Case-Study Overview• Internal: • Analysis – History, Nike overview, Key – SWOT Matrix Facts, Our Brands and Stock – SPACE Information – BCG – Nike Actual & Proposed Vision and Mission – IE matrix – Economic Performance – Grand Strategy Matrix – Evolution of Financial Ratios – QSPM – Strengths and weaknesses • Possible strategies: Matrix • Analysis: IFE Analysis• External: • Decisions – Industry overview and – Why our decision? comparison of financial ratios – Strategic implementation – Manufacturing – Actions – Opportunities and threats • Evaluation Procedure • Analysis: EFE • Current Update – Competitors • Market Share • Analysis: CPM
History1962: Phillip Knight, a Stanford University business graduate and former member of the track team, arranges to import athletic shoes from Japan and sell them in the U.S.. Knight created Blue Ribbon Sports as a cover name for his small- scale shoe-selling operations1964: William Bowerman becomes a partner by matching Knights investment of $500.1965: Hires a full time employee, and annual sales reach $2,000.1966: Blue Ribbon Sports, also known as BRS, rents its first retail space; employees can now stop selling shoes from their cars.1969: It now has several stores and 20 employees; sales are close to $300,000.1971: Nike, capitalizing on the Greek goddess of victory. The first Nike product sold with the new symbol is a soccer shoe.1970 – 1975: Steve Prefontaine was turned to the University of Oregon by Bill Bowerman and wore Nike products.
History1976: The popularity of jogging increases revenue to $14 million.1978: The company changes its name to Nike.1980: Nike goes public, offering 2 million shares of stock.1990: Nike files suit against competitors for copying the patented designs of its shoes, and also engaged in a dispute with the U.S. Customs Service over import duties on its Air Jordan basketball shoes.1997: Feb., Stocks reaches a high of $76 per share.1998: Sept., Stocks tumbles to $31 per share.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.
Origin of the Name and the Swoosh• Nike is the Ancient Greek goddess of victory“It is one of the most recognized symbols in the world – The Swoosh. Simple. Fluid. Fast.” (Quote from Nike’s website)
Nike Overview• Nike’s principal business activity is the design, development and worldwide marketing of high quality footwear, apparel, equipment, and accessory product• Distributed in over 160 countries around the world: (Asia, Australia, Canada, Europe, Latin America, and the United States)• Nike is the largest seller of athletic footwear and athletic apparel in the world.• Fiscal year ended May 2003: Revenues of $10,697 million (increase of 8.1% against 2002)• Employees: 26,000 worldwide. 650,000 in Nike contracted factories around the globe.• Facilities: in Oregon, Tennessee, North Carolina and The Netherlands. – Also operates leased facilities for: * 14 Niketowns, * Over 200 Nike Factory Stores, * 12 NikeWomen stores * Over 100 sales and administrative offices.
Key facts (2003)• Headquarters: Beaverton, OR• Index Membership: S&P 500 S&P 1500 Super Comp• Sector: Consumer Goods• Industry: Textile - Apparel Footwear & Accessories• Other Brands: Cole Haan, Converse, Hurley, Bauer Hockey, Starter Apparel• Market Cap: 21.738 billion• Ticker Symbol: NKE• Ranked 173 in the Annual ranking of Americas largest corporations (Fortune 500 magazine)
• 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.
• Hurley International, based in California, designs and distributes a line of action sports apparel for surfing, skateboarding and snowboarding, and youth lifestyle apparel and footwear.
• Converse, based in Massachusetts, designs and distributes athletic and casual footwear, apparel, and accessories.
Nike Stock (NKE) Information• Stock Symbol: NKE.• Went public in December 1980 and is traded on the New York Stock Exchange.• Price: – Dec 31st, 2003: $68.46 – May 1st, 2006: $82.21• Shares Outstanding (July 2003): 263.7 mill
Vision Statement“To bring inspiration and innovation toevery athlete* in the world”(* “If you have a body, you are an athlete”Bill Bowerman, co-founder)
Proposed Vision Statement Continue to bring inspiration to presentand future athletes, while maintaining thecompanys standard of quality for itsproducts.
Mission Statement Nike is the "largest seller of athletic footwear andathletic apparel in the world. Performance and reliabilityof shoes, apparel, and equipment, new productdevelopment, price, product identity through marketingand promotion, and customer support and service areimportant aspects of competition in the athletic footwear,apparel, and equipment industry. We believe we arecompetitive in all of these areas." The company aims to " lead in corporate citizenshipthrough proactive programs that reflect caring for theworld family of Nike, our teammates, our consumers,and those who provide services to Nike."
Proposed Mission Statement To continue to offer quality products with increasinggrowth in the industry and expanding globally. Ourmission has always been to provide a competitive edgeby developing the most technological products. Keepingin mind fair labor practices in all our suppliers’ factories,while maintaining a competitive advantage, with theshareholders interests, and company profits in mind. Wealso believe our employees are one of our mostimportant assets. To increase the responsibility towardsthe environment by evaluating the impact of day to dayoperation and attempts to change operations that have anegative impact.
