NORTHERN COLLEGE

ASSIGNMENT NO 1.

SUBMITTED BY: FARHANA SHAIKH

BUI303 – SUPPLY CHAIN MANAGEMENT
PROFESSOR-ASHLEY WOJTUS
FEBRUARY 2, 2022
1)Explain the underlying rationale for global trade and explain the difference between
comparative and absolute advantage. Illustrate your explanation with an example of
comparative and absolute advantage. Do not use an example that was provided in the
textbook/course material.

Explanation- Supply chain management is the management of the flow of goods and
services and includes all processes that transform raw materials into final products. It
involves the active streamlining of a business's supply-side activities to maximize customer
value and gain a competitive advantage in the marketplace.
Adam Smith in his renowned treatise, THE WEALTH OF NATIONS, provided not only a
rationale for a market economy based upon competition, but also advanced a rationale for
trade among nations called the Theory of Absolute Advantage. Smith argued that countries
would be better off if they would trade commodities where each country had an economic
or cost advantage for one or more of the products that they produced. In other words, sell
or trade products where they had a cost advantage and buy or trade for products where
they did not have an advantage. Smith concluded that all participants in such transactions
would be better off than trying to be self-sufficient. While the analysis was relatively
simplistic, it was valuable advice, especially for that time period.
Absolute advantage and comparative advantage are two important concepts in economics
and international trade. They largely influence how and why nations and businesses devote
resources to the production of particular goods. In isolation, absolute advantage describes
a scenario in which one entity can manufacture a product at a higher quality and a faster
rate for a greater profit than another competing business or country can accomplish.
Comparative advantage differs in that it takes into consideration the opportunity costs
involved when choosing to manufacture multiple types of goods with limited resources.

Absolute Advantage-The differentiation between the varying abilities of companies and

nations to produce goods efficiently is the basis for the concept of absolute advantage.
Absolute advantage looks at the efficiency of producing a single product.

This analysis helps countries avoid the production of products that would yield little or no
demand, leading to losses. A country’s absolute advantage, or disadvantage, in a particular
industry, can play an important role in the types of goods it chooses to produce.

Example-In Ireland, one worker can produce 1000kg of potatoes in a week and 600kg of
apples. In Spain, one worker can produce 500kg of potatoes and 2400kg of apples per week.
Ireland is twice as productive and has an absolute advantage in the production of potatoes.

Comparative advantage- Comparative advantage takes a more holistic view, with the

perspective that a country or business has the resources to produce a variety of goods.
The opportunity cost of a given option is equal to the forfeited benefits that could have
been achieved by choosing an available alternative in comparison.
In general, when the profit from two products is identified, analysts would calculate the
opportunity cost of choosing one option over the other.

For example, Ireland has a comparative advantage in cheese and butter due to climate and a
large amount of land suitable for dairy cows. China has a comparative advantage in
electronics because it has an abundance of labour.

2)What is meant by the current description of the global economy that “time and distance
have been compressed?” Do you agree? What has been in the impact of this
compression?

Explanation- The current description of the global economy that “time and distance” have
been compressed is explained below: Globalization have had enabled small and large
companies in expanding their business operations to a great extent. Technology and
transportation have created revolution in the globalization process.

One can hardly dispute that the exponential rise and evolution of information technology,
boundary spanning trade agreements, advances in transportation medium
capabilities/capacities (better shipping, better over-ground transportation, access to ports
and shipping lanes, etc.), and reduced product life cycles, along with many other factors,
have combined to relatively "compress" time and distance when compared to business
models of yesteryear. Whereas a customized personal computer may have taken weeks to
build and ship in the mid-90s, an accepted standard due to lack of available alternative, can
now reach the customer in a matter of days, if not hours.

It can be argued that supply chains help to establish the limits of what is competitively
possible in the market. In other words, the cost and value at the end of the supply chain
help determine a firm's ability to compete in a global marketplace. Good supply chains are
business power and good supply chain managers are continually pushing the limits of their
supply chains to be viable in both domestic and global markets.

Operating globally has become easier to accomplish due to advances in

information/communications technology, as noted above, and the continuing improvement
of specialists such as UPS, FedEx, DHL, etc., which can provide global supply chain services at
a very reasonable cost. A growing number of specialists and continuing improvements in
information technology/communications are contributing to the flattening of the world.
Obviously, large global companies are also contributing to this phenomenon.
It is safe to conclude supply chains and supply chain management play an important role in
the global economy and have helped to push the growth and success of companies that do
"supply chaining" very well. Reduced order cycle time, for example, has become an
important part of supply chain management since it can lead to lower inventory levels for
customers, improved cash flow, lower current assets, and accounts receivable. Conversely,
the increased length and complexity of the supply chain make it more difficult to achieve
shorter lead times. Global supply chains impact all with lower prices, increased array of
products, and convenience (read 24/7, one-stop shopping, etc.), but are not without
challenges.

