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Nike strategic management Nike strategic management Document Transcript

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  • 2 TURGAY ARIKAN HATİCE AKAN ELÇİN KARABULUT FATMA MERVE GÜVEN
  • 3 CONTENTS 1. EXECUTIVE SUMMARY…………….……………………………………………...…….…6 2. NIKE OVERVIEW………………………..…………………………………………………...8 2.1. HISTORY………………………………..………………………………………………….....8 2.2. ORIGIN OF THE NAME AND THE SWOOSH………………………………………....…18 2.3. ORGANIZATION CHART OF NIKE ……………………..…………………………...…...19 2.4. MISION AND VISION STATEMENTS OF NIKE……………….…………………...…....22 2.4.1. NIKE's VISSION...…………………………………………………….………………..….22 2.4.2. NIKE‘s MISSION....…………………………………………………..…………………...23 2.5. PRODUCTS OF NIKE ……………..……………………….………………………….…....24 2.5.1. FOR MEN AND WOMEN.................…..……………………………….………………...25 2.5.2. WIND RUNNER AND SHELLS..................…………………………………………....…26 2.5.3. THISRT...................……………………………….………………………………….…....26 2.5.4. GEAR PACKBAGES AND BAGES.…………...………………………….……………...26 2.6.NIKE PORTFOLIO OF BRAND..........…………….……………………..……….……....27 2.6.1.CONVERSE…..……………………………………….…………………….……….…..…28 2.6.2.HARLEY.......……………..………………………….…………………….…….………....28 2.6.3.JORDAN..…………………………………………….…………………….……………....28 2.6.4.COLLEHAN………………………………………….…………………….………….….29 2.6.5.BAUER………………………………..……………….…………………….……………...29 3. EXTERNAL ANALYSIS……………………………………………………..………………29 3.1. POLITICAL FORCES……………………………………………………………………….29 3.2. ECONOMIC FORCES……………………………….…………………..……...………......30 3.3.SOCIAL CULTURAL FORCES………………………………………………….……….....30 3.4. TECHNOLOGICAL FORCES…..……………………………………………..…………....30 3.5. ENVIRONMENTAL FORCES…..……………………………………………..…………...31 3.6. LEGAL FORCES…..…………………………………………………………..………….....31 3.7. GEOPAPRICAL FORCES……….……………………………………………..…………....31 3.8. INTERNATIONAL FORCES….…….………………………………………..………….....32 3.9. EFE MATRIX……………………….…………………………………………...…………..32 4. PORTERS FIVE FORCES MODEL……………………………………………….…….…33 4.1. POTENTIAL ENTRANTS……………..………………………………………………..…..34 4.2. BUYERS…………………………………………………………………………………….34 4.3. SUBSTITUTES……………………………...………………………………………...…....35 4.4. SUPLIERS…..……………………………...………………………………………...…....…35 4.5. COMPETITIVE RIVARLY………………...………………………………………...……...36 4.6. COMPETITIVE PROFILE MATRIX…………..……………………………………………36 4.6.1. MAJOR COMPETITIORS………..…………..……………………………………………36 4.6.2.COMMENT ABOUT CHART….…………..………………………………………..…….38 5. INTERNAL ANALYSIS…………………………………………………………..…………41 5.1. NIKE MANAGEMENT STRUCTURE…………..…………………………………..……41 5.2. MARKETING………………………………………...……………………………..……….42 View slide
  • 4 5.3. R&D …………………………………………………...…..………………………….……...45 5.4..PRODUCTION SYSTEM.......……………………...…..………………………….…....…...47 5.5.OPERATION MANAGENT OF NIKE....…………...…..…...……………………….…….48 5.6. FINANCE…………………………………………………….………………………..…..…48 5.7. IFE MATRIX…………………………………………………………………..………….…57 6.STRATEGY ANALYSIS (CREATE ALTERNATIVE STRATEGY)……………………59 6.1. SWOT ANALYSIS…………………………...………………….…………………………59 6.2. SPACE MATRIX……………………………….…………………..………………………63 6.3. BCG MATRIX…………………………………………………….…………………………65 6.4. INTERNAL - EXTERNAL ANLYSIS………………………………………………………68 6.5. GRAND STRATEGY MARTIX………………………………………….…………………69 7. STRATEGY SELECTION (CHOICE) AND RECOMMENDATIONS …………..……..70 7.1. QUANTITY STRATEGIC POSITION MATRIX...…………………………………..……70 7.2. FIRST RECOMMENDATION……………………………………………………..………72 7.3. SECOND RECOMMENDATION……………………...………………….………………73 7.4. THIRD RECOMMENDATION……………………………………....……………………73 8. STRATEGY IMPLEMENTATION……………………………..……….…………………74 8.1. MANAGEMENT AND OPERATIONS…………………………….……..………………74 8.2. MARKETING……………………………………………………….………..…………….75 8.3. FINANCE…………………………………………………….........…………….…………76 8.4. RESEACH AND DEVELOPMENT.………………………………..…………….…………77 9. STRATEGY EVALUATION AND CONTROL…………………………….………….…77 9.1. Evaluation………………………………….…………………………………….…………79 9.2. Balance score Card of Nike………………….………………………………….…………80 10. CONCLUSION…………………………………...………………………..………………81 BIBLIOGRAPHIC……………………………………………..………………………………82 View slide
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  • 6 ABSTRACT We analyze Blue Rıbbon Sports and NIKE Company that under of its successful group and Nıke Company’s products, market position, competitors, brand power , financial growth, partnerships, organization structure , suppliers and vision & mission in this project. Also we made up matrixes according to the general data of NIKE Company and defined our strategies. Finally, we proposed in order to be effectively about the profitability and productivity of the company in market. NIKE'S EXECUTIVES This report is an extensive research on the marketing strategies of NIKE. It covers an extensive matrix and depicts all graphs, fact and figures of NIKE. Orıgınally known as Blue Rıbbon Sports (BRS) was founded by Unıversıty of Oregon track athlete Phılıp knıght and hıs coach Bill Bowerman ın January 1964.The company is headquartered near Beaverton ,Oregon, in the Portland metropolitan area, and is one of only two Fortune 500 companies headquartered in Oregon. It is one of the world's largest suppliers of athletic shoes and apparel[3] and a major manufacturer of sports equipment, with revenue in excess of US$24.1 billion in its fiscal year 2012 (ending May 31, 2012). As of 2012, it employed more than 44,000 people worldwide. The brand alone is valued at $10.7 billion, making it the most valuable brand among sports businesses. In 1976, the company hired John Brown and Partners, based in Seattle, as its first advertising agency. The following year, the agency created the first "brand ad" for Nike, called "There is no finish line", in which no Nike product was shown. By 1980, Nike had attained a 50% market share in the U.S. athletic shoe market, and the company went public in December of that year. We analyze Nike’s management,financial position,marketing activity,production and operation facility, economomic forces,research and development activity,environmental factors.According these results,we offer to the company strategy.The External Factor Evaluation (EFE) Matrix analysed which the company develops which opportunities in the market the company can get and which threats the company should be avoided in the market area. Porter’s 5 forces model has analysed to see how environmental forces effect the business for doing job. and Company’s competitors has been anaysed and reported in Competitive Profile Matrix. The internal Factor Evaluation ( İFE ) Matrix briefly explained that the strong sides of internal factors that company is good and weakness sides of the company that the company should improve internally. In formulating strategy, we formulated some strategies by evaluating SWOT, SPACE, INTERNAL-EXTERNAL,GRAND strategy, we found out suitable strategies to implement in QSPM for selecting and recommend main strategy. Fınally, we analyze effectiveness of our strategy with Balance scorecard and evaluation stage. As a result, we summarize all our stages in our Project.
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  • 8 NIKE OVERWIEW NIKE HISTORY Founded as an importer of Japanese shoes, NIKE, Inc. (Nike) has grown to be the world's largest marketer of athletic footwear and apparel. In the United States, Nike products are sold through about 20,000 retail accounts; worldwide, the company's products are sold in about 110 countries. Both domestically and overseas Nike operates retail stores, including NikeTowns and factory outlets. Nearly all of the items are manufactured by independent contractors, primarily located overseas, with Nike involved in the design, development, and marketing. In addition to its wide range of core athletic shoes and apparel, the company also sells Nike and Bauer brand athletic equipment, Cole Haan brand dress and casual footwear, and the Sports Specialties line of headwear featuring licensing team logos. The company has relied on consistent innovation in the design of its products and heavy promotion to fuel its growth in both U.S. and foreign markets. The ubiquitous presence of the Nike brand and its Swoosh trademark led to a backlash against the company by the late 20th century, particularly in relation to allegations of low wages and poor working conditions at the company's Asian contract manufacturers. BRS Beginnings Nike's precursor originated in 1962, a product of the imagination of Philip H. Knight, a Stanford University business graduate who had been a member of the track team as an undergraduate at the University of Oregon. Traveling in Japan after finishing up business school, Knight got in touch with a Japanese firm that made athletic shoes, the Onitsuka Tiger Co., and arranged to import some of its products to the United States on a small scale. Knight was convinced that Japanese running shoes could become significant competitors for the German products that then dominated the American market. In the course of setting up his agreement with Onitsuka Tiger, Knight invented Blue Ribbon Sports to satisfy his Japanese partner's expectations that he represented an actual company, and this hypothetical firm eventually grew to become Nike, Inc. At the end of 1963, Knight's arrangements in Japan came to fruition when he took delivery of 200 pairs of Tiger athletic shoes, which he stored in his father's basement and peddled at various track meets in the area. Knight's one-man venture became a partnership in the following year, when his former track coach, William Bowerman, chipped in $500 to equal Knight's investment. Bowerman had long been experimenting with modified running shoes for his team, and he worked with runners to improve the designs of prototype Blue Ribbon Sports (BRS) shoes. Innovation in running shoe design eventually would become a cornerstone of the company's continued expansion and success. Bowerman's efforts first paid off in 1968, when a shoe known as the Cortez, which he had designed, became a big seller.
  • 9 BRS sold 1,300 pairs of Japanese running shoes in 1964, its first year, to gross $8,000. By 1965 the fledgling company had acquired a full-time employee and sales had reached $20,000. The following year, the company rented its first retail space, next to a beauty salon in Santa Monica, California, so that its few employees could stop selling shoes out of their cars. In 1967 with fast-growing sales, BRS expanded operations to the East Coast, opening a distribution office in Wellesley, Massachusetts.Bowerman's innovations in running shoe technology continued throughout this time. A shoe with the upper portion made of nylon went into development in 1967, and the following year Bowerman and another employee came up with the Boston shoe, which incorporated the first cushioned mid-sole throughout the entire length of an athletic shoe. Emergence of Nike in 1970s By the end of the decade, Knight's venture had expanded to include several stores and 20 employees and sales were nearing $300,000. The company was poised for greater growth, but Knight was frustrated by a lack of capital to pay for expansion. In 1971 using financing from the Japanese trading company Nissho Iwai Corporation, BRS was able to manufacture its own line of products overseas, through independent contractors, for import to the United States. At this time, the company introduced its Swoosh trademark and the brand name Nike, the Greek goddess of victory. These new symbols were initially affixed to a soccer shoe, the first Nike product to be sold. A year later, BRS broke with its old Japanese partner, Onitsuka Tiger, after a disagreement over distribution, and kicked off promotion of its own products at the 1972 U.S. Olympic Trials, the first of many marketing campaigns that would seek to attach Nike's name and fortunes to the careers of well-known athletes. Nike shoes were geared to the serious athlete, and their high performance carried with it a high price. In their first year of distribution, the company's new products grossed $1.96 million and the corporate staff swelled to 45. In addition, operations were expanded to Canada, the company's first foreign market, which would be followed by Australia, in 1974.Bowerman continued his innovations in running-shoe design with the introduction of the Moon shoe in 1972, which had a waffle-like sole that had first been formed by molding rubber on a household waffle iron. This sole increased the traction of the shoe without adding weight. In 1974 BRS opened its first U.S. plant, in Exeter, New Hampshire. The company's payroll swelled to 250, and worldwide sales neared $5 million by the end of 1974. This growth was fueled in part by aggressive promotion of the Nike brand name. The company sought to expand its visibility by having its shoes worn by prominent athletes, including tennis players Ilie Nastase and Jimmy Connors. At the 1976 Olympic Trials these efforts began to pay off as Nike shoes were worn by rising athletic stars.The company's growth had truly begun to take off by this time, riding the boom in popularity of jogging that took place in the United States in the late 1970s. BRS revenues tripled in two years to $14 million in 1976, and then doubled in just one year to $28 million in 1977. To keep up with demand, the
  • 10 company opened new factories, adding a stitching plant in Maine and additional overseas production facilities in Taiwan and Korea. International sales were expanded when markets in Asia were opened in 1977 and in South America the following year. European distributorships were lined up in 1978. Nike continued its promotional activities with the opening of Athletics West, a training club for Olympic hopefuls in track and field, and by signing tennis player John McEnroe to an endorsement contract. In 1978 the company changed its name to Nike, Inc. The company expanded its line of products that year, adding athletic shoes for children.By 1979 Nike sold almost half the running shoes bought in the United States, and the company moved into a new world headquarters building in Beaverton, Oregon. In addition to its shoe business, the company began to make and market a line of sports clothing, and the Nike Air shoe cushioning device was introduced. 1980s Growth through International Expansion and Aggressive Marketing By the start of the 1980s, Nike's combination of groundbreaking design and savvy and aggressive marketing had allowed it to surpass the German athletic shoe company Adidas AG, formerly the leader in U.S. sales. In December 1980, Nike went public, offering two million shares of stock. With the revenues generated by the stock sale, the company planned continued expansion, particularly in the European market. In the United States, plans for a new headquarters on a large, rural campus were inaugurated, and an East Coast distribution center in Greenland, New Hampshire, was brought on line. In addition, the company bought a large plant in Exeter, New Hampshire, to house the Nike Sport Research and Development Lab and also to provide for more domestic manufacturing capacity. The company had shifted its overseas production away from Japan at this point, manufacturing nearly four-fifths of its shoes in South Korea and Taiwan. It established factories in mainland China in 1981. By the following year, when the jogging craze in the United States had started to wane, half of the running shoes bought in the United States bore the Nike trademark. The company was well insulated from the effects of a stagnating demand for running shoes, however, since it gained a substantial share of its sales from other types of athletic shoes, notably basketball shoes and tennis shoes. In addition, Nike benefited from strong sales of its other product lines, which included apparel, work and leisure shoes, and children's shoes. Given the slowing of growth in the U.S. market, however, the company turned its attention to growth in foreign markets, inaugurating Nike International, Ltd. in 1981 to spearhead the company's push into Europe and Japan, as well as into Asia, Latin America, and Africa. In Europe, Nike faced stiff competition from Adidas and Puma, which had a strong hold on the soccer market, Europe's largest athletic shoe category. The company opened a factory in Ireland to enable it to distribute its shoes without paying high import tariffs, and in 1981 bought out its distributors in England and Austria, to strengthen its control over marketing and distribution of its products. In 1982 the company
  • 11 outfitted Aston Villa, the winning team in the English and European Cup soccer championships, giving a boost to promotion of its new soccer shoe. In Japan, Nike allied itself with Nissho Iwai, the sixth largest Japanese trading company, to form Nike-Japan Corporation. Because Nike already held a part of the low-priced athletic shoe market, the company set its sights on the high-priced end of the scale in Japan. By 1982 the company's line of products included more than 200 different kinds of shoes, including the Air Force I, a basketball shoe, and its companion shoe for racquet sports, the Air Ace, the latest models in the long line of innovative shoe designs that had pushed Nike's earnings to an average annual increase of almost 100 percent. In addition, the company marketed more than 200 different items of clothing. By 1983--when the company posted its first-ever quarterly drop in earnings as the running boom peaked and went into a decline-- Nike's leaders were looking to the apparel division, as well as overseas markets, for further expansion. In foreign sales, the company had mixed results. Its operations in Japan were almost immediately profitable, and the company quickly jumped to second place in the Japanese market, but in Europe, Nike fared less well, losing money on its five European subsidiaries. Faced with an 11.5 percent drop in domestic sales of its shoes in the 1984 fiscal year, Nike moved away from its traditional marketing strategy of support for sporting events and athlete endorsements to a wider-reaching approach, investing more than $10 million in its first national television and magazine advertising campaign. This followed the 'Cities Campaign,' which used billboards and murals in nine American cities to publicize Nike products in the period before the 1984 Olympics. Despite the strong showing of athletes wearing Nike shoes in the 1984 Los Angeles Olympic games, Nike profits were down almost 30 percent for the fiscal year ending in May 1984, although international sales were robust and overall sales rose slightly. This decline was a result of aggressive price discounting on Nike products and the increased costs associated with the company's push into foreign markets and attempts to build up its sales of apparel. Earnings continued to fall in the next three quarters as the company lost market share, posting profits of only $7.8 million at the end of August 1984, a loss of $2.2 million three months later, and another loss of $2.1 million at the end of February 1985. In response, Nike adopted a series of measures to change its sliding course. The company cut back on the number of shoes it had sitting in warehouses and also attempted to fine-tune its corporate mission by cutting back on the number of products it marketed. It made plans to reduce the line of Nike shoes by 30 percent within a year and a half. In addition, leadership at the top of the company was streamlined, as founder Knight resumed the post of president--which he had relinquished in 1983--in addition to his duties as chairman and chief executive officer. Overall administrative costs were also reduced. As part of this effort, Nike also consolidated its research and marketing branches, closing its facility in Exeter, New Hampshire, and cutting 75 of the plant's 125 employees. Overall, the company laid off about 400 workers during 1984.