Economic Performance:Revenues by Regions (2001–2003)
Internal strengths and weaknessesSTRENGTHS: WEAKNESSES:• Strong brand recognition • Lack of stores catering to the• Internet sales active females• Growing international presence• Superior research and development • Poor employment practices at department their international manufacturing• Strong financial returns sites giving a bad reputation• Strong sense of culture in the • Heavy dependency on footwear working environment sales• Great celebrity spokespersons • Issues with Footlocker• Automatic replenishment system• Successful experience being competitive• Nike doesn’t own any factories• Successful marketing campaigns
Industry Overview• Athletic footwear manufactures captured nearly one-third of the total footwear market in the early 1970s.• Over a span of more than 25 years, American consumers spent $300 billion on 7.5 billion pairs of athletic shoes.• Reebok international Ltd. and Adidas became $ 3.5 Billion companies, while Nike Inc. became the first ever $ 9.5 Billion company.• By 1996 the number of establishments had dropped to about 52, with 12 factories closing since 1995.• Chinas imports increase by 6 percent to 1.26 billion pairs in 2003 .• Brazils share increased 2.3 percent to 83.5 million pairs in 2003.• Vietnams share jumped 91.9 percent to 23.5 million pairs in 2003.• The US markets continue to be dominated by imports from countries with low-cost labor.• From 1997 to 2001, the value of industry shipments declined from $ 219.6 million to $106.5 million.• U.S. shoe manufacturing plants declined by 775 between 1967 and 2001, the number of new plants opening dwindled to nearly zero.
Manufacturing: Nationality of Contract Suppliers
External Opportunities and ThreatsOPPORTUNITIES: THREATS:• Customer use of company’s • Competitors which copy companysproducts change from athletic business model (high value brandedpurpose to a fashion item product manufactured at a low cost)• Development of international trade •Reeboks strong presence with 204(GAAT and NAFTA) factory direct stores• Generation Y children (born •Adidas-Salomon AG, top Europeanbetween 1979 and 1994) will reach competitor60 million • The impact of foreign currency•General demand for fluctuation and interest rates, andclothing/footwear for leisure activities political instabilitycontinues to increase • Labor and political unrest in the• Growing e-commerce’s positive suppliers countrieseffect since one of company’s • Cost orientated customers vscompetitive advantages is Internet company’s higher-end market.sales•Women demand for athletic footwearand clothing is increasing significantly
Decisions• Primary: Focus on finding the most promising customers (kids and women) and introduce more products or improve current ones to satisfy potential increase in demand• Alternative: – Keep expanding into current and future foreign markets by being aggressive and the worldwide leader of the footwear industry – Accelerate funding for numerous marketing campaigns in order to get to specific markets or customer groups – Focus on improving working conditions and human rights at international manufacturer centers and at the same time increasing their productivity – Implement product diversification with company’s newest technologies so resulting increased earnings could be reinvested into R&D plans
Why this strategy?• U.S. Women: Prefer fashion, not footwear, they prefer clothing, we must create a shopping style based in athletic shopping.• U.S. Kids: E-commerce, influenced by innovation and design, not only comfort or sports• We need to consolidate US sales compared to international sales and international competitors• Difficult to expand towards other sports or population segments
ImplementationActions:• Women: – Open 25 specific stores specialized only for women – Increase R&D expenses by 7% in women products – Increase Marketing expenses by 10%, designing a specific campaign for women using female endorsements – Create a new logo for women market which would be associated with fashion trends and introduce new products• Kids: – Increase R&D expenses by 7% in kids products – Increase Marketing expenses by 10%, designing a specific campaign for kids – Introduce more soccer and basketball products targeting potential youth market• Research in international market to find out what are the new trends related with women and kids products (Long-term)
Evaluations• Nike annual financial reports• Sales and profits reports (on-line and off-line) based on Women stores and Kids products• Frequent management meetings between VP Global Brand Management (US), VP Global Footwear, VP Global Apparel, and VP Subsidiaries and New Business Development• Evaluation reports
Update: 2004-2006• 2004: Nike introduces “Swift” technology. – Nike Swift increases track times by up to 1.13%. – Football (soccer) wear becomes #1 in Europe. – Nike SHOX footwear introduced in other footwear types and continues to boom.• 2005: Profits recover, growing nearly 30% to reach $1.2 billion on unprecedented revenue of $ 13.7 billion. – Nike has 8 NikeWomen stores in key cities in the U.S.. – Nike Pro Apparel introduced into NFL and MLB. – Greatly expands SHOX running footwear – August: Main competitors have joined with the recent announced acquisition of Reebok by Adidas• 2006: Nike Pro Apparel expands into NBA. – Nike uses Rihanna to help infiltrate the women’s market. – Nike expands women’s product line and website. – Introduced “Nike Consider” to be more environmental conscious. – Introduced new footwear and apparel line “Pre” dedicated to Steve Prefontaine
References• http://finance.yahoo.com• Nike Annual Reports (2003 & 2005)• Annual ranking of Americas largest corporations, Magazine: Fortune 500 (2005): cnn.money.com• www.nikebiz.com (Investor Relations)• www.bigcharts.com• www.businessweek.com• Strategic Management Concepts and Cases; Fred R. David, 10th Ed.