3)What is meant by the phrase that “supply chain security, especially on a global basis,” is
a balancing act? Is the pendulum swinging in one direction or the other?
Explanation- Given the importance of global trade to the United States, a delicate balance
exists between security and the efficient flow of global commerce. If security is too tight it
could impede the flow of needed goods or materials, causing delays and decreased
efficiency. Ports and border gateways can become congested because of security measures.
Consequently, clearance time has increased from hours to days in some instances. Steps
have been taken to improve the flow through border crossing that include infrastructure
improvements/adjustments, and regional and global trade agreements. This is necessary for
our global economy. There are continuing challenges to achieving this balance, for certain.
For example, migration from Mexico into the U.S continues to be a political “hot button”
because of the relative ease of entry into the U.S. Due to globalizations inherent threats,
physical, geopolitical, weather related, or otherwise security measures are necessarily
increasing to adjust, while still attempting to pay homage to cross-boundary principals that
help define global supply chains and corresponding management thereof.

4)Why are regional trade agreements among countries so important in the global
economy? What is your evaluation of NAFTA/CUSMA and its impact on the participating
countries?
Explanation- Regional Trade Agreements reduce trade costs and define many rules in which
economies operate. If efficiently designed, they can improve policy cooperation across
countries, thereby increasing international trade and investment, economic growth and
social welfare.
Steps have been taken to improve the flow through border crossing that include
infrastructure improvements/adjustments, and regional and global trade agreements. This
is necessary for our global economy. Electronic filing of cargo information has helped to
improve the border clearance times. The Trade Act of 2002 requires exporters to
electronically submit shipping documents to U.S. Customs 24 hours after delivery to a port
or 24 hours before vessel departure. For imports, the manifest must be filed by the ocean
carrier or the consolidator 24 hours before the U.S.-bound cargo is loaded on the vessel in
the foreign port. Because of Canada’s importance as a trading partner, an expedited
procedure (FAST) has been developed to speed up clearance through the U.S.- Canadian
border.
The North American Free Trade Agreement was signed by leaders of Canada, the United
States, and Mexico in 1993 and was ratified by Congress in early 1994. NAFTA establishes
free trade between these three countries and provides the way the agreement is to be
interpreted. NAFTA states that the objectives of these three countries is based on the
principles of an unimpeded flow of goods, most favoured nation (MFN) status, and a
commitment to enhance the cross-border movement of goods and services. MFN status
provides the lowest duties or customs fees, if any, and simplifies the paperwork required to
move goods between the partner countries. In the long run, the goal of NAFTA is to create a
better trading environment. NAFTA’s goals involve making structural changes to operate a
borderless logistics network in North America. Information systems, procedures, language,
labels, and documentation are being redesigned to expedite the border crossings and the
flow of commerce. Canada and Mexico in the top three recipients of exports from the
United States. Canada is by far the most important trading partner of the U.S., in terms of
exports. The U.S. is a major global exporting country with some concentration of trade with
its two closest “neighbours”, but also with a broad reach throughout the world.

PART 2

Nike, Inc. Global Supply Chain Strategy

1) From a global perspective, what are some of the factors that will impact the extent to
which Nike's strategies will be successful?
Ans: From a global perspective the different factors that will impact the extent to which
Nike’s strategies will be successful are:
Economy- In economy, the biggest threat for Nike would be economic recession. Nike’s
growth adversely affected during the economic recession. The US economy is experiencing a
downturn right now. The sales of products are decrease. Because of the recession, Nike’s
feeling pressure. The Asian economic crisis also affects Nike since the products are
manufactured in Asia and the labour costs and material prices are increasing.

Nike’s growth is not just affected by the local economy but also in the international
economy. Euro and Asia recession affected the sales for Nike. The overall results in the sales
generated by Nike in athletic footwear. However, it’s still remained stable due to the global
market makes up for the variances in sales, especially between peek seasons.

Natural Disaster- In China, there are having snow disaster, this disaster lead to the problem
that the world now facing the shortage of cotton in global market. In the future, there might
be more disaster will be happened will lead to another problem of shortage of another raw
material, when this happens this price of raw material will increase in the market and break
the budgeting of Nike company and lead to another problem to Nike financial because of
the high raw material price.

Ethic’s- Companies that specialize in business ethics training and corporate social
responsibility instil workplace ethics among staff by creating a business ethics policy (Fieser,
2006). The child labour cases are affected Nike’s so much. Because of this, Nike had to plan
and organize a world-wide public relation campaign to redeem their name and reputation
related to the ethical problem. Without the proper management leading and planning, Nike
will suffer from the problem of child labour.