  • 12 Faced with shifting consumer interests (i.e., the U.S. market move from jogging to aerobics), the company created a new products division in 1985 to help keep pace. In addition, Nike purchased Pro-form, a small maker of weightlifting equipment, as part of its plan to profit from all aspects of the fitness movement. The company was restructured further at the end of 1985 when its last two U.S. factories were closed and its previous divisions of apparel and athletic shoes were rearranged by sport. In a move that would prove to be the key to the company's recovery, in 1985 the company signed basketball player Michael Jordan to endorse a new version of its Air shoe, introduced four years earlier. The new basketball shoes bore the name 'Air Jordan.' In early 1986 Nike announced expansion into a number of new lines, including casual apparel for women, a less expensive line of athletic shoes called Street Socks, golf shoes, and tennis gear marketed under the name 'Wimbledon.' By mid-1986 Nike was reporting that its earnings had begun to increase again, with sales topping $1 billion for the first time. At that point, the company sold its 51 percent stake in Nike-Japan to its Japanese partner; six months later, Nike laid off ten percent of its U.S. employees at all levels in a major cost-cutting strategy. Following these moves, Nike announced a drop in revenues and earnings in 1987, and another round of restructuring and budget cuts ensued, as the company attempted to come to grips with the continuing evolution of the U.S. fitness market. Only Nike's innovative Air athletic shoes provided a bright spot in the company's otherwise erratic progress, allowing the company to regain market share from rival Reebok International Ltd. in several areas, including basketball and cross-training. The following year, Nike branched out from athletic shoes, purchasing Cole Haan, a maker of casual and dress shoes, for $80 million. Advertising heavily, the company took a commanding lead in sales to young people to claim 23 percent of the overall athletic shoe market. Profits rebounded to reach $100 million in 1988, as sales rose 37 percent to $1.2 billion. Later that year, Nike launched a $10 million television campaign around the theme 'Just Do It' and announced that its 1989 advertising budget would reach $45 million. In 1989 Nike marketed several new lines of shoes and led its market with $1.7 billion in sales, yielding profits of $167 million. The company's product innovation continued, including the introduction of a basketball shoe with an inflatable collar around the ankle, sold under the brand name Air Pressure. In addition, Nike continued its aggressive marketing, using ads featuring Michael Jordan and actor-director Spike Lee, the ongoing 'Just Do It' campaign, and the 'Bo Knows' television spots featuring athlete Bo Jackson. At the end of 1989, the company began relocation to its newly constructed headquarters campus in Beaverton, Oregon. Market Dominance in the Early to Mid-1990s
  • 13 In 1990 the company sued two competitors for copying the patented designs of its shoes and found itself engaged in a dispute with the U.S. Customs Service over import duties on its Air Jordan basketball shoes. In 1990 the company's revenues hit $2 billion. The company acquired Tetra Plastics Inc., producers of plastic film for shoe soles. That year, the company opened NikeTown, a prototype store selling the full range of Nike products, in Portland, Oregon. By 1991 Nike's Visible Air shoes had enabled it to surpass its rival Reebok in the U.S. market. In the fiscal year ending May 31, 1991, Nike sales surpassed the $3 billion mark, fueled by record sales of 41 million pairs of Nike Air shoes and a booming international market. Its efforts to conquer Europe had begun to bear fruit; business there grew by 100 percent that year, producing more than $1 billion in sales and gaining the second place market share behind Adidas. Nike's U.S. shoe market had, in large part, matured, slowing to five percent annual growth, down from 15 percent annual growth from 1980 and 1988. The company began eyeing overseas markets and predicted ample room to grow in Europe. Nike's U.S. rival Reebok, however, also saw potential for growth in Europe, and by 1992 European MTV was glutted with athletic shoe advertisements as the battle for the youth market heated up between Nike, Reebok, and their European competitors, Adidas and Puma.Nike also saw growth potential in its women's shoe and sports apparel division. In February 1992 Nike began a $13 million print and television advertising pitch for its women's segment, built upon its 'Dialogue' print campaign, which had been slowly wooing 18- to 34-year-old women since 1990. Sales of Nike women's apparel lines Fitness Essentials, Elite Aerobics, Physical Elements, and All Condition Gear increased by 25 percent in both 1990 and 1991 and jumped by 68 percent in 1992. In July 1992 Nike opened its second NikeTown retail store in Chicago, Illinois. Like its predecessor in Portland, the Chicago NikeTown was designed to 'combine the fun and excitement of FAO Schwartz, the Smithsonian Institute and Disneyland in a space that will entertain sports and fitness fans from around the world' as well as provide a high- profile retail outlet for Nike's rapidly expanding lines of footwear and clothing. Nike celebrated its 20th anniversary in 1992, virtually debt free and with company revenues of $3.4 billion. Gross profits jumped $100 million in that year, fueled by soaring sales in its retail division, which expanded to include 30 Nike-owned discount outlets and the two NikeTowns. To celebrate its anniversary, Nike brought out its old slogan 'There is no finish line.' As if to underscore that sentiment, Nike Chairman Philip Knight announced massive plans to remake the company with the goal of being 'the best sports and fitness company in the world.' To fulfill that goal, the company set the ground plans for a complicated yet innovative marketing structure seeking to make the Nike brand into a worldwide megabrand along the lines of Coca-Cola, Pepsi, Sony, and Disney. Nike continued expansion of its high-profile NikeTown chain, opening outlets in Atlanta, Georgia, in the spring of 1993 and Costa Mesa, California, later that year. Also in 1993, as part of its long- term marketing strategy, Nike began an ambitious venture with Mike Ovitz's Creative Artists Agency to organize and package sports events under the Nike name--a move that potentially
  • 14 led the company into competition with sports management giants such as ProServ, IMG, and Advantage International. Nike also began a more controversial venture into the arena of sports agents, negotiating contracts for basketball's Scottie Pippin, Alonzo Mourning, and others in addition to retaining athletes such as Michael Jordan and Charles Barkley as company spokespersons. Nike's influence in the world of sports grew to such a degree that in 1993 Sporting News dubbed Knight the most powerful man in sports.Critics contended that Nike's influence ran too deep, having its hand in negotiating everything in an athlete's life from investments to the choice of an apartment. But Nike's marketing executives saw it as part of a campaign to create an image of Nike not just as a product line but as a lifestyle, a 'Nike attitude.’Nearly everyone agreed, however, that Nike was the dominant force in athletic footwear in the early to mid- 1990s. The company held about 30 percent of the U.S. market by 1995, far outdistancing the 20 percent of its nearest rival, Reebok. Overseas revenues continued their steady rise, reaching nearly $2 billion by 1995, about 40 percent of the overall total. Not content with its leading position in athletic shoes and its growing sales of athletic apparel--which accounted for more than 30 percent of revenues in 1996--Nike branched out into sports equipment in the mid-1990s. In 1994 the company acquired Canstar Sports Inc., the leading maker of skates and hockey equipment in the world, for $400 million. Canstar was renamed Bauer Nike Hockey Inc., Bauer being Canstar's brand name for its equipment. Two years later Bauer Nike became part of the newly formed Nike equipment division, which aimed to extend the company into the marketing of sport balls, protective gear, eyewear, and watches. Also during this period, Nike signed up its next superstar spokesperson, Tiger Woods. In 1995, at the age of 20, Woods agreed to a 20-year, $40 million endorsement contract. The golf phenom went on to win an inordinate number of tournaments, often shattering course records, and to become only the second golfer in history to win three 'majors' within a single year, more than validating the blockbuster contract. Late 1990s Slippage For the fiscal year ending in May 1997, Nike earned a record $795.8 million on record revenues of $9.19 billion. Overseas sales played a large role in the 42 percent increase in revenues from 1996 to 1997. Sales in Asia increased by more than $500 million (to $1.24 billion), while European sales surged ahead by $450 million. Back home, Nike's share of the U.S. athletic shoe market neared 50 percent. The picture at Nike soon turned sour, however, as the Asian financial crisis that erupted in the summer of 1997 sent sneaker sales in that region plunging. By fiscal 1999, sales in Asia had dropped to $844.5 million. Compounding the company's troubles was a concurrent stagnation of sales in its domestic market, where the fickle tastes of teenagers began turning away from athletic shoes to hiking boots and other casual 'brown shoes.' As a result, overall sales for 1999 fell to $8.78 billion. Profits were falling as well--including a net loss of $67.7 million for the fourth quarter of fiscal 1998, the company's first reported loss in more than 13 years. The decline in net income led to a cost-
  • 15 cutting drive that included the layoff of five percent of the workforce, or 1,200 people, in 1998, and the slashing of its budget for sports star endorsements by $100 million that same year. Nike was also dogged throughout the late 1990s by protests and boycotts over allegations regarding the treatment of workers at the contract factories in Asia that employed nearly 400,000 people and that made the bulk of Nike shoes and much of its apparel. Charges included abuse of workers, poor working conditions, low wages, and use of child labor. Nike's initial reaction--which was highlighted by Knight's insistence that the company had little control over its suppliers--resulted in waves of negative publicity. Protesters included church groups, students at universities that had apparel and footwear contracts with Nike, and socially conscious investment funds. Nike finally announced in mid-1998 a series of changes affecting its contract workforce in Asia, including an increase in the minimum age, a tightening of air quality standards, and a pledge to allow independent inspections of factories. Nike nonetheless remained under pressure from activists into the 21st century. Nike, along with McDonald's Corporation, the Coca-Cola Company, and Starbucks Corporation, among others, also became an object of protest from those who were attacking multinational companies that pushed global brands. This undercurrent of hostility burst into the spotlight in late 1999 when some of the more aggressive protesters against a World Trade Organization meeting in Seattle attempted to storm a NikeTown outlet. Seeking to recapture the growth of the early to mid-1990s, Nike pursued a number of new initiatives in the late 1990s. Having initially missed out on the trend toward extreme sports (such as skateboarding, mountain biking, and snowboarding), Nike attempted to rectify this miscue by establishing a unit called ACG&mdash⁄ort for 'all-conditions gear'--in 1998. Two years later, the company created a new division called Techlab to market a line of sports- technology accessories, such as a digital audio player, a high-altitude wrist compass, and a portable heart-rate monitor. Both of these initiatives were aimed at capturingsales from the emerging Generation Y demographic group. In early 1999 Nike began selling its shoes and other products directly to consumers via the company web site. Nike announced in September of that year that it would buy about ten percent of Fogdog Inc., which ran a sporting goods e- commerce site, in exchange for granting Fogdog the exclusive online rights to sell the full Nike line. The company finally earned some good publicity in 1999 when it sponsored the U.S. national women's soccer team that won the Women's World Cup. With its record of innovative product design and savvy promotion and an aggressive approach to containing costs and revitalizing sales, Nike appeared likely to stage an impressive comeback in the early 21st century. Nike History Timeline Info 1950's • Phil Knight and Bill Bowerman meet
  • 16 1960's • Blue Ribbon Sports (BRS) was made and founded by Phil Knight • The popular Cortez aka "Dope Mans" are made in Japan 1970's • The Swoosh logo is created by Carolyn Davidson for $35.00 • The first Nike model shoe to hit the retail market is a soccer/football shoe • A Promo Nike Tee becomes the first apparel item • The famous Waffle Trainer is introduced, which becomes the best selling shoe in the US • Nike’s racing and training spiked shoe is made called the "Elite" • Factories for manufacturing are set up in Korea and Taiwan • For the first time Nike shoes are sold in Asia • Blue Ribbon Sports changes their company name to Nike Inc. • The first Nike running shoe with a air sole system to come out is the "Tailwind" • World Headquarters are opened in Beaverton, Oregon 1980's • Nike talks with the P.R. of China so they can produce shoes there • Nike shoes become Canada’s top seller • Nike shoes are now produced in 11 countries • The famous "NIKE AIR" Air Force 1 and Air Ace make their introduction • Over 200 shoes are now in Nike’s footwear line • The first high performance kid’s running shoe is called the "Destiny" • The Air Jordan makes it’s way to Nike footwear line up • The Sock Racer comes out and is part of the Dynamic-Fit technology • The first Air Max • The first Cross Trainer
  • 17 • The famous "Just Do It" slogan comes to life • The first model to combine the footbridge device and Air Sole is the Air Stab • Spike Lee’s "Mars Blackmon" character helps promote the third style of Air Jordan • Bo Jackson’s "Bo Knows" commercials include the "Just Do It" slogan • Nike moves to a new World Campus in Beaverton 1990's • The new World Campus sits on 74 acres with 570,000 square feet. • In Portland, Oregon the first Nike Town opens • The intro of the Air Huarache running shoe • The intro of the Air Mowabb • Nike Town opens in Chicago • Charles Barkley first signature shoe is introduced • The intro of the Run Walk shoe • Nike Town opens in Atlanta and Orange County • The intro of dual pressure cushioning in the Air Max • Nike gets distribution rights in Korea and Japan • The intro of Zoom Air technology • Nike Town New York opens • The Air Penny comes to life 2000's • 2000: The National Football League declines to renew its exclusive • apparel licensing arrangement with Nike. • 2001: Nike opens its first Nike Goddess store, a unit targeting women, in Newport Beach, CA. • 2003: Nike purchases Converse Inc. for $ 305 million. • 2008 :Nike acquired sports apparel supplier Umbro,
  • 18 • 2009: Air Jordan Shoe • 2010: Nike Future Sole Design Competition. Origin of the Name and the Swoosh •is the Ancient Greek goddess of victoryNike “It is one of the most recognized symbols in the world – The Swoosh. Simple. Fluid. Fast.” Evolution of the Swoosh Logo
  • 19 BOARD OF DIRECTORS Philip H. Knight:Chairman of the Board of Directors Mr. Knight, 71, a director since 1968, is Chairman of the Board of Directors of NIKE. Mr. Knight is a co-founder of the Company and, except for the period from June 1983 through September 1984, served as its President from 1968 to 1990, and from June 2000 to 2004. Prior to 1968, Mr. Knight was a certified public accountant with Price Waterhouse and Coopers & Lybrand and was an Assistant Professor of Business Administration at Portland State University.
