Vietnam has replaces China as Nike's biggest production base due to cheaper labor costs. (Photo/CFP)
Vietnam succeeds China to become the top producer of Nike shoes in the financial year that ended May 31, 2010.
According to Cain.com, Nike outsources the production of its shoes to the cheapest manufacturers overseas. China was its top contract producer in 2000, with the largest share of 40 percent. Back then, Vietnam had a 13 percent share.
However, by 2005, Vietnam managed to climb to second place, with a share of 26 percent, while China managed to hold on to the top position even though its share in production declined to 36 percent.
In 2009, Vietnam tied with China for first place, both with shares of 36 percent. Then, in 2010, it finally displaced China as the top manufacturer for Nike by claiming a 37 percent share in production, compared with 34 percent for China.
Quoting Nike Inc, Cain.com said that labor costs accounted for a large share of the prices of the company's shoes and had to be kept below 24 percent of prices to stay competitive.
Over the past three decades, Nike outsourced the production of its shoes initially to Japan, then to South Korea and Taiwan.
After production costs in South Korea and Taiwan increased and lowered Nike's profits, the company shifted production to the Philippines, Thailand and Malaysia.
Nike chose China over India for producing its shoes in 1981. Indeed, China remained its top contract manufacturer until 2010.
Indonesia was the third-largest manufacturer of Nike shoes in 2010, and along with the top two manufacturers, accounted for 94 percent of the output of Nike shoes, according to Cain.com.
The 2010 financial report is the latest available report for Nike.
Zhou Jiping is general manager of PetroChina, the listed arm of the state-run China National Petroleum Corporation (CNPC) and is recognized as a senior engineer with over thirty years experience in ...