Nayk Business Policy

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Nayk Business Policy

  1. 1. NIKE: CASE ANALYSIS Can ŞAHAN Business Policy Muzaffer ÇAĞLARYeditepe University Gökhan TAŞLIÇUKUR Halime GERÇEK
  2. 2. Case-Study Overview Internal:  Analysis  History, Nike overview, Key Facts, Our  SWOT Matrix Brands and Stock Information  SPACE  Nike Actual & Proposed Vision and  BCG Mission  IE matrix  Economic Performance  Grand Strategy Matrix  Evolution of Financial Ratios  Strengths and weaknesses  Possible strategies: Matrix Analysis External:  Decisions  Industry overview and comparison of  Why our decision? financial ratios  Strategic implementation  Manufacturing  Actions  Opportunities and threats  Evaluation Procedure  Competitors  Market Share  Conclusion  Analysis: CPM
  3. 3. 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.
  4. 4. 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.
  5. 5. Evolution of the Swoosh Logo
  6. 6. 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.
  7. 7. Brands
  8. 8. Brands 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.
  9. 9. Brands 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.
  10. 10. Brands 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.
  11. 11. Brands Converse, based in Massachusetts, designs and distributes athletic and casual footwear, apparel, and accessories.
  12. 12. 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  Nov 24st, 2008: $56,45 Shares Outstanding (July 2003): 263.7 mill
  13. 13. Stock Price Performance
  14. 14. 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)
  15. 15. Proposed Vision StatementContinue to bring inspiration to present andfuture athletes, while maintaining thecompanys standard of quality for itsproducts.
  16. 16. Mission Statement Nike is the "largest seller of athletic footwear and athleticapparel in the world. Performance and reliability of shoes,apparel, and equipment, new product development, price,product identity through marketing and promotion, and customersupport and service are important aspects of competition in theathletic footwear,apparel, and equipment industry. We believe we are competitivein all of these areas." The company aims to " lead in corporate citizenship throughproactive programs that reflect caring for the world family ofNike, our teammates, our consumers, and those who provideservices to Nike."
  17. 17. Proposed Mission Statement To continue to offer quality products with increasing growth in theindustry and expanding globally. Our mission has always been to provide acompetitive edge by developing the most technological products. Keeping inmind fair labor practices in all our suppliers’ factories, while maintaining acompetitive advantage, with the shareholders interests, and company profitsin mind. We also believe our employees are one of our most important assets.To increase the responsibility towards the environment by evaluating theimpact of day to day operation and attempts to change operations that have anegative impact.
  18. 18. Internal AssessmentMARKETING:Target Market :Male and Female; 18 – 34 y.o.Positioning : High performance shoes designed with hi-tech featuresHave many brands and products model for each type of consumers.Have high allocation of advertising budget for endorser contract, TVC,print ads, and sponsorship activities.Have top endorsers that are the champion in their sports areas.
  19. 19. Internal Assessment DISTRIBUTION: Nike has worldwide distribution line Nike has good distribution line to retailer Nike has new ordering system, named Futures Ordering Program
  20. 20. Internal AssessmentRESEARCH & DEVELOPMENT :Nike has NSRL (Nike Sport Research Laboratory) and APE (AdvancedProduct Engineering) which cooperated in developing and executingidea.Nike did direct research to the athlete by accompanying their dailyactivities to find the best suitable product.Nike always developing superior technology to compete with others.
  21. 21. Internal AssessmentManagement Style & CultureKnight as CEO Nike, is an former athlete of long distance runNike working culture is established as camaraderie and cooperative culture.Factory design in Oregon is especially designed to create natural circumstancesand equipped with complete sport facilities.
  22. 22. Internal AssessmentNike placed VP for social responsibility in 1998Nike joined Fair Labour Association (FLA) and Global Alliance for Workforceand Communities (GAWC)Nike funded many NGO such as WWF, etc.Nike do public relation activities to keep the company’s image
  23. 23. External AssessmentEconomic ForcesEU is changing into one currency.USA economic growth is in slow growth because of WTC.Contract manufacturing is chosen by many athletic shoes company.