Product Distribution- Due to the ongoing Covid-19 pandemic situation, disturbed supply
chain and distribution can be one more reason for the strategies to get affected.

2) What will be some of the challenges to be expected by Nike when implementing its
strategies in less-developed instead of developed economies?
Ans) Three critical challenges affecting Nike in developing economies have been identified
as 
Maintaining A Low-Tech- Nike manufactures high quality products with premium pricing.
Hence, it is difficult to stock low-tech, low-cost products for these markets. In addition,
many potential consumers in Dubai and other developing countries have other competing
low-cost products to buy other than Nike premium products. For example, there are direct
competitors of the company in these developing markets. These competitors have low-cost
products.
High Tariff Rates- Tariff rates in developing countries are extremely high. Therefore, high
tariff rates have affected the company’s profitability. For instance, the UAE (Dubai) and
other emerging economies have high tariff rates. According to the trade commissioner, the
import duties on most goods entering the UAE are 5%. In addition, foreigners cannot own
more than 49 percent of the company in several industries in the UAE. Although these tariffs
and ownership issues are not barriers to entry, they affect the company’s profitability,
revenues and overall growth
Marketing And Promotional Strategies- Based on Nike’s under performance in many
foreign markets, it is likely that its marketing strategy in different regions may not include
teams or individual’s native to those regions and this has resulted into a crisis. Nike should
employee locals for its marketing departments for various countries in which it operates
because people from those countries understand consumer behaviours and how they make
choices on products. Consequently, the company must review its marketing strategies to
target locals based upon the best needs that fit that specific country. Moreover, the
company relies on expensive, sports celebrities to endorse its products. It is possible that
Nike has not found suitable endorsers in certain developing countries.

3) From a company and product branding perspective, what additional thoughts do you
have that You think would be useful for Nike to consider?
Ans: From a company and product branding perspective the additional thoughts that I think
would be useful for Nike to consider are as follows:
Go Green- Nowadays, People are supporting the environmentally friendly product due to
the global warming is getting serious. Nike also starts to design shoe which using little
quantities of detrimental adhesives and more of recycle material to produce the product.
Market Research- Nike must conduct market research in developing countries to
understand advertisement messages that appeal to consumers. Nike’s quality solution to
the completion crisis relates to their understanding of the market functioning as per the
right market attributes that play an important role in creating more customer loyalty.
Promotion- Nike must review its marketing and promotional team in different countries.
The marketing department requires a different staff set up to deal with the changing times.
Currently, Adidas has embarked on fierce marketing campaigns to outdo Nike. A quality staff
engagement relates to the qualitative adjustment in the marketing performance. New
marketing officials will come up with a different approach in addressing the related market
conditions that are irrelevant now.
Collaboration- Nike manufactures sportswear for so many years. However, the company
has sought for new opportunities in fashion market. In my suggestion, Nike collaborates
with G.A.P Company. G.A.P has very good reputation in producing clothes, with wider range
of varieties. It is possible to come up with a new clothing line for sports with GAP in order to
boost up sales worldwide, which would indirectly increase brand awareness as well as
recognition by the public as the prior reason for such collaboration is the consumers.
Change of Management Styles- The changing of the management styles of Nike towards the
manufacture in third world country. Nike can try to train some manager to send to the
manufacturer factory in third world countries to guide the management style of the
countries. Those managers can control the management style of the factory. For example,
the wages pay, raw material usage, the working condition and the working environment.
Research of New Technology- In year 2010, Nike had done a research and development in
raw material to produce jersey. The research they done actually is use the recycled plastic
bottle to produce jersey. So, to overcome the problem of the price of raw material and the
shortage of raw material in the market, Nike can try to do more effort in research and
development department to find out more new material which is existing in the market no
matter is renewable or unrenewable raw material. The new material needs to be
environmentally friendly; this actually will help the growth of awareness of the global
towards Nike product because due to the high education level of public, there are more and
more public who care about the pollution of earth.
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https://www.google.com/search?
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0i10l9.7882j0j4&sourceid=chrome&ie=UTF-8

https://quizlet.com/424812673/logistics-management-short-answer-exam-1-flash-cards/

https://testallbank.com/sample2/supply-chain-management-a-logistics-perspective-10th-
edition-coyle-solutions-manual.pdf

https://www.ukessays.com/essays/marketing/impacts-of-globalization-on-nikes-
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https://books.google.com/books/about/Supply_Chain_Management_A_Logistics_Pers.html?
id=3Gf6DwAAQBAJ

https://ivypanda.com/essays/nike-company-analysis-in-developing-countries/