Costs of Production Cost of Goods Sold Nike’s cost of goods sold (COGS) is provided in Table 1, showing the company’s COGS have increased in the last five years, mainly due to the increase in the price of raw materials including thread and leather. The major portion of COGS included inventory costs. The cost of warehousing and transport also affected the company’s COGS.                     2012    2013    2014    2015    2016   Cost of Goods Sold  13,657  14,279  15,353  16,534  17,405  Table 1: Cost of Goods Sold. Source: (Nike Inc B, 2016). Total Operating Expenses The company’s total operating expenses for the last five years are provided in Table 2. These expenses, which include labor cost, have increased over that time period.                           2012   2013   2014   2015   2016   Total Operating Expenses  7,431  7,780  8,766  9,892  10,469  Table 2: Total Operating Expenses. Source: (Nike Inc B, 2016). Net Income The company’s sales increased at a higher growth rate than its COGS and total operating expenses in the last five years, allowing the company to report higher net income in each of the last five years (See Table 3). The COGS and operating expenses significantly affect the company’s profitability because its operations are highly labor intensive. The increase in the price of raw materials has a negative effect on the product’s price. The increase in the product’s cost reduces the company’s profitability.             2012   2013   2014   2015   2016  Net Income  2,233  2,485  2,693  3,273  3,760  Table 3: Net Income. Source: (Nike Inc B, 2016). Classification of Costs Cost analysis of Nike indicates that there are two types of costs reported by the company: fixed costs and variable costs. The fixed costs are not affected by the company’s sales but the company cannot avoid them. On the other hand, the company’s sales determine the total variable costs. They vary according to the level of business activity. The following tables provide classification of fixed and variable costs as reported by the company. Classification of Variable Costs        Cost of Sales                           Inventory costs                         Warehousing costs                       Third-party royalties                   Foreign currency hedge gains and losses Research, design, and development costs Outbound shipping and handling costs     Table 4: Variable Costs. Source: (Nike – Form 10-K 2016, 2016). Classification of Fixed Costs     Administrative salaries           Distribution cost                 Promotional expenses              Advertisement cost                Lease expense                     Payroll and benefit related costs Depreciation and amortization     Professional services             Meetings                          Travel                             Table 5: Fixed Costs. Overall Market Global Market Share The global athletic footwear market is highly diverse and not concentrated. Many famous brands dominate the global athletic footwear market. These leading companies have international operations as they have various production units located in different countries. However, small manufacturers also sell their products in local