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ORGANIZATIONAL THEORY, DESIGN AND THEORY (7TH ED.) 2013 JONES, G.R., PRENTICE HA

ORGANIZATIONAL THEORY, DESIGN AND THEORY (7TH ED.) 2013 JONES, G.R., PRENTICE HA

ORGANIZATIONAL THEORY, DESIGN AND THEORY (7TH ED.) 2013 JONES, G.R., PRENTICE HALLNike Learns How to ChangeNike, headquartered in Beaverton, Oregon, is the biggest sports shoemaker in the world.Throughout the 1990s it seemed that its founder and CEO, Phil Knight, and his teams of shoedesigners could do no wrong; all their innovative design decisions led to the global acceptance ofNike’s shoes and record sales and profits for the company. As time went by, however, and itsfortune soared, some strange dynamics occurred. The company’s managers and designers becameconvinced they "knew best" what customers wanted, and that their decisions about how to changeand improve Nike’s future shoes would be enthusiastically received by customers.But things were changing in the sport-shoe environment. New competitors had entered the marketand they began to offer alternative kinds of sports shoes-shoes targeted at specific market segmentslike skateboarders, soccer players, or power walkers. Nike had no shoes in these market segments.Moreover, Nike also failed to notice that sports shoes were evolving into performance shoes formore everyday uses such as walking or backpacking. It also failed to take note of consumers’increasing preferences for dark blue and black shoes that wore well in cities and that could doubleas work and walking shoes.In the 2000s Nike’s sales and profits fell sharply as many of its new lines of sports shoes were notwell received by customers, and CEO Phil Knight knew he had to find a way to turn his companyaround. Realizing that his designers were starting to make poor decisions, he brought in managersfrom outside the company to change the way decisions were made. An executive who was broughtin to lead the outdoor products division advised Knight to take over and purchase small specializedcompanies, such as North Face, to quickly widen Nike’s product line. But Nike’s other managersand designers resisted this idea, believing that they could still make the best decisions. With salesstill slumping, it became obvious that Nike would have to take over specialist shoe companies togrow successfully.One of the first of its acquisitions was Cole Haan, the luxury shoemaker, and Nike’s designersproceeded to revitalize its line of shoes by using their skills to make them more comfortable. Then,realizing it had to get into small markets, in the 2000s, Nike bought other small companies such asHurley, the skate and surfboard apparel maker.To try to overcome its past errors in its decision making, however, Knight decided on a new way todesign shoes for specialized niche markets, like the skateboarding, golf, and soccer markets.Henceforth, rather than having Nike’s designers all grouped together in one large designdepartment, they would be split up into different teams. Each team would focus on developingunique products to match the needs of customers in its assigned market segment. The skate team, for example, was set up as a separate and independent unit, and its designers and marketing expertswere charged to develop a unique line of shoes for the sport. Similarly, because of poor sales, Nikeseparated golf products from the rest of the company and created an independent unit to developnew golf shoes, clubs, and other golfing products.Nike was attempting to demolish the old companywide mindset that had resulted in its pastdecision-making errors that led to the wrong kinds of changes. With many different teams, eachworking on different lines of shoe and other products, Nike was hoping to build diversity into itsdecision making and create teams of experts who were attuned to changing customer needs in theirsegments of the sports product market. Nike’s new approach to decision making worked; most ofits new shoes are now leaders in their market segments and its sales and profits have soared in the2010s as a result of the way it has changed the way it makes decisions. Nike learned from itsmistakes and Knight continues to promote organizational learning – the process of helping themembers of an organization to "think outside the box" and be willing to experiment, take risks, and make change possible.Discussion Questions1. How did Nike change the way it made decisions and introduce new products?2. In what ways could Nike use the change techniques discussed in this chapter to find waysto improve its effectiveness and competitive advantage?

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