Nike- Strategic analysis

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  • Growing power of retail chains. EgWalmart… Fierce Competition- Adidas, Reebok, New Balance
  • Nike- Strategic analysis

    1. 1. PGDM – B Group – 6 Avishek Singh 113Mohammad Shadab 129 Pratik Akerkar 139 Somjeet Dutta 152 1
    2. 2.  Major publicly traded clothing, footwear, sportswear, and equipment supplier based in the United States Headquartered near Beaverton, Oregon, in the Portland metropolitan area Revenue in excess of US$19 billion in its fiscal year 2010 Employs more than 34,400 people worldwide as of May 2010 2
    3. 3. Shoes Miscellaneous Running  Bags Basketball  Socks Soccer  Sports balls Sport-inspired urban  Eyewear shoes  Timepieces Children’s shoes  Apparels  Bats  Gloves  Protective equipments 3
    4. 4.  Originally known as Blue Ribbon Sports (BRS) Founded by University of Oregon track athlete Philip Knight and his coach Bill Bowerman in January 1964 Initially operated as a distributor for Japanese shoe maker Onitsuka Tiger (now ASICS) Launched its own line of shoes branded as Nike in 1971 .The Swoosh was first used by Nike on June 18, 1971, and was registered with the U.S. Patent and Trademark Office on January 22, 1974 4
    5. 5. Threat of New entrants(Low) High Barriers to Entry Capital Intensive Strong Brand Following Economies of scale High Marketing & R&D Costs Industry in consolidation phase Bargaining Power of Internal Rivalry (Low) Bargaining Power of Supplier Buyer (Low) Fierce Competition (Low) End user brand loyalty Mature Industry Abundantly available raw Price sensitivity issues materials Mostly Non-Price competition Retail and vendor consolidationsCheap resources-commodity item Differentiation strategy Growing power of retail chains Industry in consolidation phase Good Infrastructure Threat of Substitutes (Low) Other types of shoes Other sport apparel 5
    6. 6. Threat of New entrants(High) Less/Not explored Markets Un-Sophisticated market needs Less Capital Intensive No major brand following Local players advantage Bargaining Power of Bargaining Power of Supplier Buyer (High) (Low) Internal Rivalry (High) Fierce Competition from global Consumer needs to be educated Inexpensive labor brands Retailers need to be educated Abundantly available raw materials Local players with cultural High Price sensitivity advantage Brand image to be re-establishedCheap resources-commodity item Lack of proper infrastructure Threat of Substitutes (High) Bare foot, walking with slippers e.g. India Leather boots and slippers 6
    7. 7.  Infrastructure: free space, good roads, jogging parks Sports equipments:  Backpack, balls, bats, rackets, etc. Partnerships with other products are widening the domains of complementors for sportswear products. E.g. Nike+iPod Sports kit 7
    8. 8. 8
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    10. 10.  The company sells its products to retail accounts, through its owned retail stores, and through a mix of independent distributors and licensees, as well as through internet website ‘www.nikestore.com’ It has 4 major subsidiaries:  Converse  Cole Haan Holdings  Nike Bauer Hockey  Hurley International 10
    11. 11.  Technology in Products– Historically had some of the most cutting-edge products on the market. E.g. Nike + iPod Manufacturing Skills– Use of low cost contract manufacturers, based outside USA, for its manufacturing Strength of patents  Nike Air  Nike Zoom  Nike Air Max  Nike Shox Economies of scale Application of IT– Nike relies heavily on IT in order to manage its supply chains 11
    12. 12.  Marketing– Nike is a marketing company Research & Development– Nike’s R & D lab evaluated as “far & away the best” in the industry. Large number of patents testimony to its commitment to R & D. Extensive SCM capabilities– has attained competency in leveraging low cost countries like China & Vietnam as its manufacturing hub. Sources its products from 900 factories spread across 50 countries. 12
    13. 13.  Nike’s distinctive competency lies in the area of marketing, particularity in the area of consumer brand awareness and brand power. While the reasons that Nike is successful in marketing products are numerous, this key distinctive competency towers over its competitors. As a result, Nike’s market share is number-one in the athletic footwear industry. Catch phrases like, "Just Do It," and symbols like the Nike "Swoosh," couple with sports icons to serve as instant reminders of the Nike Empire. 13
    14. 14.  Nike brand is the most valuable among sports businesses Of the companys $18.4 billion in revenues in 2009, 90% was attributable to merchandise emblazoned with either the Nike or Nike Golf logos. Nike’s brand value is US$ 18.6 billion in 2012, comprising more than 52% of its enterprise value* 30th most powerful brand in the world, and the number one in its industry. Its nearest rival Adidas is ranked at distant 135, while Reebok is ranked at 408. * source: Brandirectory, 2012. 14
