NIKE - STRATEGIC CONCEPT PAPER

MODUL INT. STRATEGIES, PROF. DR. JENS KIRCHNER, SS 2019 - AYDOGDU, BIERSACK, ECKER, ERBER, WILLARDT

Strategy Concept - NIKE
NIKE‘s mission and vision statement are in line with its values
emphasizing inspiration, innovation, and its market position
*If you have a
body you are
an athlete
1

The scope of operations of NIKE covers a wide product range and a
defined spectrum of business activities
1. Athletic & Casual Footwear
2. Apparel
3. Equipment
4. Accesories
5. Services
International branch offices in 51
countries worldwide in all 5
continents & products sold in
110 countries
2

NIKE’s product line offers products for every type of sport as well as
lifestyle fashion merchandise
Running, gym,
team sports,
skateboarding,
etc.
Air Max, Air
Force, Air
Jordan, etc.
Lifestyle,
sports, surfing
& swimwear,
and NIKE Pro
Balls, gloves,
swim googles,
etc.
Sunglasses,
watches, bags,
etc.
Expert Fitting
Trial Run
Risk-free
product trial
The most relevant sports that
NIKE manufactures products
for are:
 Football/ Soccer
 Basketball
 American Football
 Ice Hockey
 Tennis
 Athletics & Running
 Volleyball
3

NIKE’s generic strategies emphasize product mix diversity whereas intensive
growth strategies focus on innovation, improving market position, and
increasing market share
4

NIKE’s generic strategies emphasize product mix diversity whereas intensive
growth strategies focus on innovation, improving market position, and
increasing market share
LAUNCH OF NIKE‘s
FIRST
SPORT HIJAB IN
2017
AIR
SUSAN
4.12 4PM
NIKE
ADAPT
BB
INCREASED NUMBER
OF STORES FROM
858 TO 1182
5

Revenues of NIKE remain constant between 2017 and 2018 in general
but equipment revenues dropped slightly by 4%
43%
27%
15%
15%
Total Revenues
2018
North America -> 2% decline
EMEA -> 16% increase
Greater China -> 21% increase
APAC & LA -> 9% increase
21081
9654
1425
22268
10733
1396
0
5000
10000
15000
20000
25000
Footwear: 4% growth Apparel: 9% growth Equipment: 4% decrease
Revenues in Million USD
2017 2018
6

In million
USD
2018 2017 % Change 2016 % Change
EBIT
Nike Brand
5.525 5.192 6% 5.328 -3%
EBIT
Corporate
-1.456 -724 -101% -1.173 38%
Total EBIT
Nike Inc.
4.379 4.945 -11% 4.642 7%
In million
USD
2018 2017 2016 2015 2014
Revenues 36.397 34.350 32.376 30.601 27.799
Gross profit
15.956 15.312 14.971 14.067 12.446
Gross margin
43.8% 44.6% 46.2% 46.0% 44.8%
Net income
1.933 4.240 3.760 3.273 2.693
Cash flow
from
operations
4.955 3.846 3.399 4.906 3.158
Despite exchange rate caused setbacks NIKE delivers a solid financial
performance
• Nike´s revenue is growing continuously and
achieved a new record for fiscal 2018 by
growing 6% to $36.4 billion
• Gross margin decreased 80 basis points in
2018 primarily due to foreign currency
exchange rates, however gross profit
remains stable
• Net income for fiscal 2018 decreased
tremendously, in part reflecting the negative
impact of weakening foreign currency
exchange rates
• Cash flow from operations skyrocketed over
the past 4 years
• North America and EMEA account for
almost 2/3 of Nike´s total revenue
• Greater China boasts a double-digit growth
in revenues -> Increasing strategic
importance
• Moderate growth for APAC and LA
7

Well-functioning logistics system achieved through efficient
organization of processes and high degree of innovation
INBOUND
LOGISTICS
OPERATIONS OUTBOUND
LOGISTICS
• Locally
purchase most
raw materials in
bulk
• Focus on
sustainability
• Local logistic
providers
• Outsourcing
manufacturing
and assembly
• Heavy
investment in
R&D and
technical
innovation
• Quality control
• Efficient
distribution
system
• Just in time
delivery
• Good
relationship
with suppliers
8

Focus of marketing efforts on outstanding customer service and
emotional branding collaborating with well-known athletes
MARKETING SALES &
SERVICE
Established brand and
logo through marketing
→ Strong brand
reputation
Price leadership &
value based pricing
Sponsoring most
excellent athletes
Emotional branding
and advertising
Excellent pre and post
sale customer service
Extensive customer care
„Athletes helping
Athletes, 7 days a week“
9

Overview of content
1. Company analysis
2. Market analysis and customer environment
3. Competitive environment analysis
4. SWOT – analysis
5. Strategic recommendations for further growth
6. Management summary
10