  • 20 MARK PARK:President & Chief Executive Officer, NIKE, Inc. Mr. Parker has been President and Chief Executive Officer and a director since 2006. He has been employed by NIKE since 1979 with primary responsibilities in product research, design and development, marketing, and brand management. Mr. Parker was appointed divisional Vice President in charge of development in 1987, corporate Vice President in 1989, General Manager in 1993, Vice President of Global Footwear in 1998, and President of the NIKE Brand in 2001. In addition to helping lead the continued growth of the Nike brand, Parker is responsible for the growth of NIKE, Inc.'s global business portfolio, which includes Converse Inc., and Hurley International LL David J. Ayre :Vice President, Global Human Resources Mr. Ayre, 50, joined NIKE as Vice President, Global Human Resources in July 2007.Prior to joining NIKE, he held a number of senior human resource positions with PepsiCo, Inc. since 1990, most recently as head of Talent and Performance Rewards. Donald W. Blair :Vice President and Chief Financial Officer Mr. Blair, 52, joined NIKE in November 1999. Prior to joining NIKE, he held a number of financial management positions with PepsiCo, Inc., including Vice President, Finance of Pepsi−Cola Asia, Vice President, Planning of PepsiCo’s Pizza Hut Division, and Senior Vice President, Finance of The Pepsi Bottling Group, Inc. Prior to joining PepsiCo, Mr. Blair was a certified public accountant with Deloitte, Haskins, and Sells
  • 21 Charles D. Denson:President of the NIKE Brand Mr. Denson, 54, has been employed by NIKE since 1979. Mr. Denson held several management positions within the Company, including his appointments as Director of USA Apparel Sales in 1994, divisional Vice President, U.S. Sales in 1994,divisional Vice President European Sales in 1997, divisional Vice President and General Manager, NIKE Europe in 1998, Vice President and General Manager of NIKE USA in 2000, and President of the NIKE Brand in 2001. Gary M. DeStefano :President, Global Operations Mr. DeStefano, 53, has been employed by NIKE since 1982, with primary responsibilities in sales and regional administration. Mr. DeStefano was appointed Director of Domestic Sales in 1990, divisional Vice President in charge of domestic sales in 1992, Vice President of Global Sales in 1996, Vice President and General Manager of Asia Pacific in 1997, President of USA Operations in 2001, and President of Global Operations in 2006. TREVOR EDWARD: As President of the NIKE Brand Edwards is responsible for leading all category and geographic business units, the Jordan Brand and Action Sports, which includes Hurley International LLC, Digital Sport and brand management throughout the world as well as leading NIKE's wholesale, retail and e-commerce operations.Edwards was previously Global Brand & Category Management Executive Vice President, where he was responsible for helping to drive the NIKE Brand growth strategy by leading its category business units globally.
  • 22 Mission Statement Nike aims to lead in corporate citizenship through proactive programs that reflect caring for the world family of Nike, our teammates, our consumers, and those who provide services to Nike.Nike is the "largest seller of athletic footwear and athletic apparel in the world. Performance and reliability of shoes, apparel, and equipment, new product development, price, product identity through marketing and promotion, and customer support and service are important aspects of competition in the athletic footwear, apparel, and equipment industry. We believe we are competitive in all of these areas." Jeanne P. Jackson :President, Direct to Consumer Ms. Jackson, 58, served as a member of the NIKE, Inc. Board of Directors from 2001 through March 2009, when she resigned from our Board and was appointed President, Direct to Consumer. She is founder and CEO of MSP Capital, a private investment company. Ms. Jackson was CEO of Walmart.com from March 2000 to January 2002. She was with Gap, Inc., as President and CEO of Banana Republic from 1995 to 2000, also serving as CEO of Gap, Inc. Direct from 1998 to 2000. Since 1978, she has held various retail management positions with Victoria’s Secret, The Walt Disney Company, Saks Fifth Avenue, and Federated Department Stores. Ms. Jackson is the past President of the United States Ski and Snowboard Foundation Board of Trustees, and is a director of McDonald’s Corporation. She is a former director of Nordstrom, Inc., and Harrah’s Entertainment, Inc.
  • 23 PROPOSED MISSION The company aims to " lead in corporate citizenship through proactive programs that reflect caring for the world family of Nike, our teammates, our consumers, and those who provide services to Nike." To continue to offer quality products with increasing growth in the industry and expanding globally. Our mission has always been to provide a competitive edge by developing the most technological products. Keeping in mind fair labor practices in all our suppliers’ factories, while maintaining a competitive advantage, with the shareholders interests, and company profits in mind. We also believe our employees are one of our most important assets. To increase the responsibility towards the environment by evaluating the impact of day to day operation and attempts to change operations that have a negative impact. Vision Statement “To bring inspiration and innovation to every athlete in the world.” To equip every athlete with products that combine performance, quality, and fashion. PROPOSED VISION Continue to bring inspiration to present and future athletes, while maintaining the company's standard of quality for its products.
  • 24 Nike future plan During its investor meeting in New York, the Company announced a revenue target of $27 billion by the end of fiscal 2018 based on growth expectations across its portfolio, which includes the NIKE Brand, Cole Haan, Converse, Hurley, Jordan Brand, NIKE Golf and Umbro. Additionally, the Company believes it can generate over $12 billion of cumulative free cash flow from operations through 2018. Both goals extend NIKE, Inc.’s long-term financial model of high single-digit revenue growth, mid-teens earnings per share growth, and expanding returns on capital. Nike expects to Increase its future orders for delivery.Nike will continue to focus their resources on those investments that drive sustainable and profitable growth. Nike anticipate its gross margins in fiscal 2011 may be negatively impacted by macroeconomic factors including changes in currency exchange rates and rising costs for product input costs. Nike expect demand creation will increase at a slightly slower rate than revenues, with spending weighted toward the first quarter driven by key events including the 2010 World Cup. The company anticipate operating overhead will grow at a mid single−digit rate, with faster growth in the first half of the fiscal year, driven by increased investments in NIKE−owned retail business. PRODUCTS Nike produces a wide range of sports equipment. Their first products were track running shoes. They currently also make shoes, jerseys, shorts, base layers etc. for a wide range of sports including track & field, baseball, ice hockey, tennis, Association football, lacrosse, basketball and cricket. The most recent additions to their line are the Nike 6.0 and Nike SB shoes, designed for skateboarding. Nike has recently introduced cricket shoes, called Air Zoom Yorker, designed to be 30% lighter than their competitors'. In 2008, Nike introduced the Air Jordan XX3, a high performance basketball shoe designed with the environment in mind.Nike positions its products in such a way as to try to appeal to a "youthful....materialistic crowd". It is positioned as a premium performance brand. However, it also engineers shoes and apparel for discount stores like Wal-Mart under the Starter brand. Nike sells an assortment of products, including shoes and a pararel for sports activities like association football, basketball, running, combat sports, tennis, American football, athletics, golf and cross training for men, women, and children. Nike also sells shoes for outdoor activities such as tennis, golf, skateboarding, association football, baseball, American football, cycling, volleyball, wrestling, cheerleading, aquatic activities, auto racing and other athletic and recreational uses. Nike is well known and popular in Youth culture, Chav Culture and Hip hop culture as they supply urban fashion clothing. Nike recently teamed up with Apple Inc. to produce the Nike+ product which monitors a runner's performance radio device in the shoe which links to the iPod nano. While the product generates useful statistics, it has been criticized by researchers who were able to identify users'R F I D devices from 60 feet (18 m) away using small, concealable intelligence motes in a wireless sensor network.
  • 25 In 2004, they launched the SPARQ Training Program/Division. It is currently the premier training program in the U.S. In the video game Gran Turismo 4 there is a car by Nike called the NikeOne 2022, designed by Phil Frank. For Men and Women: Shoes The Nike Air Force, now known as the Air Force 1 (or AF1 or AF-1) athletic shoe is a product of Nike, Inc. created by designer Bruce Kilgore. This was the first basketball shoe to use the Nike Air technology. This shoe is offered in low, mid and high top. Nike Max is a line of shoes first released by Nike in 1987. The shoe was originally designed by Tinker Hatfield, who started out working for Nike as an architect designing shops and offices; he also designed the Air Jordan shoe The shoe is given a simple outer design that consists of the Nike Swoosh symbol across the sides of the shoe and a streak across the lower portion of the outer sole. Leather was the first material used to construction the shoe Nike designers began a mission to re-craft iconic sports apparel in the most technical materials they could find. The ubiquitous American varsity jacket was an obvious choice for the experiment that would become Nike Sportswear. Raiding the All Conditions Gear (ACG) innovation cache, they found fabrics, laminates, and bonding methods that could brave nasty weather but still look fresh.
  • 26 Wind runners and shells t-shirt: Gear – Backpacks, bags The Nike Checkered Flash Men's Running Jacket offers ultra-lightweight weather protection and reflectivity for comfort and visibility on cool, low-light runs. The Nike Checkered Flash Men's Running Jacket offers ultra- lightweight weather protection and reflectivity for comfort and visibility on cool, low-light runs.  The Nike Checkered Flash Men's Running Jacket offers ultra-lightweight weather protection and reflectivity for comfort and visibility on cool, low-light runs. Rib crew neck with interior taping for durability and comfort. Screen print at front for style. Regular fit that's not too slim, not too loose.    With a cushioned shoulder strap and water- resistant bottom, the Nike Team Training Max Air (Medium) Duffel Bag provides lightweight shock absorption and keeps gear dry in wet conditions. Adjustable shoulder strap with Max Air unit for shock absorption and custom cushioning. Dual-zip main compartment for secure, spacious storage. Ventilated shoe compartment for versatile storage. The Nike Team Training Gym Sack helps you organize your gear with an interior divider and bonded zip pocket. Water-resistant fabric with a PU-coated bottom keeps your essentials dry and secure.   
  • 27 NIKE PORTFOLIO OF BRANDS
  • 28 Converse Inc., established in 1908 and based in North Andover, Massachusetts, has built a reputation as “America’s Original Sports Company”™ and has been associated with a rich heritage of legendary shoes such as the Chuck Taylor® All Star® shoe, the Jack Purcell® shoe and the One Star® shoe. Today, Converse offers a diverse portfolio including premium lifestyle men's and women's footwear and apparel. Converse product is sold globally by retailers in over 160 countries and through more than 79 company-owned retail locations in the U.S. Headquartered in Costa Mesa, California, Hurley International LLC designs and distributes a line of action sports apparel for surfing, skateboarding and youth lifestyle apparel and footwear under the Hurley brand name. For more information on Hurley and the company's latest collections, please visit Hurley.com. A division of NIKE, Inc., Jordan Brand is a premium brand of footwear, apparel and accessories inspired by the dynamic legacy, vision and direct involvement of Michael Jordan.
  • 29 The Jordan Brand made its debut in 1997 and has grown into a complete collection of performance and lifestyle products. Cole Haan, based in Maine, sells dress and casual footwear and accessories for men and women under the brand names of Cole Haan, g Series, and Bragano. Nike Bauer Hockey, based in New Hampshire, manufactures and distributes hockey ice skates, apparel and equipment, as well as equipment for in-line skating, and street and roller hockey. EXTERNAL ANALYSIS POLITICAL FORCES:  Striking dock workers  Political unrest in the production countries  Terrorism in the home country The government must create economic policies that will foster the growth of businesses. Nike, fortunately, has been helped by the US policies which enable it to advance its products. The support accorded to Nike by the US government, particularly in the general macroeconomic stability, low interest rates, stable currency conditions and the international competitiveness of the tax system, form the foundation critical to Nike’s growth.
  • 30 ECONOMIC FORCES:  Slow down in the economy  Reduction in consumer confidence  Barriers of entry to the EU  Contract manufacturing In economy, the biggest threat for Nike would be economic recession. During recession, Nike’s growth will be adversely affected. The US economy is experiencing a downturn right now. Consumer purchases are slowing down. Currently, Nike's feeling the pinch of the economic recession. The Asian economic crisis also affects Nike since its goods are manufactured in Asia. The labor costs and material prices are going up. Nike's growth is not just affected by the local economy but also in the international economy. A weak Euro and an Asian recession could mean weak sales for Nike. SOCIAL CULTURAL FORCES:  Brand conscious consumers  Change in buying habits in younger people  Generation Y prefers other types of footwear  Increase in the female share of the market  Corporate social responsibility People are more health conscious nowadays. Diet and health are getting more prominence. Consequently, more and more people are joining fitness clubs. There is an accompanying demand for fitness products particularly exercise apparel, shoes and equipment. Nike is at the forefront of this surge in demand as people are looking for sports shoes, apparel and equipment.Nike, however, failed to foresee problems brought about by a sweatshop expose pertaining to labor and factory conditions at production locations in Asia. This caused bad publicity and declining sales as society and consumers demand more socially responsible companies. TECHNOLOGICAL FORCES:  Speed of change of product  Design Ability  Speed of News reporting Nike uses IT in its marketing information systems very effectively. Nike applies marketing information systems to the economics of innovation, segmentation and differentiation for most of its businesses. Nike’s leadership status owes in large part to the use of extremely valuable Information Technology, and applying it to every aspect of the product from development to distribution. Nike introduced Nike Shox, which revolutionized the cushioning foam used in shoes Nike also collaborated with Apple and is launching new apparel and footwear that will easily carry the consumer’s iPod .Product innovation is an ongoing process and is vital to stay ahead of competition Companies in
  • 31 this industry invest money in R&D to keep up with the new demands of today’s athletes. Nike employs many specialists including engineers, athletes, biomechanics, and industrial designers to work together in the design process. ENVIRONMENTAL FORCES:  Re use a shoe  Sustainability philosophy  Climate impact Environmental consciousness has a strong presence in Western Europe and Japan, as well as in the United States. Currently, Nike has been “… pursuing product sustainability for more than a decade. From increasing the use of water-based solvents in footwear manufacturing and working to keep greenhouse gas emissions in check, to supporting organic cotton and turning old shoes into new sports surfaces, Nike’s commitment to sustainability is part of our Considered ethos” (“What led us to Nike Considered”). It can be said then that Nike does not suffer environmental issues. LEGAL FORCES:  Threaten action by underage workforce  Poor employment record  Corporate social responsibility  Contract manufacturing and copying of product (intellectual property)  Trade agreements Without proper management leading and planning in the Nike Corporation, the company would have suffered from the child labor issue. Nike has made a true bounce-back from the negative media attention, and continues to be successful due to their strong business ethic philosophy. GEOPAPHICAL FORCES: - Production is outsourced to plants in Asia, Latin America, and Africa - This reduces costs because labor is cheaper -Puts sources of production closer to where they will be sold Firms who outsource lose the ability to closely monitor product quality and working conditions .Although some people find this unethical, firms cannot afford to keep production close to home and still compete on profit margins.Plants are also located in many different countries, rather than being concentrated in one area .
