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INTERNATIONAL CLASS PROGRAM Global Financial System and Midterm PaperCourse Facilities : Alia SetyoriniDue Date : June, 6th 2012“ I hereby declare that the attached assignment is my own work and understand that if i amsuspected of plagiarism, cheating or any form of Academic Misconduct, my work will be referredto the Board of Examiners, which may result in me being expelled from the program.” Name Student ID Signed Date Reno Saputra 09125007 June, 6th 2012
Table of content 1. About NIKE 2. NIKE’s Products 3. Going Global 4. Financial 5. Foreign Exchange
About Nike Nike is a major publicly traded clothing, footwear, sportswear, and equipment supplier based inthe United States. The company was founded on January 25, 1964 as Blue Ribbon Sports by BillBowerman and Phil Knight, and officially became Nike, Inc. on May 30, 1978. It started with a handshakebetween two visionary Oregonians - Bowerman and his University of Oregon runner Phil Knight. Theyand the people they hired evolved and grew the company that became Nike from a U.S.-based footweardistributor to a global marketer of athletic footwear, apparel and equipment that is unrivaled in theworld. When Nike co-founder Bill Bowerman made this observation many years ago, he was defining how he viewed the endless possibilities for human potential in sports. He set the tone and direction for a young company created in 1972, called Nike, and today those same words inspire a new generation of Nike employees. Nike world headquarters is located near Beaverton, Oregon, a suburb of Portland. So while the Pacific Northwest is the birthplace to Nike, today we operate in more than 160countries around the globe. Through our suppliers, shippers, retailers and other service providers, wedirectly or indirectly employ nearly one million people. That includes more than 35,000 Nike employees across six continents, each of whom makestheir own contribution to fulfill our mission statement: to bring inspiration and innovation to everyathlete* in the world. In the year 2000, Nike had contracts in 46 countries with 565 subcontractors. Thecompany was enjoying 45% global market share. It had various outsourcing units in Taiwan, Indonesiaand South Korea. Nike have established their Brand successfully, the brand alone is valued at $10.7 Billion makingit the most valuable brand among sports businesses. The Nike brand itself is the biggest strength of Nike.Its other strengths include international operations where it is expanding aggressively, innovation ofnew products and ability to connect with its consumers.
Nike markets its products under its own brand, as well as Nike Golf, Nike Pro, Nike+, Air Jordan,Nike Skateboarding. Along the way, Nike has established a strong Brand Portfolio with several wholly-owned subsidiaries including Cole Haan, Converse Inc., Hurley International LLC, NIKE Golf, and UmbroLtd.Nike vision The Nike goal is to carry on his legacy of innovative thinking, whether to develop products thathelp athletes of every level of ability reach their potential, or to create business opportunities that setNike apart from the competition and provide value for our shareholders.Nike mission To bring inspiration and innovation to every athlete in the world. If you have a body, youare an athlete.Nike’s Product NIKE’s athletic footware product are designed primarily for specific athletic use, although a largepercentage of the products are worn for casual or leisure purposes. NIKE place considerable emphasison high quality construction and innovation in products designed for men, women, and children.Running, training, basketball, soccer, sport-inspired casual shoes, and kid’s shoes are currently NIKE’stop-selling footwear categories. NIKE also sell sport apparel and accessories covering most of the above categories, sportinspired lifestyle apparel, as well as athletic bags and accessory items. In term of performanceequipment NIKIE sell with their own name including bags, socks, sport balls, eye wear, timepieces, andother equipment designed for sport activities.Brand acquisitions
As of November 2008, Nike, Inc. owns four key subsidiaries: Cole Haan, Hurley International,Converse Inc. and Umbro. Nikes first acquisition was the upscale footwear company Cole Haan in 1988.In February 2002, Nike bought surf apparel company Hurley International from founder Bob Hurley.In July 2003, Nike paid US$309 million to acquire Converse Inc., makers of the iconic Chuck Taylor AllStars sneakers. On March 3, 2008, Nike acquired sports apparel supplier Umbro, known as themanufacturers of the England national football teams kit, in a deal said to be worth £285 million (aboutUS$600 million). Other subsidiaries previously owned and subsequently sold by Nike include BauerHockey and Starter.Going global The increasing market demand make the founder of Nike think to expand globally in order tofulfills and support both in terms of marketing, production, and sales to aligning and realizing themission that has been embedded and committed by Nike. Nike, with 41% market shares (Reuters, 2010),dominates the global market for the athletic footwear and apparel earned the revenue of $ 19014million in year 2010 (financial report, 2010). The company is outsourcing all of its work without hurtingthe quality of its products; Nike still is a market leader. The international sales of the company are morethan 60% of its total revenue enabling the company to receive 51% gain in the profit (business week,2007). Going global has benefited Nike through various aspects the chief ones among them areincreased market share and customer base. Going global offers the advantage of targeting new group ofcustomers whose preferences meets Nike’s products and reduced labor costs. The diverse productofferings are one of the biggest advantages to Nike for its global expansion (business week, 2007). The global revenue of the company has increased a lot but the business practices in U.S marketsare not very favorable as they were before the recession hit the country. The company has to facechallenges like increasing costs, freight charges and fluctuating currency rates (Nike Inc, 2011).