Higher customer expectations force sportswear brands to focus on
sustainability and digital store experiences
Market
Trends
Focus on
Personalization
Sustainability and
Eco-friendliness
Increased
Competition
Rise of experiential
Retail
Use of open source
for product design
Customization of
products provides
unique experience
Customers willing
to pay more for
sutainability
Increased use
of recycled
materials
Innovative in-store
technologies
Focus on selling
experiences instead
of products
New market
entrants
Rise of fashion
brands selling
athleisure (H&M)
11

Nike targets a young and urban international audience with increasing
focus on females
MODUL INT. STRATEGIES, PROF. DR. JENS KIRCHNER, SS 2019 - AYDOGDU, BIERSACK, ECKER, ERBER, WILLARDT 12

Reaching customers through socially-conscious social media
campaigns and partnerships with world-class athletes
Creates user engagement and stimulates conversation
Creative and
funny ads telling
meaningful
stories featuring
top athletes
High degree of
Innovation and
cutting-edge
technologies like
Nike+ Run Club
Encouraging a
global mindset,
promoting social
justice & women´s
rights
Endorsements &
partnerships with
sport legends
like Michael
Jordan
13

Overview of content
1. Company analysis
14

Competitive environment analysis - NIKE
Puma as a main competitor pursuing an international sales and supply
chain strategy
Financial performance
• Revenue: € 4.7 billion
• EBIT: € 337 million
• Net earnings: € 187 million
Supply Chain Activities
• Outsourced most of the production
• 139 suppliers worldwide (130 in Asia)
• Code of conduct and ethics
Internationalization strategy
• Globally balanced sales
• Internationally standardized product
with some local adaptions
15

Puma is selling its wide-ranging product portfolio in various online
and offline channels
Retail Organisation
& Sales Channels
Footwear
76% Wholesale
(globally)
24% Direct-to-
Customer (globally)
Apparel Accessories
- Innovative products
- Sustainability
approach
- Minor global market
share
- Low brand awareness
in Asia
16

Puma promotes its products using innovative marketing tools and
famous ambassadors
Marketing
Activities Similar approach to
NIKE, i.e. heroic and
motivating message
Puma even launched a
bootline named after
him
Selena Gomez Instagram
post in collaboration with
PUMA got 5.9 billion likes
Storytelling
Collaboration with top
athletes, teams, and
influencers as
ambassadors
Social Media for buzz
creation
17

Adidas competes with Nike being globally present and having high
revenues
• Revenue: € 21.9 billion
• EBIT: € 2.3 billion
• Net earnings: € 1.7 billion
• Most products sold in APAC,
Europe, and Northern America
• Global brand organization &
internationally standardized
products
• Outsourced most of the production
• Collaborations with 700 independent
factories worldwide (70% APAC)
• 100 strategic suppliers
• Workplace standards
33,86%
27,91%
22,24%
7,75%
5,42%
2,82%
Geographic sales split
APAC Europe
North America Latin America
Emerging Russia/CIS
18

Adidas distributing 1 billion units of different products in diverse own,
franchise and wholesale sales channels
Footwear, apparel & accessories for
lifestyle and sports particularly
football, running, outdoor
• 2,300 own retail stores
• 14,000 mono-branded franchise
stores
• 150,000 wholesale partners
• Digitalization focus: Website and
app for ecommerce
19

Competitive environmental analysis - NIKE
Adidas sponsoring important events, athletes and stars using
innovative digital marketing
Marketing communication
activities
• Sponsorship for huge events
(FIFA world cup etc.)
• Collaborations with famous
athletes (Lionel Messi)
and testimonials (Kylie
Jenner, Kanye West)
• Social media campaigns
• Open source
• Strong customer
relations and
involvement
• High market
share in Asia
• Low market share
in America
• High cost structure
20

Overview of content
1. Company analysis
21

Strong market presence and high degree of innovation opposed to
lack of environmental protection and poor labor conditions
Strengths Weaknesses
Opportunities Threats
 New market entrants
 Strong competition
 High variety of potential
subsitutes
 High amount of counterfeiting
of footwear and clothing
 Scarcity of resources
 Expansion into emerging
markets
 Favorable industry trends
 Growing segments of
sporting industries (women´s
apparel, parcours, muslims)
 Increase in digital sales
 Largest supplier and market
leader in apparel & footwear
 Cutting-edge designs
 State-of-the-art technologies
 Unique and creative
marketing campaigns
 Environmental protection
and sustainability
 Labor conditions
 Limited presence in
developing countries
 Overseas manufacuring
dependency
22

Focusing on Sustainability, International Presence and Authenticity as
major success factors for future growth
Weaknesses
Focus on Sustainability
• Protection of the environment
• Improve labor conditions in developing countries
International Growth
• Tap into markets of developing countries
• Increase presence in established markets like
Europe
Authenticity
• Stay true to brand values
• Keep on fighting for social justice and women´s
rights
23