  • 32 INTERNATIONAL FORCES: The demographic environment tells marketers who can be potential customer in terms of size, density, location, age, sex, race, occupation, and other statistics. Changes can result in significant opportunities and threats presenting themselves to the organization and major trends for marketers include worldwide explosive population growth (Kotler and Armstrong). All of these can provide Nike with the tools and assets it needs to promote its products in different areas of the world and gain a bigger share of the market globally. The industry has realized the influence of women’s sport players and is preparing to accommodate such an increase and as women increase their consumption the younger generation is decreasing because of the popularity of other footwear. EFE MATRIX External Opportunities Weight Rating Weight Score 3. Growing segment of the female athletes. 0.12 4 0.48 4. International expansion into emerging markets – e.g. India 0.12 4 0.48 5. Additional marketing of existing products to appeal to new demographic groups. 0.07 2 0.14 6. Develop new alliances with companies that are respected regarding social responsibility. 0.08 2 0.16 7. Brand reorganization by market regions 0.08 2 0.16 External Threats 1. High competitive industry 0.14 4 0.56 3. Production of counterfeit goods, and generic products. 0.10 3 0.30
  • 33 4. Negative public perception created by environmental, child labor, contracted manufacturing issues, and sponsored athletes. 0.10 3 0.30 5. International currency changes could decrease profits. 0.12 3 0.36 6. Federal Trade regulations in dealing with foreign manufactures. 0.07 2 0.14 Totals 1.00 3.08 PORTER’S FIVE FORCES MODEL:
  • 34 POTENTIAL ENTRANTS:  Other sportswear manufacturers expanding their portfolio  Cheap copies from the Far East  Threats of New Entrants: (Low) Barriers to entry in the athletic footwear industry are high due to several factors. It is as very capital intensive industry. Even though it would not be difficult for a new company to obtain the raw materials and the labor needed to produce shoes, there is almost no chance for them to gain popularity in such a mature industry with some of the strongest brand names in the world. Brand loyalty is extremely strong and it would be very hard for a new entrant to “steal” loyal customers from the already existent players. Economies of scale play a huge role as well and the bigger players have an advantage of producing the products at a lower price than compared with newer entrants. As the output is bigger and the fixed costs of factories, machinery, marketing and R&D will be decreased per unit. Both marketing and R&D constitute high costs and since new entrants will not be able to take advantage of the economies of scale they will be less competitive. The industry itself is in a consolidation phase and only the big ones will survive. The large companies are strategically and constantly acquiring smaller companies. Some of the most popular acquisitions include Reebok by Adidas, Converse by Nike, Saucony by Stride Rite, etc. Small companies are bought before they become a threat to the bigger ones and before they have a chance to gain market share. In other words, it is impossible to grow in this industry because someone will take over your company. BUYERS:  The buyers of sports footwear have changed in the past decade.  There has been and increase in women purchasing the shoes,  Generation Y has a different tastes and purchasing methods  Customers more affected by price  Buyer Power: (Very High)  The buyers for this industry are retailers and end users. The footwear retailers, i.e. Footlocker, Wal-Mart, range in sizes. However, the top 25 retailers account for two-thirds of the sales of athletic footwear- approximately $15 billion in value. New retailers are entering the market, such as “big box stores” and vendors that open their own stores. The lack of concentration among buyers brings down the margins and gives the power to the vendors. Retailers also have no power in determining the design of the product. Therefore the big footwear manufacturers generally dictate the price of their shoes.
  • 35 In order to gain more power buyer companies have started merging- Footlocker –Foot Action, Sport Authority- Gart. This consolidation will transfer some of the power from the big players because in order to be industry leaders they will need these well- recognized retailers as well. Growing margins suggest that buyer power has been increasing.The end user of the industry is also considered a buyer and he has unlimited power.Every company is fighting for the loyalty of the end user through constant innovations and brand management. However, if the user is dissatisfied, he can easily switch the brand to another one. SUBSTITUTES:  Substitutes for athletic shoes are shoes in another category.  When required for professional use there is no substitute goods, but as a fashion item there are many other goods that could be purchased.  Substitutes: (Low)  Lifestyle athletic shoes sales, for instance are growing at the fastest annual rate and Puma is undoubtedly the leader in this segment- with more than 50% sales growth. First, in the sports industry, other types of apparel could also be seen as a substitute, in terms of building image and style.Second, in the same product category, other types of shoes are also substitutes, such as slippers, heels, boots, flip-flops, etc. Even though sneakers are still the most popular type of footwear in the world. Companies such as Steve Madden and Sketchers are also seen as threats. Steve Madden’s “thick high heeled shoes”19 are very popular and since thick heels are considered a more comfortable version among women they could be a substitute for sneakers. Sketchers introduced non-athletic heel-less shoes also called “sneaker mules”20 These shoes, first gained popularity in Europe but now are also becoming popular in the United States. SUPLIERS: -Using production facilities in the Far East has give Nike economies of scale. Although there are now problems arising from these factories, they are switching to making there own goods, labour and political unrest causes delays in manufacturing and shipping of the goods, -Supplier Power: (Low) -The suppliers do not have the power to bargain the price of their product, since there are numerous suppliers. There has been some standardization of production in the industry due to growing concerns of labor practices of the suppliers and manufacturers. These practices have been damaging the image of some companies including Nike.Therefore, the big companies prefer to work only with approved manufacturers and suppliers that are known to follow these labor standards. Both Adidas and Nike have created a system to
  • 36 ensure that all the high quality of the product, the working conditions, and the distribution are at high standards. COMPETITIVE RIVARLY:  Reebok, offering more choice of shoe, introducing endorsement by sports personalities, sponsoring sporting leagues  Adidas have recovered from the problems that plagued them, and have a good product mix, covering a wide range of sports. In order to stay competitive and have presence in all sectors, many mergers and acquisitions, i.e. Adidas and Reebok, are taking place and the market is going towards consolidation. As a result, maintaining a single brand image for companies like Nike becomes really a tough ask.In general, with three out of five forces being high, emerging market does not look like a favorable environment. However, on continuous marketing an educating effort, this market might be transferred into a growth region for all companies. COMPETITIVE PROFILE MATRIX MAJOR COMPETITORS: ADIDAS: Adidas was founded in 1924 in Germany by two bothers Adi and Rudolf Dassler. The company was first named Dassler shoes and later became Adidas. By the Dassler shoes being seen in the Olympics this really helped the company get it’s name known. However, in 1948 Rudolf Dassler leaves to start his own company which is now known as Puma. Once Rudolf left his brother came up with the famous three stripes logo and changed the name to Adidas.The 3 stripes were created to keep the foot stable, but ended up being the logo. Throughout the years Adidas was seen in the Olympics, and it was the leading brand making their shoes highly sought after by Olympic athletes. In 1978, Adi Dassler passed at age 78 and his wife Kathe ran the company. Six years later Kathe passed and the company was left for their son Horst Dassler to run, and three years later Horst passed at age 51. After Horst’s death Adidas ran into some major financial problems, and later Bernard Tapie comes to make an attempt to save the company. Well to be HONEST, later down the road a hip-hop group named Run-DMC came and put Adidas on another level just like Jordan did for Nike, and the rest is HISTORY! They even made a song called "My Adidas", and it was a hit all around the world. After Run-DMC came to Adidas they even had their own signature line. Run DMC is still making Adidas money today just like Jordan is still making Nike tons of money......these guys are true legends to the "Shoe Game".Adidas has worked with many famous people and has a signature shoe line for Stan Smith, Kevin Garnett, Tracy McGrady aka TMAC, Missy Elliot, and many others. REEBOK: In 1958 one the owners grandsons started a companion company to what they were doing,
  • 37 he decided to call it Reebok after the African Gazelle. After a number of years the company produced a trainers under the Reebok name and presented it at an international trade show. At the show which is 1979, a American sports distributor picked up the trainer and took it back to the US to be sold. He took it back and got the licence to sell it, which at the time became the most expensive trainer on the market at $60 for a pair. The 1980’s saw the introduction of women’s athletic trainers for aerobic dance, the trainer was released and called freestyle. The end of the 80’s also saw the introduction of Reeboks design innovation with the Pump trainer, which is still available today. The 90’s saw the transition of Reebok going over to focusing on sports and fitness, trying to get involved in the major sports around the world, from football, track and field, baseball and other sports.The new millennium saw an exclusive partnership deal struck between Reebok and the NFL to produce, sell and market licensed NFL products. The following year then saw a similar agreement signed between Reebok and the NBA which increased the market value of Reebok. Over the next decade Reebok collaborated with Jay-Z and 50 Cent in the production of their successful branded products, but also branch out further to sports like the NHL to go along with the already signed deals with the NFL and NBA.In 2006, Reebok was acquired by Adidas which saw two big sporting goods manufactures to merge to create a giant. The merger has seen the Reebok brand more easily available in other countries but also helps to produce the same quality of goods. NIKE ADIDAS REEBOOK CRITICAL SUCCESS FACTORS WEIGH TS RATIN G W.SCO RES RATING W.SCO RES RATING W.SCOR ES Domestic factor positioning 0.1 4 0.4 2 0.2 3 0.3 Internatıonal market positioning 0.1 4 0.4 3 0.3 3 0.3 Consumer loyalty 0.08 3 0.24 3 0.24 3 0.24 Brand recognition 0.1 4 0.4 4 0.4 4 0.4
  • 38 Price competiveness 0.09 3 0.27 3 0.27 4 0.36 Product Quality 0.07 4 0.28 4 0.28 3 0.21 Relationship with supliers and manufactures 0.07 3 0.21 4 0.28 3 0.21 Product R&D 0.1 4 0.4 3 0.3 3 0.3 Product diversty 0.1 4 0.4 3 0.3 2 0.2 Financial positioning 0.07 3 0.21 3 0.21 2 0.14 Marketing organitational 0.08 4 0.32 4 0.32 3 0.24 Organitational structure 0.04 3 0.12 3 0.12 3 0.12 TOTAL 1 2.85 2.72 2.42 COMMENT ABOUT CHARTS Nike is widely recognized as the market leader in the sports apparel industry by virtue of its market share, profitability and global reach.Its exceptional knowledge of its customers and their motivations, marketing, design and development of new products and its supply chain management have blended together into a unique strategic knowledge which constitutes its core competencies and its ;  Technology in Products
  • 39 ž Nike has historically had some of the most cutting-edge products on the market.For example, Nike teamed up with Apple and launched the “Nike + iPod” line of products.This technology allows consumers to connect their iPod devices to sensors inside the shoes to record time, distance, pace, and calories burned.  Manufacturing Skills ž Due to cheap labor in foreign countries, Nike outsources virtually all production to other areas of the world.This behavior has become an industry standard, with all major competitors also outsourcing production.Consequently, no competitor has a major advantage in manufacturing.  Strength of Patents ž One of Nike’s most revolutionary technologies comes through its footwear cushioning.The cushioning systems in a shoe serve to distribute pressure evenly among the foot, absorb shock, and deliver comfort to the user. ž Nike has patents on four cushioning technologies:  Nike Air: Nike Air Max is a line of shoes first released by Nike, Inc. in 1987. The shoe was originally designed by Tinker Hatfield, who started out working for Nike as an architect designing shops and offices; he also designed the Air Jordan shoe .  Nike Zoom: Nike Zoom cushioning is part of the Nike Air family, and—like its siblings—it’s lightweight and durable. Because Nike Zoom cushioning is incredibly thin, it brings the foot closer to the ground and enhances stability, especially during quick cuts and multi-directional movements.After impact, the tightly stretched fibers inside the pressurized air unit quickly bounce back into shape, providing a super- responsive feel and improved awareness of the surface you’re playing on.
  • 40  Nike Air Max: Max Air is part of the Nike Air family and designed to provide maximum impact protection during repetitive landings.Shoes with Max Air feature less midsole material and larger-volume airbags for lighter weight and maximum cushioning you can see.  Nike Shox : Nike Shox technology is a revolution in cushioning and impact protection. Nike Shox technology provides an optimal environment for cushioning, a slower rate of impact loading (helping reduce the risk of impact-related injuries) and a uniquely responsive feel.The highly resilient foam in Nike Shox columns is made of energy-efficient material that enhances durability and spring.
  • 41 ž Although some of Nike’s earlier patents are beginning to expire, they still hold patents on the newer technologies.In the past, competitors have tried to match rival Nike’s cushioning systems, but none have matched their success.  Economies of Scale ž Nike is the single largest producer of athletic footwear and apparel, allowing them large cost advantages over competition.Larger companies tend to have major economies of scale over smaller companies in areas such as distribution and marketing.Nike is so large that many of the company’s suppliers depend on Nike to remain in business.  ž Application of Information Technology ž Being such a large corporation, Nike relies heavily on IT in order to manage its supply chains.Nike admits that it is at serious risk if a breakdown were to happen in these systems, resulting in bad effects on their business and financial condition This puts them at a disadvantage against some of their smaller competitors, who do not rely so heavily on IT .The very fact that they are such a large company makes them more likely to have these problem. INTERNAL ANALYSIS NIKE MANAGEMENT STRUCTURE Nike management structure is composed of a matrix organizational structure commonly known as a flat organizational structure. Nike is one of the few companies that has been able to apply this model effectively.The Compensation Committee is responsible for overseeing the performance evaluation of the CEO. The Compensation Committee considers (1) achievement against approved financial performance measures and targets (such as revenue, net income, and earnings per share), and (2) other factors such as leadership, achievement of strategic goals, market position, and brand strength, which are signals of Company success. The Compensation Committee endeavors to reflect the CEO’s performance in the CEO’s compensation. The Board plans for succession of the CEO and certain other senior management positions in order to assure the orderly functioning and transition of the management of the Company, in the event of emergency or retirement of the CEO. As part of this process, the Chairs of the Nominating and Corporate Governance Committee and the Compensation Committee, in consultation with the CEO, assess management needs and abilities in the event a transition becomes necessary.A strategic plan is something that a company needs in order to succeed at anything. Nike needs to develop this plan and move forward from this fiscal year in 2010. The manager of Nike needs to set goals and determine the best way to achieve them.Core values upon the crew at Nike and ask the question: What does this organization stand for? A revamp of all of this is need if Nike is to make sales revenue increase in 2010. A core value that can be put into the Nike Company is telling the employers that they need to be winners, as opposed to heroes. A SWOT analysis could be
  • 42 created for Nike by a manager and the employees will read it and will see an assessment of how the company is doing in terms of strengths, weaknesses, opportunities, and threats. These will keep the companies employees on its toes.Functional organization is something that Nike might want to take into consideration when thinking about a change in their organization. They can cluster groups together who are alike and who can compatibly plan and keep the company in its prime.Directing is providing focus and direction to others within the Nike Company and the managerial can take directing and use it to their advantage.With Nike’s board being an extremely experienced and thoughtful board they can take a lot of ideas from each other. Even the other employees such as middle managers and low level managers can give input into the companies managerial such as marketing in other companies and making sure the quality of Nike’s product is better than its competitors. Phil Knight can set high, yet achievable goals for his employees to look forward to. He could improve his company by using the principle of leverage. Phil Knight could use new technologies in sneakers, apparel, and sports equipment to successfully manage his company. He can use networking by socializing with companies he could cooperate with such as he has done with Apple in the past to increase revenue. MARKETING Significant role for the competition of market share in the footwear industry plays marketing in order to strengthen the brand image, develop product identity and expand customer loyalty. Competition between players is n o n - p r I c e but rather based on differentiation in brand image and product innovations. Therefore, substantial investments in marketing campaigns are required. Nike invests annually between 11% and 13% of revenue in marketing. Nike focuses all of their attention on the Athlete, but delivers much more than shoes; they deliver all the surrounding products that the Athlete needs for experience. It is part and parcel of what makes Nike such a great consumer-focused brand.