The company’s success in the international markets is the collective effort to connect its brandsto the emotions, culture, and endorsement with the local celebrities. Nike joined United Nations project to promote human rights in the year 2000 since then the global image of the company have improved enormously and earned it more than 1.1 billion dollars revenue from its business in Asia (Czinkota, 2008). Financial Report Almost every year Nike have increasing their revenue, it represent how great and promises ofNike performance time to time. This revenue is cumulative from Nike brand and other subsidiariesbrand (Converse, Umbro, Nike Golf, Hurley, and cole haan) Nike earns more revenues from its international operations than its domestic market. Nike earned about $ 10,4 billion (57,85%) FY 2011 from its international operations, compared to $7, 58 billion (42,15%) from its domestic market. International operations appear to be a key driver of Nikes growth. Nikesinternational operations are divided into 3 different regions. The EMEA region oversees operations inEurope, Middle East, and Africa. The Asia Pacific Region oversees operations in East Asia, South Asia,Southeast Asia, and the Pacific. The Americas region oversees operations in South America, and NorthAmerica (excluding United States). Europe, Middle East, & Africa (EMEA) is headquartered in Hilversum, Netherlands. In terms of revenue, the EMEA is Nikes second largest region. EMEA region contributed about $4.8
billion in revenues for Nike. Of these, footwear revenues contributed $2.9 billion, apparel revenues contributed $1.6 billion and equipment revenues contributed $292 million. FY11, 27% of Nike brand revenue was generated by sales in the EMEA region. This region is also the third largest in terms of manufacturing. EMEA region employs about 6,000 Nike employees, and has about 104 contract factories. These factories in addition, employ 29,242 workers. The Asia Pacific region is Nikes third largest in terms of revenue, and the largest in terms of manufacturing. Nike has 13 branch offices and subsidiaries in the Asia Pacific region. China has become both a source country and a vital market for Nike. Asia Pacific region has 3,282 Nike employees approximately. The region also has 252 contract factories located in North Asia, and 238 contract factories located in South Asia. Combined, these factories employ 550,821 workers. Nikes revenues for year 2011 from its Asian operations were about $2.7 billion. Of these revenues, approximately $1.5 million were from footwear sales, $1.1 million from apparel sales and $175 million from equipment sales. The Americas region is the smallest in terms of revenue 2nd largest in regards to manufacturing. The first Nike shoe ever contracted out was done in Mexico in 1971. For year 2011, the region provided Nike with revenues of $2.73 million. Of these revenues $1.897 million were from footwear sales, $657 million from apparel sales and $182 million from equipment sales. This region has approximately 1076 Nike employees and additional 44,568 workers working in 137 total contract factories. Nike has branch offices and subsidiaries in five countries.NIKE’s involvement in Foreign Exchange Nike as a company that has been jump in the international business must have ownstrategies in the global business world which they concern on, the involvement of foreignexchange rates would have a direct impact on the performance and corporate profits. NIKEglobal activity that requires the currency that can be used globally as a reference for countriesthat have involvement of their business in order to facilitate business transactions. Wage labor,
raw materials, production costs, and distribution costs to retailers, where retailers are locatedoutside the U.S. and spread across parts of the State making the mobility of companies relyheavily on foreign exchange. Foreign currency exchange rates influence NIKE’s revenue. For instance, in 2011 Grossmargins of NIKE fell to 44.5 percent from 44.7 percent in the year-ago quarter, caused by higherdiscounting and foreign exchange impacts caused by factors involved. NIKE estimate the year-over-year change in foreign currency related gains and losses included in Other (income)expense, net combined with the impact of changes in foreign currency exchange rates on thetranslation of foreign currency-denominated profits did not have a significant impact on Incomebefore income taxes.Referenceshttp://www.123helpme.com/view.asp?id=47254 (competitive advantages)http://www.nytimes.com/2009/12/18/business/18nike.html?_r=1http://www.nike.com