of managing its supply chain. This is achieved through forming alliances and relationships rather than using pricing strategy with an aim of purchasing stuff as cheap as possible (Frisch, 2008). The company has managed to maintain its relationship with contract manufacturers for its foot-ware by having different types of suppliers. The strategy is used in pricing its commodities where they have participants at different channel levels so that they could control costs and influence practices of pricing. For example, there are tier 1 suppliers and tier 2 suppliers where the former are firms with a stronger relationship with Nike who act as more of a strategic alliance than having a pure contractual relationship with Nike. Tier 2 suppliers are associated with pricing and may be managed by tier 1 firms or more closely related firms.

Reference:

Frisch, A. (2008). The Story of Nike. Minnesota: Creative Education. Pp. 1-46.