  • 43 Marketing Mix 1. Product: Nike offers a wide range of shoe, apparel and equipment products, all of which are currently its top-selling product categories. Nike started selling sports apparel, athletic bags and accessory items in 1979. Their brand Cole Haan carries a line of dress and casual footwear and accessories for men, women and children. They also market head gear under the brand name Sports Specialties, through NikeTeam manufactures and distributes ice skates, skate blades, in-roller skates, protective gear, hockey sticks and hockey jerseys and accessories. 2. Price: Nike’s pricing is designed to be competitive to the other fashion Shoe retailer. The pricing is based on the basis of premium segment as target customers. Nike as a brand commands high premiums. Nike’s pricing strategy makes use of vertical integration in pricing wherein they own participants at differing channel levels or take part in more than one channel level operations. This can control costs and influence product pricing. 3. Place: Nike shoes are carried by multi-brand stores and the exclusive Nike stores across the globe. Nike sells its product to about 20,000 retail accounts in the U.S. and in almost 200 countries around the world. In the international markets, Nike sells its products through independent distributors, licensees and subsidiaries. The company has production facilities in Asia and customer service and other operational units worldwide.
  • 44 4. Promotion: Promotion is largely dependent on finding accessible store locations. It also avails of targeted advertising in the newspaper and creating strategic alliances. Nike has a number of famous athletes that serve as brand ambassadors such as the Brazilian Soccer Team (especially Ronaldo, Renaldo, and Roberto Carlos), Lebron James and Jermane O’Neal for basketball, Lance Armstrong for cycling, and Tiger Woods for Golf. Nike also sponsors events such as Hoop It Up and The Golden West Invitational. Nike’s brand images, the Nike name and the trademark swoosh; make it one of the most recognizable brands in the world. Nike’s brand power is one reason for its high revenues. Nike’s quality products, loyal customer base and its great marketing techniques all contribute to make the shoe empire a huge success. Market Share Nike was the clear market leader, with 31% of the global athletic footwear market in 2007. Looking at the market in the United States, Europe, or Asia reveals a similar picture: Nike's market share in these regions hovers around 36%, followed by Adidas at 20%, with Puma and New Balance as distant third and fourth.
  • 45 The market for athletic apparel is both larger--$49.5 billion in 2005--and more diffuse; the top five firms control only 27% of the market. Nike is, however, also the global leader in apparel, with a 7% market share in 2007. NIKE RESEARCH AND DEVELOPMENT Product Research and Development Nike believe our research and development efforts are a key factor in our past and future success. Technical innovation in the design of footwear, apparel, and athletic equipment receive continued emphasis as NIKE strives to produce products that help to reduce injury, enhance athletic performance and maximize comfort. In addition to NIKE’s own staff of specialists in the areas of biomechanics, chemistry, exercise physiology, engineering, industrial design and related fields, we also utilize research committees and advisory boards made up of athletes, coaches, trainers, equipment managers, orthopedists, podiatrists and other experts who consult with us and review designs, materials and concepts for product improvement. Employee athletes, athletes engaged under sports marketing contracts and other athletes wear-test and evaluate products during the design and development process. The Nike Sports Research Laboratory (NSRL) is located on the Nike campus in Portland, Oregon in the United States of America. The research and development (R&D) centre's role is to identify the physiological needs of athletes. The NSRL works directly with Nike's design teams and has established partnerships with major universities throughout Asia, Europe and North America.
  • 46 Nike’s Research Program Nike has been in the Research & Development in the market for quite a long time. The research that it has been carrying out relates to the earlier STP analysis which allows Nike to create a market for its products. Also Nike has a history of constantly innovating new products and attain the first-in-the-market advantage and charge a premium price. Nike spends a lot out of its revenue into R & D of new products and designs to constantly stay ahead of the competition. Nike conducts both qualitative and quantitative research forgathering vital information for its products and new launches. The qualitative research refers to the consumer purchasing behavior like why, how, what do they decide on the basis of Nike’s image as well as products. The quantitative research deals with what are the results of the company i.e. revenue against cost and other financial analysis .Nike indulges into research analysis of consumer markets as well as competitor’s analysis and thus understanding the consumer behavior and their buying pattern. Nike does extensive research in the attitudes and tastes and preferences and their changing pattern by having questionnaires filled up by its customers online as well as personally. It also indulges into personal interviews with its valued-customers to make some necessary changes that they might require. This is how the company came to be recognized as a high valued by its customers and thus attain maximum loyalty. Also the company came up with the idea of customization of their products online through this type of research itself which has yielded high results. Nike products undergo a rigorous testing process that covers a huge variety of testing surfaces (regular basketball hard wood, soccer turf, a running track, and endless outdoor testing on various terrain), and takes into account four major factors, geography, gender, age, and skill level as well as profession. All of this combined with the results of about a dozen other tests are use to develop new, user-friendly products like the Nike Shox, Nike Air, and other Nike basketball and running shoes. This is mainly because Nike needs to constantly be aware of the changes in the consumer buying behavior which can only be done through various researches. Nike has an underground research lab full of evil geniuses toiling to create the newest and most advanced designs and technology in the sneaker business. It’s true that Nike’s research lab has grown up considerably from its early days with Bill Bowerman and a waffle iron to create the Nike Waffle Racer. Today, it commands approximately 13,000 square feet containing some state-of-the-art research equipment. Research is primarily divided into three parts: Biomechanics How the body moves. Physiology How the body works, especially under stress.
  • 47 Sensory/Perception The evaluation of how a product works, feels, and wears; how a person feels when wearing the shoes. The Nike Sports Research Laboratory is located on the Nike campus in Portland, Oregon in the United States of America. Nike’s research team has spent more than 16 years dreaming, researching, developing and testing the possibility of attaching springs to the bottom of an athlete’s foot. Nike Shox, the most acclaimed technological development makes the dream a reality (“Nike”). Therefore, by advancing in technology, Nike holds a competitive edge in the market. PRODUCTION SYSTEM Location of Facilities Nike’s facilities are located throughout Asia and South America. The locations are geographically dispersed which works well in our mission to be a truly global company. The production facilities are located close to raw materials and cheap labor sources. They have been strategically placed in their locations for just this purpose. In general, the facilities are located further from most customers, resulting in higher distribution costs. However, the cost savings due to the placement of our production facilities allows for cheaper production of our products despite the higher costs of transporting our products. As Nike continues to expand in the global economy and increase its market throughout the world, these dispersed facilities will prove to be beneficial. Newness of Facilities Our facilities abroad have attracted bad publicity in recent years. Though our facilities comply with local labor standards, generally, they have not met U.S. standards. We want to be a leader and set a responsible corporate example for other businesses to follow. As part of Nike’s new labor initiative, we commit to: o Expanding our current independent monitoring programs to include non- governmental organizations, foundations and educational institutions. We want to make summaries of their findings public; o Adopting U.S. Occupational Safety and Health Administration (OSHA) indoor air quality standards for all footwear factories; o Funding university research and open forums to explore issues related to global manufacturing and responsible business practices such as independent monitoring and air quality standards. While establishing these policies is a step in the right direction for Nike, the difficult task at hand will be the implementation of the aforementioned goals to ensure the success of the program.
  • 48 OPERATION MANAGEMENT OF NIKE Nike's Operations management concerned about forecasting, controlling, designing, operating, and scheduling business operations in the production of Nike foot ware. Its excellent management that has been developed and ameliorated during the long term operation has enabled that business operations to be efficient and at the same time using as few resources as required. It is also effective in terms of satisfying customer demands, and thus it has become one of the key issue that Nike develop prosperously despite the fierce competitions with other foot ware giants such as Adidas, Reebok, Puma, etc. The operation management system includes manufacturing and production systems, equipment maintenance management, production control, industrial labor relations and skilled trades supervision, strategic manufacturing policy, systems analysis, productivity analysis and cost control, and materials planning. Nike started with dispersed production strategy as it is too small to construct its own production line and cannot support to recruit a large number of staff as well, especially in USA.. Every thing has both sides, and such strategy become its superiority in later time. It invited European designers to design for Nike sport shoes, then produce them through Asian manufacturers. It was its utmost objective to minimize its cost at that time in order to survive. The management strategy had been successful, and has greatly reduced the production cost. Nike had no more than 48 staff in 1972, compared with 3000 in Adidas at that time. However, the sales volume has increased nearly 1000 times during 12 years based on such operation management, from 1 million to 10 milliard dollar. The forward-looking operation management strategy had been an effective support for the brand to become the biggest foot ware company in USA. FINANCIAL STATEMENTS NIKE, Inc. CONSOLIDATED STATEMENTS OF INCOME For the period ended May 31, 2013 THREE MONTHS ENDED % TWELVE MONTHS ENDED % (Dollars in millions, except per share data) 5/31/20 13 5/31/201 2 Chang e 5/31/20 13 5/31/201 2 Chang e Income from continuing
  • 49 operations: Revenues $ 6,697 $ 6,236 7 % $ 25,313 $ 23,331 8 % Cost of sales 3,757 3,567 5 % 14,279 13,183 8 % Gross profit 2,940 2,669 10 % 11,034 10,148 9 % Gross magrin 43.9 % 42.8 % 43.6 % 43.5 % Demand creation expense 642 735 - 13 % 2,745 2,607 5 % Operating overhead expense 1,380 1,161 19 % 5,035 4,458 13 % Total selling and administrative expense 2,022 1,896 7 % 7,780 7,065 10 % % of revenue 30.2 % 30.4 % 30.7 % 30.3 % Interest expense (income), net 3 1 - (3 ) 4 - Other expense (income), net 13 37 - 65 % (15 ) 54 - Income before income taxes 902 735 23 % 3,272 3,025 8 % Income taxes 206 176 17 % 808 756 7 % Effective tax rate 22.8 % 23.9 % 24.7 % 25.0 % NET INCOME FROM CONTINUING OPERATIONS 696 559 25 % 2,464 2,269 9 % NET (LOSS) INCOME FROM DISCONTINU ED OPERATIONS (28 ) (10 ) - 21 (46 ) - NET INCOME $ 668 $ 549 2 2 % $ 2,485 $ 2,223 1 2 % Earnings per share from continuing operations: Basic earnings per common share $ 0.78 $ 0.61 28 % $ 2.75 $ 2.47 11 % Diluted earnings per common share $ 0.76 $ 0.60 27 % $ 2.69 $ 2.42 11 %
  • 50 Earnings per share from discontinued operations: Basic earnings per common share $ (0.03 ) $ (0.01 ) - $ 0.02 $ (0.05 ) - Diluted earnings per common share $ (0.03 ) $ (0.01 ) - $ 0.02 $ (0.05 ) - Weighted Average Common Shares Outstanding: Basic 892.6 916.3 897.3 920.0 Diluted 913.4 936.3 916.4 939.6 Dividends declared per common share $ 0.21 $ 0.18 $ 0.81 $ 0.70 NIKE, Inc. CONSOLIDATED BALANCE SHEETS As of May 31, 2013 May 31, May 31, (Dollars in millions) 2013 2012 % Change ASSETS Current assets: Cash and equivalents $ 3,337 $ 2,317 44 % Short-term investments 2,628 1,440 83 % Accounts receivable, net 3,117 3,132 0 % Inventories 3,434 3,222 7 % Deferred income taxes 308 262 18 % Prepaid expenses and other current assets 802 857 -6 % Assets of discontinued operations - 615 -100 % Total current assets 13,626 11,845 15 % Property, plant and equipment 5,500 5,057 9 % Less accumulated depreciation 3,048 2,848 7 % Property, plant and equipment, net 2,452 2,209 11 % Identifiable intangible assets, net 382 370 3 % Goodwill 131 131 0 % Deferred income taxes and other assets 993 910 9 % TOTAL ASSETS $ 17,584 $ 15,465 14 %
  • 51 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 57 $ 49 16 % Notes payable 121 108 12 % Accounts payable 1,646 1,549 6 % Accrued liabilities 1,986 1,941 2 % Income taxes payable 98 65 51 % Liabilities of discontinued operations 18 170 -89 % Total current liabilities 3,926 3,882 1 % Long-term debt 1,210 228 431 % Deferred income taxes and other liabilities 1,292 974 33 % Redeemable preferred stock - - - Shareholders' equity 11,156 10,381 7 % TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 17,584 $ 15,465 14 % NIKE, Inc. DIVISIONAL REVENUES1 For the period ended May 31, 2013 % Chang e % Chang e Exclud ing Exclud ing THREE MONTHS ENDED % Curren cy TWELVE MONTHS ENDED % Curren cy (Dollar s in million s) 5/31/ 2013 5/31/ 2012 Chan ge Chang es 2 5/31/ 2013 5/31/ 2012 Chan ge Chang es 2 North Ameri ca Footwe ar $ 1,793 $ 1,668 7 % 8 % $ 6,687 $ 5,887 1 4 % 14 % Apparel 748 616 2 1 % 22 % 3,028 2,482 2 2 % 22 % Equip ment 173 140 2 4 % 24 % 672 470 4 3 % 43 % Total 2,714 2,424 1 2 % 12 % 10,387 8,839 1 8 % 18 % Weste rn Europ e Footwe ar 695 651 7 % 8 % 2,646 2,526 5 % 10 %