    15. 15. Nike’s key resource evaluated on RBV framework The test of inimitability: Nike’s brand value cannot be duplicated or matched in the short-term. The test of durability: By continually investing significantly in brand building exercise, Nike has maintained and increased its brand value. Nike spent more than US$ 3 billion in 2010 on marketing. The test of appropriability: Since a lot of value that Nike creates is owing to its brand value, it derives maximum benefit from the value creation process. The test of substitutability: Brand as a resource is intangible. The only way it can be trumped is by creating a stronger rival brand (something that can take years to build and leverage) or by diluting Nike’s brand value The test of competitive superiority: Forbes ranked Nike as the top-most sports brand for a number of consecutive years. Its brand value is 10 times that of Reebok and more than 50% greater than that of Adidas. 15
    16. 16. 1. Athletic Footwear ▪ 54 % of total revenue ▪ Casual Footwear Line2. Apparel ▪ 27 % of total revenue3. Rest ▪ Equipment ▪ Sports related business 16
    17. 17.  “To distribute low-cost, high-quality Japanese athletic shoes to American consumers in an attempt to break Germany’s domination of the domestic industry” 17
    18. 18.  Quality Products Constant Innovation Aggressive Marketing 18
    19. 19.  180 Countries Total Revenue 6.7 17.3 34.1 US Europe Middle East Africa 28.7 19
    20. 20.  High-end, High Income Level between the age of 16-55 20
    21. 21. 21
    22. 22.  Sports Attitude Lifestyle  Just do it  You don’t win silver, You lose gold 22
    23. 23.  Flag Ship stores Nike Town shops NikeId Big Retail Discount Stores 23
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    25. 25. 25
    26. 26.  departments by both geographic divisions and product categories created overlapping management responsibilities and a fluid leadership structure 26
    27. 27.  Sweat Shop debacle, 1990s Diversity and Inclusion 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 27
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    29. 29. THREAT OFTHREAT OF SUBSTITUTIONIMITATION ADDED VALUE APPROPRIATED VALUETHREAT OF THREATSLACK OF HOLDUP 29
    30. 30.  Barriers to Imitation  Economies of scale ▪ Shared distribution channels and efficient production reduces costs  Patents & copyrights ▪ Nike has around 3775 patents in the sports shoes, apparels and the equipments domain e.g. Nike AIR technology, self lacing shoes, etc.  Innovation ▪ Strong emphasis on R&D and product development through new designs(more than 300 designs a year) e.g. recycled polyester for jerseys  Brand reputation and Image ▪ Celebrity endorsements & sponsorships of sports events 30
    31. 31.  Responses to substitution  Customization of footwear ▪ Online customization of footwear  Aggressive advertising ▪ ‘Just Do It’ campaign  Mergers and Acquisition ▪ Umbro, Converse, etc. 31
    32. 32.  Responses to Holdup  Multiple sourcing and Contracting ▪ Contract suppliers in China, Vietnam, Indonesia and Thailand; Argentina, Brazil, India, and Mexico  Building relationships with complementors ▪ Tie up with Apple for the ‘Nike + iPod’ sports kit  Increase Bargaining power ▪ ‘Just Do It’ advertising campaign  Forward Vertical Integration ▪ Opened Discount stores in rural areas and flagship stores in urban areas  Building Trust ▪ Improving working conditions through various programs e.g. Joining FLA & GAWC, transparency through publishing monitoring results 32 on the website
    33. 33.  Responses to Slack  Performance based incentives  Pay dividends to the shareholders  Nike encourages outsiders to become part of board, in order to avoid bias connected with “corporate conformism” 33
    34. 34.  Nike’s current policy of constantly widening the range of sports which they produce could be continued and further expanded. Nike could look into different markets, for example Fishing, Hiking, etc. Nike could attempt joint ventures or acquisitions with companies to expand their product portfolio and also achieve economies of scale and access to markets. Nike could take their collaboration with Apple one step ahead by forming exclusive gamepads featuring games like soccer, cricket, golf, NHL, NBA, etc. Focus on different segments as well e.g. Age group 50+ with shoes specially meant for walking, custom footwear for women athletes. Nike should start ‘Ethical’ campaign against the counterfeit production to improve on its image. Nike could get into partnerships with other firms and setup sporting academies in developing markets as a brand building exercise. Nike could make available online training videos of sporting stars and give their access to customers complementary along with certain range of products. Nike could also get into sporting accessories like sunglasses which are highly profitable and are complementary in nature. Nike could cut down on the contracting in order to avoid threat of imitation and future competition. 34
    35. 35.  Economies of scale Brand reputation and Image New designs and technology (recycled polyester for jerseys) Customization of footwear Relationships Aggressive advertising Sub brands ( Cole Haan, Converse, Hurley International, Hurley International, and Umbro Inc) Competition is non priced based on differentiation Celebrity endorsements and sporting event sponsorships Just do it campaign – signifies attitude, sports and lifestyle Flagship stores for selling Partnerships with retail discount stores like walmart Contract suppliers in China, Vietnam, Indonesia and Thailand. And also in Argentina, Brazil, India, and Mexico Nike + ipod Nike for women campaign 35
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