  24. 24. External AssessmentSocial Forces Since 70-s, customer is more brand-minded. Sport Consumer preferences is changing into more fashion-oriented. Young consumer is believed much in advertising promotion and use internet as the primary sources of information. Buying motives of young consumer is dominated for leisure activity Since 90-s, woman’s consumer dominated the athletic shoe market because of the changing lifestyle.
  25. 25. External Assessment Political Forces World is entering global trade climate with NAFTA and GATT There is anti-dumping regulation existed in EU
  26. 26. External Assessment Technology Forces Nike has integrated technology system to develop their product Nike always adopted latest technology for their product and matched with their vision
  27. 27. External Assessment Competitive Forces Competition is more tight with the coming of Reebok and Adidas Competition is happened around the world, globally, not locally Athletic shoe trend is going to be fashion-oriented
  28. 28. Branding: powerful marketing mechanism used by Nike Leads to higher and more consistent product quality. Increases innovation by giving producers an incentive to look for more new features that can be safeguarded by the patent. Branding results in more product variety and choice for consumers. Branding provides consumer information about products and where to find them.
  29. 29. Nike’s Market Expansion Strategies Economies of Scale. Shared distribution channels among varied product lines lower costs. Large size provides opportunity for more leverage against competition. Efficient use of production facilities lowers costs.
  30. 30. Brand Image Ability to charge premium price by establishing an “image”• Access to new/different markets• Premium product placement in retail leading to higher sales• Image and celebrity endorsements create hopes/dreams/emotional attachment to product
  31. 31. Innovation Innovation may be difficult for competitors to imitate. Difficult for competitors to compete with rate of innovation/production. Ability to capture market for different attitudes/values across cultures with product variety. Strong emphasis on R&D leads to continuous improvement in products.
  32. 32. Geographical Outreach Ability to reinforce brand and create loyalty across cultures leading to a broad customer base.• Increased company growth potential.• Cross-subsidization of weaker markets.
  33. 33. Product Diversification New products introduced by Nike will be more readily accepted by customers due to strong brand image
  34. 34. PRODUCT MIXProduct MixA product mix is the set of all products and items that aparticular seller offers for sale to buyers also known asproduct assortment. Product WidthIt refers to how many product lines the company carries.
  35. 35. PRODUCT MIX Cont’d Product line A product line is a group of products that are closely related because they perform similar functions Product length It refers to the total number of items in its product mix Product depth It refers to how many products are offered of each product line.
  36. 36. PRODUCT MIX for Nike• Footwear• Studs for Striker• Mid fielders• Defenders• Apparel• Headwear• Tops/Polo• Jersey• Jackets• Shorts• Shocks• Equipment• Ball• Bags• Watches• National Team Gear• Jersey for Brazil, England, etc.• Club Gear• Club Jerseys like Man U, Real Madrid, etc
  37. 37. Evolution of Financial Ratios (2004-2008)
  38. 38. Internal strengths and weaknessesSTRENGTHS: WEAKNESSES: Strong brand recognition  Lack of stores catering to the active Internet sales females Growing international presence  Poor employment practices at their Superior research and development international manufacturing sites department giving a bad reputation Strong financial returns  Heavy dependency on footwear sales Strong sense of culture in the working  Issues with Footlocker environment Great celebrity spokespersons Automatic replenishment system Successful experience being competitive Nike doesn’t own any factories Successful marketing campaigns
  39. 39. 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.