  • 52 Apparel 280 332 - 1 6 % - 15 % 1,261 1,377 - 8 % -4 % Equip ment 49 56 - 1 3 % - 10 % 221 241 - 8 % -3 % Total 1,024 1,039 -1 % 0 % 4,128 4,144 0 % 5 % Centra l & Easter n Europ e Footwe ar 223 195 1 4 % 15 % 714 671 6 % 11 % Apparel 113 111 2 % 3 % 483 441 1 0 % 14 % Equip ment 25 24 4 % 8 % 90 88 2 % 9 % Total 361 330 9 % 11 % 1,287 1,200 7 % 12 % Greate r China Footwe ar 403 402 0 % -1 % 1,493 1,518 - 2 % -3 % Apparel 231 230 0 % -1 % 829 896 - 7 % -9 % Equip ment 35 35 0 % -2 % 131 125 5 % 3 % Total 669 667 0 % -1 % 2,453 2,539 - 3 % -5 % Japan Footwe ar 120 128 - 6 % 10 % 429 439 - 2 % 5 % Apparel 77 91 - 1 5 % 0 % 301 325 - 7 % -1 % Equip ment 17 22 - 2 3 % -9 % 61 71 - 1 4 % -9 % Total 214 241 - 11 % 4 % 791 835 - 5 % 1 % Emerg ing Marke ts Footwe ar 658 607 8 % 14 % 2,570 2,387 8 % 15 % Apparel 239 213 1 2 % 18 % 918 815 1 3 % 19 % Equip ment 63 50 2 6 % 32 % 230 209 1 0 % 17 % Total 960 870 1 % 16 % 3,718 3,411 9 % 16 %
  • 53 0 Global Brand Divisi ons3 33 27 2 2 % 16 % 117 111 5 % 8 % Total NIKE Brand 5,975 5,598 7 % 8 % 22,881 21,079 9 % 11 % Other Busines ses4 732 663 1 0 % 11 % 2,500 2,298 9 % 9 % Corpor ate5 (10 ) (25 ) - - (68 ) (46 ) - - Total NIKE, Inc. Reven ues From Contin uing Opera tions $ 6,697 $ 6,236 7 % 9 % $ 25,313 $ 23,331 8 % 11 % Total NIKE Brand Footwe ar $ 3,892 $ 3,651 7 % 8 % $ 14,539 $ 13,428 8 % 11 % Apparel 1,688 1,593 6 % 8 % 6,820 6,336 8 % 10 % Equip ment 362 327 11 % 13 % 1,405 1,204 1 7 % 20 % Global Brand Divisio ns3 33 27 2 2 % 16 % 117 111 5 % 8 % NIKE, Inc. FISCAL YEAR ENDED % Change Excluding Currency SUPPLEMENTAL NIKE BRAND REVENUE DETAILS1 5/31/2013 5/31/2012 % Change Changes 2 (Dollars in millions) NIKE Brand Revenues by: Sales to Wholesale Customers $ 18,438 $ 17,438 6 % 8 % Sales Direct to Consumers 4,326 3,530 23 % 24 % Global Brand Divisions 117 111 5 % 8 % Total NIKE Brand Revenues as Reported $ 22,881 $ 21,079 9 % 11 %
  • 54 NIKE Brand Revenues on a Wholesale Equivalent Basis:3 Sales to Wholesale Customers $ 18,438 $ 17,438 6 % 8 % Sales from our Wholesale Operations to Direct to Consumer Operations 2,450 1,986 23 % 25 % NIKE Brand Wholesale Equivalent Revenues $ 20,888 $ 19,424 8 % 10 % NIKE Brand Wholesale Equivalent Revenues by Category:3 Running $ 4,274 $ 3,696 16 % 18 % Basketball 2,627 2,169 21 % 22 % Football (Soccer) 1,931 1,862 4 % 9 % Men’s Training 2,380 2,064 15 % 17 % Women’s Training 1,067 1,011 6 % 8 % Action Sports 495 497 0 % 2 % Sportswear 5,637 5,741 -2 % 1 % Others4 2,477 2,384 4 % 6 % Total NIKE Brand Wholesale Equivalent Revenues $ 20,888 $ 19,424 8 % 10 % NIKE, Inc. FISCAL YEAR ENDED % Change Excluding Currency SUPPLEMENTAL OTHER BUSINESSES REVENUE DETAILS 5/31/2013 5/31/2012 % Change Changes 1 (Dollars in millions) Other Businesses: Converse $ 1,449 $ 1,324 9 % 9 % NIKE Golf 791 726 9 % 10 % Hurley 260 248 5 % 5 % Total Revenues for Other Businesses $ 2,500 $ 2,298 9 % 9 % NIKE, Inc. EARNINGS BEFORE INTEREST AND TAXES1,2 For the period ended May 31, 2013 THREE MONTHS ENDED % TWELVE MONTHS ENDED % (Dollars in millions) 5/31/201 3 5/31/201 2 Chang e 5/31/201 3 5/31/201 2 Chang e North America $ 723 $ 562 29 % $ 2,534 $ 2,030 25 % Western Europe 135 133 2 % 640 597 7 %
  • 55 Central & Eastern Europe 84 71 18 % 259 234 11 % Greater China 242 247 -2 % 809 911 -11 % Japan 42 43 -2 % 133 136 -2 % Emerging Markets 262 201 30 % 1,011 853 19 % Global Brand Divisions3 (373 ) (354 ) -5 % (1,396 ) (1,200 ) -16 % TOTAL NIKE BRAND 1,115 903 23 % 3,990 3,561 12 % Other Businesses4 127 105 21 % 456 385 18 % Corporate5 (337 ) (272 ) - 24 % (1,177 ) (917 ) - 28 % TOTAL EARNING S BEFORE INTEREST AND TAXES $ 905 $ 736 23 % $ 3,269 $ 3,029 8 % NIKE, Inc. NIKE BRAND REPORTED FUTURES GROWTH BY GEOGRAPHY1 As of May 31, 2013 Reported Futures Orders Excluding Currency Changes 2 North America 12 % 12 % Western Europe 2 % 0 % Central & Eastern Europe 14 % 12 % Greater China 3 % 0 % Japan -17 % 6 % Emerging Markets 12 % 12 % Total NIKE Brand Reported Futures 8 % 8 % FINANCIAL RATIOS Price Ratios Company Industry S&P 500 Current P/E Ratio 21.6 20.5 21.3 P/E Ratio 5-Year High NA 13.2 12.5
  • 56 P/E Ratio 5-Year Low NA 1.7 2.2 Price/Sales Ratio 2.11 2.59 2.14 Price/Book Value 4.24 5.46 3.54 Price/Cash Flow Ratio 17.90 17.20 12.90 The company high PE ratio shows that investors are expecting higher earnings growth in the future < 1.1%> Profit Margins % Company Industry S&P 500 Gross Margin 46.5 51.8 39.5 Pre-Tax Margin 13.4 18.2 16.8 Net Profit Margin 10.1 12.6 12.2 5Yr Gross Margin (5-Year Avg.) 44.9 51.6 38.3 5Yr PreTax Margin (5-Year Avg.) 12.8 18.0 15.8 5Yr Net Profit Margin (5-Year Avg.) 9.3 12.1 11.2 Also compared to the industry Nike has lower gross margin <5.3%> and lower net profit margin. Financial Condition Company Industry S&P 500 Debt/Equity Ratio 0.06 0.06 1.07 Current Ratio 3.4 3.2 1.4 Quick Ratio 2.6 2.3 0.9 Interest Coverage 648.7 441.4 37.8 Leverage Ratio 1.5 1.5 3.1 Book Value/Share 20.21 14.97 23.78 Nike has slightly higher current ratio than industry <0.2%>, it means that the company has liquidity than can cover the debts. Also, higher quick ratio refers Nike higher ability to meet its short term obligations. Nike have the same leverage ratio compared to industry, it means that Nike have normal ability to cover its debts throw assets. Investment Returns % Company Industry S&P 500 Return On Equity 20.8 26.3 25.4 Return On Assets 14.3 17.4 8.0 Return On Capital 18.4 22.2 10.5 Return On Equity (5-Year Avg.) 21.7 24.7 16.4 Return On Assets (5-Year Avg.) 14.1 16.8 7.8 Return On Capital (5-Year Avg.) 18.8 21.5 10.5 Lower ROA<3.1%> reflects that managers don’t use its assets efficient.
  • 57 Lower ROE<5.5%> indicates that company don’t generate its profit throw the equity. Management Efficiency Company Industry S&P 500 Income/Employee 56,765 108,278 102,166 Revenue/Employee 563,677 696,031 926,601 Receivable Turnover 6.9 13.2 17.0 Inventory Turnover 4.6 3.9 10.8 Asset Turnover 1.4 1.4 0.8 Nike low R turnover reflects how ineffective receivables are collected. Also low I turnover shows how ineffective the company inventory sold during the period. NIKE and competitors ratios Direct Competitor Comparison NKE ADDYY.PK PVT1 PVT2 Industry Market Cap: 41.07B 13.71B N/A N/A 380.26M Employees: 34,400 42,659 4,0001 9,5031 1.21K Qtrly Rev Growth (yoy): 7.80% 20.10% N/A N/A 9.20% Revenue (ttm): 19.39B 15.75B 1.64B1 3.53B2 486.15M Gross Margin (ttm): 46.51% 47.79% N/A N/A 40.15% EBITDA (ttm): 2.94B 1.61B N/A N/A 46.45M Operating Margin (ttm): 13.23% 8.01% N/A N/A 9.94% Net Income (ttm): 1.95B 791.64M N/A 180.40M2 N/A EPS (ttm): 3.96 1.89 N/A N/A 1.38 P/E (ttm): 21.70 17.32 N/A N/A 16.35 PEG (5 yr expected): 1.80 3.14 N/A N/A 1.00 P/S (ttm): 2.11 0.88 N/A N/A 0.79 INTERNAL FACTOR EVALUATION
  • 58 STRENGTHS: • Strong brand recognition • Internet sales • Growing international presence • Superior research and development department • Strong financial returns • Strong sense of culture in the working environment • Great celebrity spokespersons • Automatic replenishment system • Successful experience being competitive • Nike doesn’t own any factories • Successful marketing campaigns WEAKNESSES: • Lack of stores catering to the active females • Poor employment practices at their international manufacturing sites giving a bad reputation • Heavy dependency on footwear sales • Issues with Footlocker
  • 59 INTERNAL FACTOR EVALUATION MATRIX STRATEGY ANALYSIS (CREATIVE ALTERNATIVE STRATEGIES) SWOT ANALYSIS NIKE should use result of the SWOT matrix analysis to make strategic planning . SWOT does not show how to achieve a competitive advantage because capabilities, threats, and strategies change, the dynamic of a competitive enviroment may not be revealed in a single matrix. SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies. STRENGTHS Nike has a strong global brand which everyone will know by its logo. The logo itself needs to be presented without the name and everyone will know what it is, that is how powerful the brand is. Some companies require their names to be present but in this case that is not true. This is garnered a long term customer loyalty base where the products are synonymous with high quality clothing and fitness trainers. The power of the brand is also evident in the fact that Nike has well known athletes and other celebrities which will put further backing to the brand if it is deemed to be “cool” to wear. Athletes like LeBron James, Roger Federer and Key Internal Factors Weights Rating Weighted Score INTERNAL STRENGTHS 1. Strong brand recognition 0.12 4 0.48 2. Successful marketing campaigns 0.1 4 0.4 3. Superior research and development department 0.1 4 0.4 4. Great celebrity spokespersons 0.08 3 0.24 5. Internet sales 0.07 3 0.21 6. Growing international presence 0.07 3 0.21 7. Successful experience being competitive 0.06 4 0.24 INTERNAL WEAKNESSES 1. Poor employment practices at their international manufacturing sit 0.15 2 0.3 2. Lack of stores catering to the active females 0.1 2 0.2 3. Heavy dependency on footwear sales 0.1 2 0.2 4. Issues with footlocker 0.05 2 0.1 TOTALS 1 2.98
  • 60 others such as Andrew Luck where each of these people represent a different sport from basketball to tennis to American football respectively. They promote the company by wearing Nike branded clothes from head to toe to more recently wrist in the form of the Nike FuelBand. The company is a clothing brand and there is little to innovate in. However, Nike has managed to find ways to innovate their products and to provide a range for various different price points to cater for different demographics. This shows that the company is versatile in its product offering, whilst also remaining relevant as the industry leader. The new Flyknit running shoes, the FuelBand wristband and the Dri-Fit clothing technology are all innovative and are applicable to different products. The Flyknit trainers are very unique where they allow the runner to have a bare foot feel experience, while the FuelBand moves into the new market of wearable technology with a focus on keeping active. The FuelBand allows the user to connect it to their smartphones and to compete against their friends to give a competitive side to always moving and being active. WEAKNESSES Due to the strong brand, the company can be seen as exploitative and greedy. The company can stick their logo on a plain white t-shirt and sell it for over triple the manufacturing cost, not to mention the fact that the company has had problems in the past with its manufacturing processes. The high mark up on the basic products allows the company to generate large levels of profits which can be a seen as unethical, but they do operate as a for profit company. The supply chain is the most important aspect of Nike’s business model, as they need to ensure that they have a solid supply chain from sourcing raw materials to manufacturing and to delivery logistics. Each of these areas creates a cost for the company, much like any other, and they could try to squeeze their factory workers with lower wages and/or bad working conditions. Due to the strong brand, the company can be seen as exploitative and greedy. The company can stick their logo on a plain white t-shirt and sell it for over triple the manufacturing cost, not to mention the fact that the company has had problems in the past with its manufacturing processes. The high mark up on the basic products allows the company to generate large levels of profits which can be a seen as unethical, but they do operate as a for profit company. The supply chain is the most important aspect of Nike’s business model, as they need to ensure that they have a solid supply chain from sourcing raw materials to manufacturing and to delivery logistics. Each of these areas creates a cost for the company, much like any other, and they could try to squeeze their factory workers with lower wages and/or bad working conditions. OPPORTUNITIES Technology is moving very quickly, and the industry is coming up with new different form factors of usable technology. Mobile phones became smartphones, CDs became MP3 players and VHS became Blu-Ray discs. Nike has dabbed it’s hand in technology when it created Nike+ with a collaboration with Apple where is was sold as a smartphone feature to track running distances and calories burned. Nike had then moved onto making its own wearable fitness technology with a fitness watch, the FuelBand and with a game with the Kinect camera
  • 61 for Xbox 360. Nike could look at investing into more of these types of wearable technology so that they technology is already placed in smartphones. This would be an excellent way to create licensing revenue as well as having a wider reach of consumers. There are various different types of shoes that Nike offer and the products are seemed to be blurring into other product ranges. Within the Nike Free range, there is Freerun 3.0, Freerun 5.0, Freerun+ 2ID, FlyKnit, FlyKnit Lunar1 +ID and it can be confusing when picking a running shoe. There are only slight differences in the product but the differences can be hard to understand when there is no expanded explanation. The only way in which a consumer can understand these differences is to spend time reading each one and comparing it, or physically going to a Nike store and getting a sales person to assist, and there is no guarantee that the sales person knows everything. Nike could try and streamline the naming of some of their products within certain ranges. This will allow the company to maximise the customers understanding of the products on offer and the features they represent. THREATS For large multinational corporations, the profit generated from different countries is a great way to continue operating when the domestic market is reaching saturation. The main risk with this is currency fluctuations and how a massive change in the foreign and domestic currency will make any profits overseas can turn it into a loss. Companies have had to create finance divisions specifically to manage their currency risk, most likely using a combination of forward contracts, futures contracts and call/put options. The recent decline in the Indian Rupee shows how the company can benefit from drops in foreign currencies where the goods that Nike will ship to other countries will be even cheaper. The main problem with any currencies changing would be domestic currency for Nike which will be the US Dollar. The US Federal Reserve choosing to continue its asset purchase scheme has allowed the US Dollar to strengthen stock markets to be more risk taking and choose the US market to invest in and the Federal Reserve seems to be continuing asset purchases for the foreseeable future. The recent collapse of a Bangladesh clothing manufacturing factory caused major publicity problems for fashion retailers. The collapse brought to light the bad working conditions and the major problem of cutting corners in countries where building legislations are sometimes ignored, especially in the case of the Bangladeshi factory. Nike has had problems with their factories which they have actively and vocally created internal codes of conduct to address concerns of the public. When it comes to the problems of the collapse, the developed world would find it ways to boycott a company is there are seen to be unethical. Nike could find difficulties domestically if they encounter problems with sales if they have any problems with their factories.
