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Ba453 Ba453 Presentation Transcript

  • Nike and Deckers Acquistion Andrew Dingler Brian Gilroy Ramsen Golphasin Robby Morrissey David Paulson
  •  Description of Nike Nike’s competition How does Nike compete? How successful has Nike been? Nike’s major challenges going forward? Action Plan and Recommendations Description of Plan Strategic implications for Nike How Nike will assess their success Nike’s expected financial implications?
  •  In 1962 Bill Bowerman and Phil Knight founded Blue Ribbon Sports (BRS). In 1966, Bowerman, who had previously designed shoes for his university athletes, worked with Tiger to design the Cortez running shoe. In 1971, BRS, with creditor support, started manufacturing their own line of shoes. The shoe bore the Nike brand name, referring to the Greek Goddess of Victory, and the “Swoosh” trademark, meant to symbolize the Greek Goddess’ wing.
  •  BRS and Tiger ended their relationship in 1972. BRS soon changed its name to Nike, Inc. and debuted at the 1972 Olympic In 1973, Steve Prefontaine was the first prominent track star to wear Nike shoes. The 1980’s were marked by the signing of Michael Jordan as a product spokesperson
  •  Extremely team-oriented Environment is a collaborative, matrix organization, where team members report into two areas, geographic and global. Team work across footwear, apparel and equipment product engines. Their core consumer categories are action sports, basketball, football, soccer, mens training, running, sportswear, and womens training. These are focused in 6 geographic sales locations- North America, Western Europe, Central and Eastern Europe, Greater China, Japan, and Emerging Markets Nike’s also owns and operates under the Jordan, Cole Haan, Converse, Hurley International, and Umbro Inc. brand names.
  •  Nike uses factories and subcontractors to manufactures their products. They do this by outsourcing to companies throughout Asia and Europe. Most of their suppliers are located within factories in China, Indonesia, and Vietnam, with smaller manufacturing firms in Italy, the Philippines, Taiwan, and South Korea.
  •  Nike sells to retailers in 170 countries globally. Nike can be found in sporting goods stores, as well as department stores. Some of the major sporting goods stores that sell Nike products are Footlocker, Sports Authority, Big 5, Dick’s Sporting Goods, and Champs. Major department stores like Nordstrom, Macy’s and Kohl’s sell Nike products as well. Nike operated factory and retail stores
  •  Main competitors are Adidas and Under Armour Adidasis 2nd largest athletic footwear and apparel manufacturer Adidasrelies on Europe to drive company revenues UnderArmour is small, but one of the fastest growing companies in the industry
  • FOOTWEAR APPAREL Threat of New Entrants- Low  Threat of New Entrants- Powers of Suppliers- Low Moderate Power of Buyers- Low  Power of Suppliers- Low Threat of Substitutes- Low  Power of Buyers- Low Rivalry- High  Threat of substitutes- Low  Rivalry- High
  •  Usestrong brand image to demand higher prices Strong advertising campaigns help brand image – endorsements Outsourcing maintains strong gross margins Use website to sell directly to customers
  •  Largest Market Share in Both Athletic Footwear and Apparel
  •  International Distribution Channels Research and Development Globally Recognized Brand Sponsorship is key High Profile Athletes Team Deals New NFL Contract
  •  7.8% compound sales growth  industry average of -5.3%  Increased ROA so increased Efficeny NKE UA ADDYY DECK COLM NKE UA ADDYY DECK COLM 2003 2010Gross Margin 41% 44% 43% 42% 46% Gross Margin 46% 50% 43% 46% 42%Profit Margin 7% 5% 4% 8% 13% Profit Margin 10% 6% 2% 14% 5%Asset Turnover 1.6 2.1 1.4 1 1.2 Asset Turnover 1.4 1.6 1.2 1.4 1.1Return on Assets 11% 11% 6% 8% 15% Return on Assets 14% 10% 3% 20% 6%Financial Leverage 1.635 4.56 2.84 1.72 1.22 Financial Leverage 1.42 1.31 2.24 1.18 1.29Return on Equity 18% 48% 17% 13% 18% Return on Equity 20% 13% 6% 24% 7%
  •  Imitation and Counterfeits Toning Shoes Trend Lack of Casual Women’s Shoe Sponsored Athletes Under Armour NFL Contract
  •  Acquire Deckers Outdoor Corporation Discontinue Current Female Boot Line Leverage new NFL deal
  •  Manufacturers of the popular UGG boots Would spark an immediate increase in female casual footwear market share for Nike Nike can help Deckers achieve its goal of broadening its target market
  •  Currently not competing well in the market Nike has slashed the prices on all five boots in the female line Sales figures are down
  •  Find unique ways to  Do not tinker with NFL add value to deal traditionalists Follow blueprint of  Expected to increase popular college revenues anywhere uniforms from $350-500 million VS.
  •  Nike has been successful in strategy of acquiring other companies, notably Cole Haan, Hurley, Converse Deckers has enterprise value of $3.01 billion, while Nike has $4.6 billion available in cash and short- term investments Instead of reinvesting money in company, or paying out higher dividends, Nike can choose to acquire Deckers to boost revenues and market share
  •  Donot pursue NBA league deal Ambush Continue to use strength of player endorsements to lead the basketball industry Avoidentering toning shoe industry
  •  The NFL Contract Rebooks success with the NFL contract as a benchmark Create a brand awareness survey for NFL fans to measure the awareness of the Nike-NFL contract Ultimate measure for success for the NFL contract would be a renewal of the contract
  •  Acquisition of Deckers 2010 2011 Nikes Market Share 26.77% 28.33% Increases Nike’s market share Deckers outperforming their old bench marks Increased UGG product awareness globally
  • Forecasted Net IncomeRevenue 2011 2012 2013Nikes Current Path 20,683 22,749 24,720Deckers Added Revenue 930 1,952 2,300Nikes New Path 21,613 24,701 27,020
  • Operating income needed to sustain original ROA and ROEImproving benchmarks Current Path 2010 2011 2012 2013 ROA 18.48% 20.94% 21.74% 23.06% ROE 27.71% 30.97% 32.00% 33.59% New Path 2010 2011 2012 2013 ROA 18.48% 18.43% 24.72% 25.53% ROE 27.71% 27.14% 35.94% 36.28%
  • In conclusion, acquiring Deckers Outdoorswill improve Nike’s financial position withintheir market. This acquisition is feasibleand within Nike’s traditional strategy.Looking forward for the next three yearsNike will be in great shape if they are ableto capitalize on the acquisition of Deckersand the NFL deal.