Overview of content
1. Company analysis
24

Overview on strategic recommendations to induce further growth
Extension to new customer segments
Commitment to sustainability
Digital investments
Exploit full potential of promising marketplaces
Enhance working conditions
Broaden product portfolio to aerobics and parcours
25

Boost growth by launching a self-standing sub-brand to also serve low
price segment
Extension to new customer segment1
• Creation of low-price product variants
• Trading down with less quality and lower prices
• Strict differentiation required to maintain premium image
• Utilization of discounters as distribution channels
Advantages
Capture market share by gaining low-budget customers that are highly price-sensitive
Disadvantages
Risk negative repercussions on entire brand image if clear separation carried out improperly
Implementation
Rolling out self-standing and separately marketed product range, distribution via inexpensive
channels (e.g. discounters)
Potential
Convince customers that are unwilling to pay premium prices and counteract counterfeiting
26

Proposal of name and slogan for low-price product line
27

Incorporate sustainablity into all aspects of the company to counteract
scarcity of resources and generate competitive advantage
Commitment to sustainability2
• Increase current 71% of recycled materials to 100%: induce
customers to send in old products
• Decentralization & relocation of production facilities to
diminish environmental footprint and distribution cost
• Drive innovations for sustainable production processes
Advantages
Tackle problem of scarce resources and environmental pollution, lower costs for recycled materials
Disadvantages
High involvement and cost for R&D, major change in company structure and production processes
Implementation
Long term planning required and high financial investment, integrating customers in the sustainibility
processes
Potential
Create competitive advantage and improve brand image
28

Generate sales and revenue in greatly promising markets of women’s
apparel and China by a more targeted approach to customers
Exploit full potential of promising marketplaces3
• Intensify activites regarding women‘s apparel market
and Chinese market, e.g. by sponsorships or
cooperations
• Adjust products according to respective preferences
Advantages
Generating further sales within these markets to realize more revenue, exploit their potential
Disadvantages
Time-intensive research process to filter out preferences; adjustments reduce economies of
scale
Implementation
Huge investment of funds and need for specialized departments
Potential
Raise brand awareness; satisfy customer needs and preferences and gain market share
29

Extend product range and adjust products to appeal to and suit the
requirements of the arabic-islamic market
Broaden product portfolio4
• Factor in cultural backgrounds of buyers with special
regards to women in the arabic- islamic world
• Design products to suit the different types of veiling
(material, style and product range)
Advantages
Establish position and generate sales in the sports market for muslims
Disadvantages
Comparatively low market volume in the European and American market
Implementation
Breathable materials to enable sports for veiled women despite hot weather, extend product
range from hijabs to burkinis and specially designed products
Potential
Raise brand awareness; improve brand image by adaptation to cultural background of
customers
30

Overview of content
1. Company analysis
31

Management Summary (1/2)
Key Facts
• NIKE attained a market leading position by emphasizing inspiration, innovation and
broad product portfolio encompassing lifestyle fashion merchandise
• Although its exchange rate caused setbacks NIKE delivers a solid financial performance
• Draws on a well-functioning logistics system achieved through efficient organization of
processes and high degree of innovation
• Focus of marketing efforts on outstanding customer service and emotional branding
collaborating with well-known athletes
Strategic Position
• Nike targets a young and urban international audience with increasing focus on females
• Reaching customers through socially-conscious social media campaigns and partnerships
with world-class athletes
• Puma is Nike’s main competitor pursuing an international sales strategy and by heavily
promoting their wide-ranging portfolio via innovative marketing tools and famous
ambassadors
• Adidas competes by utilizing an extended distribution system, generating attention by
sponsoring important events, athletes and stars and diverse digital marketing activities
32

Management Summary (1/2)
Market Environment
• Higher customer expectations force sportswear brands to focus on sustainability and
digital store experiences
• Strong market presence and high degree of innovation opposed to lack of
environmental protection and poor labor conditions
• Focusing on Sustainability, International Presence and Authenticity as major success
factors for future growth
Recommendations
• Boost growth by launching a self-standing product diversification to also serve low
price segment
• Incorporate sustainablity into all aspects of the company to counteract scarcity of
resources and generate competitive advantage
• Generate sales and revenue in greatly promising markets of women’s apparel and
China by a more targeted approach to customers
• Extend product range and adjust products to appeal to and suit the requirements of the
Arabic-Islamic market
33

NIKE - STRATEGIC CONCEPT PAPER

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to NIKE - STRATEGIC CONCEPT PAPER

Similar to NIKE - STRATEGIC CONCEPT PAPER (20)

Recently uploaded

Recently uploaded (20)

NIKE - STRATEGIC CONCEPT PAPER