  • 62 , STRENGHTS √ World’s leading brand for sports shoes and apparel √ Launched many other products in collaboration with companies e.g. launched music player, watches etc √ Leading top of the mind brand with excellent innovative advertising and branding √ It differentiates by making innovative products which has global recognition √ Effective business relationship globally WEAKNESSES √ In Vietnam the company faced allegations of labor and wage laws with employees √ In Cambodia and Pakistan there have been allegations for child labor and poor working conditions √ Other products: Nike are dependent on their footwear for profits due to other branded products not being as strong. OPPORTUNITIES √ Product expansion in areas like more concentration in sunglasses, sportswear etc. which gives high profit √Can open their stores in tier 2 cities in emerging economies as well √ Enhance brand visibility by opening sports academies across the world for nurturing talent SO STRATEGIES √Promote ınternatıonal Sales as ınternatıonal trade develops(S1 S3 S4 O3) √Increase promotıon of NIKE not only as athletıc but leısure clothıng(S1 S5 O4) WO STRATEGIES √Market products create more products and more stores to and for women and men(W1 O5 O7) √Develop beter employment practıces especıally ın other countrıes to help maıntaın a posıtıve ımage wıth most consumers(W2 O3)
  • 63 THREATS √ Footwear market is so competitive, major competition from other brands √ As it is an international brand currency fluctuations of countries affects the business √ Fake imitations and replicas often cause a problem √ Adaption of new techniques and innovation by other brands √Increase marketıng to the generatıon Y market for current and future sales boost(W1 O5 O7) ST STRATEGIES √ Promote products more agressıvely through endorsements wıth more hıgh profıle athletes(S1 S4 T2 T3) √ Promote company as an ethıcal company and one fort he people(S1 T4) WT STRATEGIES √ Promote NIKE town and develop more of an onlıne presence to overcome obstacles such as Footlocker(W3 T2 T4) √ Offer a female subdıvısıon to be more appealıng and to focus on the ımprovıng the female market before competıtors(W1 T1) SPACE MATRIX Financial Strenght Rating is 1(worst) 6 (best) Ratin gs 1 Liquidity 6,0 2 Leverage 6,0 3 Working Capital 6,0 4 Return on Assets 4,0 5 Return on Equity 4,0 6 Price per Earnings 6,0 7 Earning per Share 5,0 Industury Strenght Rating is 1(worst) 6 (best) 37,0 1 Profit Potential 6,0 2 Extent Leveraged 5,0 3 Economies of Scale 5,0
  • 64 4 Growth Potential 5,0 5 Financial Stability 6,0 6 Resource Utilization 5,0 7 Diverse Portfolio 5,0 Environmental Stability Rating is -1(best) -6 (worst) 37,0 1 Price Range of Competing Products -2,0 2 Competitive Pressure -2,0 3 Ease of Exit from Market -1,0 4 Succesful and Recognized Advertising -1,0 5 Endorsement Agreements -1,0 6 Price Elasticity Demand -1,0 7 Risk Involved in Business -1,0 Competitive Advantage Rating is -1 (best) -6 (worst) -9,0 1 Market Share -1,0 2 Global Presence -1,0 3 Strong Investor Reputation -1,0 4 Technological Innovation -1,0 5 Product Life Cycle -2,0 6 Customer Loyalty -1,0 7 Control over Supplier and Distributors -3,0 -10,0 NIKE IS AGGRESSIVE.. -Backward,forward,horizantal integration -Market penetration -Product development -Diversification(Reletad or Unrelated) ES average -1,29 CA average -1,43 IS average 5,29 FS average 5,29 X coordinate 3,86 Y coordinate 4,00 Strategy >>> Agressive
  • 65 Suggested Strategies After analyzing the SPACE Matrix, we can clearly see that NIKE exists in the aggressive quadrant. This means that it is in an excellent position to use its internal strengths, to take advantage of external opportunities, to overcome internal weaknesses and avoid external threats.Different strategies can be conducted upon this analysis, such as market penetration, market development, product development, diversification and backward, forward, horizontal integration.In this case we are going to suggest two intensive strategies, product development and market penetration. BCG MATRIX This study aims on analyzing the products and services offered by NIKE. The BCG matrix approach is based on the product lifecycle concepts which can be utilized to identify what priorities should begiven in the product portfolio of a business level. To make sure that the company is creating long-term value, an industry should have a portfolio of products which contains both high-growth products in need of cash inputs aswell as low-growth products which establishes a lot of profit or cash.BCG matrix relies on 2 dimensions: market growth and market share. The basic notion behind it is that the higher the market share of a specific product has or the faster the product’s marketability grows, the better it is for the industry. Placing appropriate products in the BCG matrix, results in 4categories, in the business portfolio of an industry. The four categories include the Stars, cash cows, dogs, question marks. Each of these categories has their own measurement. First, the stars are considered as those products which have high market growth and market share. The stars products use large amounts of cash and considered to have competitive position in the business which results in generating more profit. The stars products arefrequently noted as rough in balance on net cash flow. But if needed, any attempt should be created to hold market share to avoid becoming cash cow. The second category is Cash cows which are commonly considered to have low growth with high market share. Here in, the profits and generation of cash are considered high but because of the low market growth, the investment required should be low.It is said that cash cows should keep the profit high and is noted to be the foundation of the company. The last category is question markets which is high growth with low market share. Question marks products are considered to be the worst cash features of all, because high demands make it to have low returns due to low market share. Here in, if the company would not be able to solve the issue of question market products, these may be able to absorb great amount of cash and may result from stopping dogs to grow.Accordingly, BCG matrix approach can help the business companies tounderstand a frequently made approach mistake. Boston Consulting GroupMatrix is a tool used for product portfolio planning 2005). This tool has two controlling elements which includes market growth relative market share. In this manner, the current situation NIKE in the standpoint of the market environment will be analyzed using this marketing tool. This analysis will give emphasis on the product and service portfolio of NIKE. Thus, the product and services that the company offers will be
  • 66 analyzed using thefollowing figure.It can be said that NIKE products and business portfolio can be divided infour major products or services; each service operates in accordance with its functions along with the products and services in different areas especially made as a distinction of each division. The NIKE analysis will be based in assessment of the services offered by the company. Next category is Dogs which is low market growth and share.It’snot that an industry should avoid or reduce the number of dog’s products in the industry.In addition, the company is also recommended to beware of the expensive turn around plans. BCG MATRIX Net Sales Pre-Tax Income % Sales % Op. Income Market Share Position Indus try Grow t Rate US $ 4,658 $ 957 44% 50% 1 2% Europe,Middle East and Africa $ 3,241 $ 533 30% 28% 0,92 8% Asia Pacific $ 1,358 $ 295 13% 16% 1 8% Americas $ 527 $ 96 5% 5% Other $ 911 $ 19 9% 1% Total Nike $ 10,695 $ 1900 100% 100%
  • 67 -20 Relative Market Share(X) This strategy is totally based on the market share of the product and the growth of the market. It is a typical strategy where the companies should have products with high growth in large markets and also products that have low growth but can generate more cash for the company. Based on such combinations of this matrix, there are four dimensions for this model based on which the companies can understand how much cash is being generated and consumed. There are four categories that a company can divide its products based on the BCG Growth matrix. They are cash cows, stars, problem child and dog. Cash Cows: In NIKE, the different kinds of products that are sold on the brand name of adidas are the cash cows for the company. The reason behind this is that these are widely used by people and reasonable profit is generated from these products. By selling such products, NIKE is able to generate more cash for the company and this can be used either for the development of new products or investment can be done in some other business area. The main financial pillars for the company are NIKE products which are the cash cows and so the revenue generated from these cash cows is very crucial for the company to sustain. Stars 16% 5% 28% 1% 20 Question Marks 15 10 5 1 0,8 0,6 50% Cash- Cow 0 0,4 0,2 0 -5 -10 -15 Dogs US EMEA ASIA PASIFIC AMERICAS OTHER
  • 68 Star: Stars are such kind of products that generate enough amount of revenue for the company, but at the same time these products need more cash to maintain its position in the market. Question Mark (or Problem Child) : Such products are made available in high markets and the market share is very less. They require lot of funds to improve their market share and it is uncertain whether they will grow or not. As the markets are growing phenomenally, NIKE has few problem Childs and these can be ignored by the company. Dogs :These are products that have fewer shares in the market and also have a very slow growth rate. The products don’t consume lot of investment and they don’t generate huge revenue for the companies. INTERNAL EXTERNAL ANALYSIS
  • 69 GRAND STRATEGY MATRIX
  • 70 STRATEGY SELECTION (CHOICE) AND RECOMMENDATIONS) (QSPM) QUANTITATIVE STRATEGIC MATRIX Market Expansion Prod/Recyc le/Materials Add. Sports Accessories Key factors Wei ght AS TAS AS TAS AS TAS Exter nal 1 to 4 1 to 4 1 to 4 Create products from recycled materials 0.1 3 0.3 2 0.2 4 0.4 Promotion as a fashionable wear, not just sportswear. 0.07 3 0.21 1 0.07 2 0.14 Growing segment of the female athletes 0.08 - - - - - - International expansion into emerging markets - India 0.12 4 0.48 2 0.24 1 0.12 Add. marketing of existing prod - appeal to new groups 0.1 3 0.3 2 0.2 4 0.4 New alliances with co. respected for social responsibility 0.06 3 0.18 2 0.12 1 0.06 Brand reorganization by market regions 0.06 4 0.24 1 0.06 2 0.12 High competitive industry 0.08 4 0.32 3 0.24 2 0.16 Failure to respond to market trends in timely manner 0.06 - - - - - - Negative public perception 0.06 - - - - - - Federal Trade regulations with foreign manufactures 0.08 4 0.32 3 0.32 2 0.16 International currency changes could decrease profits 0.07 2 0.14 4 0.32 3 0.21
  • 71 Production of counterfeit goods, and generic products 0.06 3 0.18 2 0.12 1 0.06 total should be 1.0 1 Inter nal 1 to 4 1 to 4 1 to 4 Recognized brand name – Swoosh is ubiquitous 0.1 4 0.4 3 0.3 2 0.2 Strong in research and development/innovation 0.09 4 0.36 2 0.18 3 0.27 Strong marketing campaign/sponsors top athletes 0.08 2 0.16 1 0.08 3 0.24 Diverse portfolio 0.09 1 0.09 3 0.27 2 0.18 Successful advertising campaigns 0.07 1 0.07 2 0.14 3 0.21 Customer loyalty 0.07 3 0.21 2 0.14 1 0.07 Strong financial position 0.08 2 0.16 3 0.24 4 0.32 Strong international presence 0.08 4 0.32 3 0.24 1 0.08 Products are highly priced 0.06 1 0.06 2 0.12 3 0.18 Revenues still mostly dependent upon footwear sales 0.05 3 0.15 2 0.1 1 0.05 Violations for wages and child labor in manuf. countries 0.06 - - - - - - Little control over quality of prod. from 3rd party contract. 0.06 2 0.12 3 0.18 1 0.06 Anti-globalization groups 0.05 - - - - - - Price sensitivity of products 0.06 3 0.18 2 0.12 1 0.06 total should be 1.0 1 0
  • 72 FIRST RECOMMENDATION: Product Development We provide comprehensive consulting services from idea to product launch.NIKE by the sport works with start-ups as well as established companies, utilizing virtually all disciplines required to bring a new product to market. Some of these disciplines include: • Market research and focus groups • Marketing communication • Public relations • Sales and sales coaching • Industrial design • Mechanical design • Mechanical fabrication • Short-run manufacturing • High-volume manufacturing • Plastics tooling and production • Application software development • Funding sources 4.95 4 3.75
  • 73 Your creative idea infused with our strategic expertise will maximize the success of your product in the marketplace. SECOND RECOMMENDATION:Market Development A company follows a market development strategy for a current brand when it expands the potential market through new users or new uses. New users can be found in new geographic segments, new demographic segments, new institutional segments or new psychographic segments. Another way is to expand sales through new uses for the product. The key difference between this growth strategy and market penetration is that the definition of the target market must change. In other words, the market potential must increase through this strategy, whereas the market size is "fixed" with a market penetration strategy. THIRD RECOMMENDATION :Market Penetratıon A market development strategy targets non-buying customers in currently targeted segments. It also targets new customers in new segments. Market development strategy entails expanding the potential market through new users or new uses. New users can be defined as: new geographic segments, new demographic segments, new institutional segments or new psychographic segments. Another way is to expand sales through new uses for the product. Penetration is a measure of brand or category popularity. It is defined as the number of people who buy a specific brand or a category of goods at least once in a given period, divided by the size of the relevant market population.
  • 74 STRATEGY IMPLEMENTATION As we can realize that our market area is quite well, we are sells our product over 200 countries and we already reach our target market area ,after now we have to work on to increase our market share ,sales and profit so that we have to create new and additional strategy to insert our current strategy. MANAGEMENT AND OPERATION Nike manufactures all of its footwear from outside United States. Nike has contract suppliers in China, Vietnam, Indonesia and Thailand15. These countries accounted for 36%, 36%, 22% and 6% of total NIKE brand footwear respectively. Nike also has manufacturing agreements with independent factories in Argentina, Brazil, India, and Mexico to manufacture footwear for sale primarily within these countries. Primary reason for this is that it is cheaper to manufacture in South East Asia and transport it to USA and Europe, regardless of the transportation and tariff costs involved. The sweat shop debacle in late 1990s has led Nike to form a distinctive strategy to provide a good working environment for employees. They have several internal guidelines and compliance standards apart from state laws for ensuring proper working conditions for all workers in its contracted supplier factories. Due to the magnitude of Nike and their number of stores and manufacturing plants throughout the world, Nike has taken the time to recognize the importance of each individual and what they can contribute to the team. For this reason, Nike does not call its employees, ‘employees’ but rather ‘team members’ because each part of the team has something to add to the business. They have also admitted that they have a very large array of workers and this brings many diverse cultures and points of views together. According to one of its statement, diversity and inclusion is a crucial factor in Nike’s diplomacy in their many locations and globally. In identifying the differences they have set apart the opportunities to better understand how their teams will work together and what adversity they may face because of this. In order to strive to reach this mission they have put into action these strategies: →Cultivate diversity and inclusion to develop world-class, high-performing teams →Ignite change and inspire critical conversations around diversity, inclusion and innovation →Create venues and environments for open dialogue, diverse opinions and a multitude of perspectives All of the above will in future venture apply and assist them in working more efficiently and having more satisfied employees for longer periods of time.
  • 75 MARKETING Nike’s strategy was to create dominant presence in media. Nike created media presence in several trend setting United States cities. TV ads linking Nike to a city were used, but real drivers were huge oversized billboards and murals on buildings that blanketed cities with messages featuring key Nike-sponsored athletes, not products. The company focuses its marketing on celebrity endorsement, i.e. athletes in basketball, golf, soccer, and tennis. Lately, Nike has also began to sponsor big sporting events so as to create huge awareness and brand following. In 2008, Nike spent significant amount on advertising in the Beijing 2008 Olympics and the Football Championship. After the recent Tiger Woods scandal Nike plans on revisiting it celebrity endorsement strategy. It can be noted that the ‘swoosh logo’ is one of the most famous in the world due to these huge advertising efforts. Nike’s strategy in this front is to develop a premium brand associated with high quality product that satisfies customer needs. Nike’s brand is associated with an aggressive attitude portrayed by, “you don’t win silver, you lose gold,”12 which clearly suggests that winning is vital. The Nike customer associated the Nike brand with being the ‘American’ way: Being individual and aggressive like Michael Jordan and John McEnroe. Nike built its brand around sports, attitude and lifestyle. Nike backed this strategy with marketing campaigns like “Just do it” and with the companies front athletes like Michael Jordan and Tiger Woods.
  • 76 FINANCE Nike’s strategy in early 2000s was to develop, flag ship stores, Nike Town shops in bigger cities, first national, and then abroad. Nike was the first company to establish flagship stores and it turned out to be a sensation. There are independent small retail stores that sell Nike products all around the world as well. Also, on seeing the potential of the low price market, Nike took efforts in 2005 to tap in to the low price segment by striking a deal with big retail discount stores like Walmart and rolled out starter shoes at a cheaper price, competing with private label brands. However, to avoid brand dilution, Nike did not use the swoosh logo in these shoes. Currently, Nike has a high quality website and uses it as an online selling channel. N i k e I d14, a part of the website allows a customer to customize his own shoes and buy it. The website is available in 14 languages and is different according to the country requirements.
  • 77 RESEARCH AND DEVELOPMENT Nike manufactures all of its footwear from outside United States. Nike has contract suppliers in China, Vietnam, Indonesia and Thailand15. These countries accounted for 36%, 36%, 22% and 6% of total NIKE brand footwear respectively. Nike also has manufacturing agreements with independent factories in Argentina, Brazil, India, and Mexico to manufacture footwear for sale primarily within these countries. Primary reason for this is that it is cheaper to manufacture in South East Asia and transport it to USA and Europe, regardless of the transportation and tariff costs involved. With over 21,000 employees worldwide, the company was organized into departments by both geographic divisions and product categories, which created overlapping management responsibilities and a fluid leadership structure. For example, a footwear manager in Europe answered to both the Vice President of Footwear and the Vice President of Europe. However, there was no formal communication link between the regional vice presidents (those in the United States, Europe, Asia-Pacific, and Latin America) and the product vice presidents (footwear, apparel, equipment). STRATEGY EVALUATION AND CONTROL The aim of this project is to evaluate Nike Inc.’s marketing Strategy. In this project we do an analysis of the Nike’s external environment and research about its competitors. We then evaluate the Nike’s sales and profit trend along with its market share. An internal assessment of Nike is also covered in this project. We then see on what basis Nike has divided its various market segments and who are its target market. The positioning strategy has also been discussed briefly. We then take a look at the Marketing Mix of Nike, i.e., the 4P’s of marketing. On the basis of the above information collected through the duration of the project we could conclude that if Nike would like to uphold its position as the market leader in the athletic footwear market, then it has to provide its customer base with new and innovative products.
  • 78 Nike Inc. is the world’s leading supplier of athletic shoes and apparel and a major manufacturer of sports equipment with revenue of more than $19 billion in 2009. The company was created in 1962 as Blue Ribbon Sports by Bill Bowerman and Philip Knight and officially became Nike Inc. in 1978. The company takes its name from Nike, the Greek Goddess of victory. Nike owns the subsidiaries Cole Haan, Hurley International, Umbro and Converse. Nike sponsors many high profile athletes and sports team around the world, with the very recognized trademarks ‘Just Do It’ and the logo ‘SWOOSH’. THE MARKET ENVIRONMENT Geographical Market Nike’s geographic market is spread throughout the globe. In March 2009, Nike announced its plan to reorganize its global business in order to bring goods closer to the consumers as well as to reduce management overlap. Following this plan Nike then decided to develop its market share in North America, Western Europe, Eastern/Central Europe, Greater China, Japan and Emerging Markets. Main Business Nike Inc. specializes in footwear, apparel, equipment and accessory products for men, women and children. The company offers footwear for football, basketball, golf, sport- inspired casual shoes, kids’ shoes and other athletic and recreational purposes. The company also markets sports apparel and accessories, along with sports inspired apparel and athletic bags. Nike also offers performance equipments which include bags, sport balls, eyewear, electronic devices, and other equipments designed for sports activities under the brand name NIKE. Political The support accorded to Nike by the US government, particularly in the general macroeconomic stability, low-interest rates, stable currency conditions and the international competitiveness of the tax system, form the foundation critical to Nike’s growth. Nike’s main production faculties lie in the Asian countries where political unrest prevails. The rise and fall of governments’ results in change in policies relating to employment laws, trade restrictions, etc. This political unrest may affect Nike. Economic The economic downturn has resulted in the slowdown in sales. This will affect the growth of Nike. Also, labor cost and raw materials prices are increasing, which will affect the profit margin of the company. Nike deals in different currencies for trading purpose. Hence, costs and margins are not stable over long periods of time due to changing exchange rates. Social People today prefer to buy products which have brand value associated with them. They now want fashion-oriented products for leisure activity instead of sports activities. There are also an increasing number of women consumers in the market due to changing lifestyle and trends. The bad publicity due the poor labor and factory conditions in Asian Countries resulted in decline in sales as society wants socially responsible firms. Technological Nike has integrated technology to develop its products fast. Nike always adopts latest technology for its product manufacturing and development.
  • 79 Environment/Green Nike makes every attempt to reduce the impact of each of its products on the environment from design to manufacturing, and ultimate disposal. Nike shoes produce solid waste. The largest of these by weight is cured rubber used in shoes soling. Nike employees engineered a creative way to keep it out of landfills and convert it into more outsoles, called REGRIND. THE COMPETITION Main Competitors Nike’s main competition comes from Adidas AG along with companies such as Puma AG, New Balance, etc. Due to Nike’s brand awareness, its competitors have to put in more effort to sell their products & new entrants in the industry should have huge amount of capital to invest in advertising to create brand awareness. This restricts the amount of entrants in the market. Sales & Profit Trend We can see that from the year 2006 to 2008 both Adidas and Puma have growing sales & profits. But in 2009 both companies saw a drop in sales & profits. This may be due to the footwear market is saturated & there is high competition where companies are striving for maximum market share &/or to maintain their existing market share. Market Share Adidas Group & Reebok together hold 22 percent of the market share, followed by Puma 7 percent and New Balance 6 percent. Since the athletic footwear market is saturated, there may be a possibility that the company’s market share erodes. Target Market All the companies in the athletic footwear market are targeting the same type of consumer – those who are interested in sports like the aspiring athletes, teams, individual athletes, etc., along with the urban youth. THE COMPANY Sales & Profit Trend Nike’s revenue and net income are constantly growing from the year 2005. This shows that Nike has a strong grip on its market share. Consumers like Nike’s innovative new products and are willing to pay a higher price than its competitors. Market Share Nike is the market leader in the athletic footwear industry with a 31 percent market share. This shows that Nike with its strong research and development and extensive product range along with the marketing expertise have captured the consumer’s preferences. Business Sector Nike is part of the Consumer Goods sector which mostly consists of Fast Moving Consumer Goods such as dairy products, farm products, etc. In this sector, Nike belongs to the Textile-Apparel, Footwear and Accessories Industry. Project Focus Nike’s focus is on product development & providing its customer with innovative & compelling products. The introduction of Nike+iPod establishes this fact that Nike wants to cater the customer need for new & innovative products. Nike also lays heavy emphasis on maintaining its Brand name & value in the market. Hence, it invests large amounts of money in research & development of its products so that it can maintain its position as the market leader.
  • 80 NIKE’S MARKETING STRATEGY Segmentation & Targeting Nike’s target market for its shoes, clothes and other accessories are males and females between the age of 13 and 35 years. Nike segments its markets on the basis of age, gender, geographic locations, psychographic, and benefits sought. On the basis of age, Nike targets a variety of age groups from young adolescent to middle- aged adults. Nike has different advertisements for men and women of every race and nationality separately. Nike now is focusing on targeting more on women and Generation Y. Also teams of any sport are targeted by Nike. Nike’s aim is to push its products in countries that apply to certain sports, which are popular in that particular country. For example, Products relating to Rugby are advertised more frequently in Europe when compared to U.S., as Rugby is popular in Europe. Nike promotes a positive and confidant attitude and targets people who want to attain that attitude. It also is targeted towards customers who are interested in athletics. On the basis of benefits sought, Nike provides shoes, apparel and equipment for a variety of sports all over the world. It also offers products to many different people who have different tastes, interests and needs. This can be seen from the fact that Nike has a website where consumers can design their shoes according to their requirements and tastes. Positioning Nike promotes products that ooze with style, attitude and self-confidence. This message is clear in Nike’s tagline ‘Just Do It’ or ‘If you have a body, you are an athlete’ which is shown in many advertisements of Nike. The former message of Nike has been used since 1989, when it was first introduced and the latter was developed by Bill Bowerman when Nike first started. This message clearly defines Nike’s image which is a positive and self-confident nature. Porter’s Generic Strategy (Differentiation/Low Cost Leadership/Focus) Since the footwear market is highly competitive, companies are striving to provide the best possible deals to the consumers. This means that they are trying to cut down costs. Since Nike outsources its manufacturing to other countries, it doesn’t have any capital tied up in machinery, equipment or factories. This means it doesn’t have any expenses that may arise out of maintenance of any of the above. Nike also lays heavy emphasis on Differentiation and continually strives to innovate and develop its products. The introduction of Nike+iPod sports kit in the year 2008. This enables runners to log and monitor their runs via iTunes and the Nike+ website. Growth Strategy On May 5th, 2010 Nike revealed its Global Growth Strategy to achieve sustainable, long- term growth across its global portfolio of brands. With a revenue target of $27 billion by the year 2015, Nike outlined each and every category of their product line – from Nike SB to Women’s Training – and hoped to reach that goal through a consumer-focused strategy. The company also expects to generate over $12 billion of cumulative free cash flow from operations through 2015. Both goals extend NIKE Inc.’s long term financial model of high single-digit revenue growth, mid-teens earnings per share growth and expanding returns on capital. NIKE INC.’S MARKETING MIX Marketing Mix Product Mix
  • 81 Nikes product range includes an assortment of goods which include shoes and apparel for sports activities such as Basketball, Football, Athletics, Golf, Cross training, etc., for men, women as well as children. Product Life Cycle The athletic footwear industry and Nike Inc. are both at the maturity stage of the Product Life Cycle. Nike’s revenue and net income are constantly increasing at almost the same pace for the last 5 years. But in the year 2009, we can see that the rate of growth in revenue and net income has decreased due to saturation and high competition in the market. Nike can maintain its revenue, net income and market share in the footwear market by introducing new innovative products to keep the consumer base captivated, expansion into new market like India and China and use extensive marketing of the product to continue its demand in the market. Since Nike is the market leader in the footwear market, it is safe to say that it is established within its market segments. The market for footwear is saturated with high competition. This places Nike in the Cash Cows category. Being in the cash cows category means that Nike has to maintain its sales and hold its position of a market leader in the market. To do this Nike has to spend a lot of money in research and development to provide customers with fresh and original products to keep them loyal to the brand Nike.Since the athletic footwear market is saturated with no scope for much growth in the market Nike can choose from either Market Development or Diversification Strategies. If Nike opts for Market Development it means that Nike will focus on the emerging markets such as India, China, etc. with its existing products. If Nike opts for Diversification then it would have to focus on new markets with new and innovative products. Price Mix Nike Inc. applies a premium pricing strategy. This strategy implies the product to be priced higher than that of the competitor based on the quality of the product. Some critics and people claim that the prices of Nike’s product are high. However, the company owners and employees argue that these prices reflect the quality of the product. This strategy seems to be working as consumers who purchase Nike products are ready for their prices. Place Mix Nike products are available in multi-brand stores along with the exclusive Nike stores across the globe. Nike sells its products to more than 20,000 retailers in the U.S. and in approximately 200 countries in the world. Along with this Nike has its own ‘Niketown’ stores.Nike also sells its products through its official website, where people can also customize and design their shoes according to their preferences and directly delivers these from the manufacturer to their house. Nike sells its products in the international markets through independent distributors, licensees & subsidiaries. Promotion Mix Nike reinvests around 12 percent of their revenue into marketing, which includes advertising, endorsements and sponsorship deals.Nike advertises it products through print media, television and billboards and posters. Apart from this Nike has a number of celebrity athletes like Cristiano Rolando for soccer, Tiger Woods for golf, etc., and professional teams like Manchester United to focus attention on their products.
  • 82 Nike also has several websites for individual sports such as nikebasketball.com, nikefootball.com and nikegolf.com. EVALUATION OF COMPANY’S STRATEGIES AND TACTICS Evaluation of Nike Inc.’s Current Position & Evidence of Success & Prospects of Future Growth/Success We can see that Nike’s Earnings per Share (EPS) and Return on Invested Capital has gone down. This may be due to the reduction in Earnings before Interest and Tax (EBIT) due to fall in revenue Hence, we can say that Nike has to maintain its position in its existing market and grow in the new markets to increase or maintain its EPS and Return on Invested Capital. If Nike wants to maintain its market leadership it has to focus its strategies on product development to provide its loyal customer base with new, captivating and innovative products. Along with product development, Nike also has to penetrate new & emerging market like India and China if it wishes to grow be number one in its industry. Time and again Nike has proven to be the best when it comes to satisfying consumers needs. Nike provides people with innovative and original products that others in the industry are not able to provide, thus upholding its position as market leader in the athletic footwear market. This gives Nike a competitive advantage over its competitors, which provides Nike with opportunities which Nike has used to its maximum. With its Marketing mix, Nike has been able to create an all around dominant strategic plan. Nike has shown that they are a true force to be reckoned. BALANCE SCORECARD Area of Objectives Measure Time Expectation Primary Responsibility Customers 1. Customer satisfaction Customer and online surveys Quarterly Managers/ Marketing 2. Customer Loyalty Product and purchasing reviews. Memberships and number of returning and new customers. Quarterly Marketing 3. Accessibility Open more stores in various countries. Biannually- Annually Marketing Managers/Employees
  • 83 1. Improve working conditions Increase in productivity, employee surveys. Quarterly CEO 2. Improve employee training Increase in productivity and overall operating efficiency Quarterly Human Resources Community/Social Responsibility 1. Business Ethics Endorse positive role model athlete`s. Increase promotion of sports and wellness. Annually CEO 2. Environmentally Friendly Recycle materials, improve reputation and customer perspective. Biannually CEO 3. Community involvement Run local sports camps, community/ city events- increase customer awareness. Biannually Regional Managers Operations/ Processes 1. Improve Brand Image Increase in sales and customer recommendations. Quarterly CEO 2. Product Innovation Number of new stores, products and marketing Quarterly CEO/ Marketing 3. Market Penetration Number of stores and sales in new/ other countries Annually Marketing Financial 1. Reduce Cost of Decrease in Annually CFO
  • 84 production production expenses. 2. Increase Revenue Increase in annual sales Annually CFO CONCLUSION NIKE Company has still well position on market and our increasing will regularly and we will be best largest sports wear and shoes manufacturer. We are already implement our current strategy of focusing strategy and diversification strategy .But with some little bit focus on different conjectures. We have recommended some strategies NIKE. They are Advertisıng, Brandıng, Sellıng, Manufacturıng, Organızatıonal and Human Resource Management Strategy.We have chosen one of them and it is Advertisement and Brandıng Strategy.We think that if we are change our advertisement shape and tend to make a advertisement which touching the community values, we will get much more sales and revenue from this market.
  • 85 BIBLIOGRAPHIC 1-) www.nike.com 2-) www.slideshare.net 3-) www.wikinvest.com/stock/Nike 4-) www.assignmentstudio.net 5-)www.wikipedia.org/wiki/Nike 6-) www.financeyahoo.com 7-) www.google.com 8-) www.newyorktimes.com 9-) www.dailymarkets.com/stock/2010/09/22/earnings-preview-nike-inc/ 10-) condor.depaul.edu/aalmaney/StrategicAnalysisofNike.htm