  40. 40. Key Ratios: Overall Comparison (2007)
  41. 41. Key Ratios: Overall Comparison (2007)
  42. 42. Key Ratios: Overall Comparison (2007)
  43. 43. Manufacturing: Nationality ofContract Suppliers
  44. 44. 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
  45. 45. Athletic Shoe Market Share (2007)
  46. 46. SWOT Analysis
  47. 47. Business StructureOperating Segments: Operating Regions:  Footwear  US  Apparel  Europe, Middle East  Equipment and Africa (EMEA)  Asia Pacific  Americas
  48. 48. BCG Matrix Question marksStarsCash-Cow Dogs
  49. 49. The Grand Strategy Matrix Question marksStars  Potential Strategies:  - Market Development  - Market Penetration  - Product Development  - Backward Integration  - Forward Integration  - Concentric DogsCash-Cow Diversification
  50. 50. Comparative Balance SheetAcoount Heads 2007 2006 Increase/Decrease % ChangeCurrent Assets 8077 7359 718 9.76%Total Non currentAssets 2612 2511 101 4.02% Question marks StarsTotal Assets 10689 9870 819 8.30%Current Liabilities 2584 2623 -39 -1.49%Total Non-currentLiabilities 1079 961 118 12.28% Cash-Cow DogsTotal Liabilities 3663 3584 79 2.20%Total Equity 7025 6285 740 11.77%
  51. 51. 12000 10689 987010000 80778000 7359 7025 62856000 2007 2006 Question marks Stars4000 3663 3584 2612 2584 2511 26232000 1079 961 Cash-Cow Dogs 0 Current Assets Non Cur. Asset Total Assets C. Liabilities Total Non cur. Total Liabilities Total Equity Liab.
  52. 52. Comparative Income Statement Increase/DecreaAccounts 2007 2006 se % ChangeRevenue 16326 14954 1372 9.17%COGS 9165 8368 797 9.52%Gross Profit 7161 6586 575 8.73%SG&A Expense 4759 4187 572 13.66%Depreciationa & Question marks StarsAmortization 270 291 -21 -7.22%OperatingIncome 2132 2108 24 1.14%NonoperatingIncome 68 32 36 112.50%Income BeforeTaxes 2200 2140 60 2.80% Cash-Cow DogsIncome Taxes 708 750 -42 -5.60%Net IncomeAfter Taxes 1492 1390 102 7.34%
  53. 53. 18000 1632616000 14954140001200010000 9165 8368 8000 7161 2007 6586 2006 6000 4759 4187 4000 2132 2200 2108 2140 2000 1492 1390 708 270 291 750 68 32 0
  54. 54. Financial Strength 3.363.5 3.11 3 2.322.5 2.16 2 Company Industry1.5 10.5 0.08 0.06 0 Quick Ratio Current Ratio Debt To Equity Ratio
  55. 55. Efficiency8 7.3 6.93765 4.39 4.26 Company4 Industry3 1.63 1.64210 Receivable Trunover Inventory Turnover Asset Turnover
  56. 56. Valuation Ratios2018161412 Company Industry10 8 6 4 2 0 P/E Ratio Price to Sales
  57. 57. Management Effectiveness 21.79 24.4925 21.79 21.220 16.68 16.1515 Company Industry10 5 0 Return on Assets Return on Investment Return on Equity
  58. 58. Dividends 24.59 24.2325 22.88 19.232015 Company Industry10 5 1.48 1.52 0 Dividend Yield Dividend 5 Year Growth Payout Ratio
  59. 59. INDUSTRIAL ANALYSIS Porter’s Five Forces ModelBargaining Power of Suppliers: -Subcontracts to more than 500 small scale factories -Low bargaining power due to Nike’s big volumeBargaining Power of Buyers: -Competitive products all compete on differentiation -Low switching costs
  60. 60. INDUSTRIAL ANALYSIS Porter’s Five Forces ModelThreat of Substitute Products: -Non-existentThreat of Potential New Entrants: -Economies of Scale -Strong and Well Established Brand Name -High Capital requirements -Low threat
  61. 61. INDUSTRIAL ANALYSIS Porter’s Five Forces ModelIntensity of Rivalry between Firms in the Industry: -High competitive in an Oligopoly (other leading firms include Adidas, Puma, Fila, New Balance) -Strong brand identity and product differentiation -Intensity of Rivalry is moderate
  62. 62. INDUSTRIAL ANALYSIS Porter’s Five Forces Model High Moderate Low Bargaining Power of Suppliers Bargaining Power of Buyers Threat of Substitutes Threat of New Entry Intensity of Rivalry Between Firms
  63. 63. DECISIONS•Primary: Focus on finding the most promising customers (kids andwomen) and introduce more products or improve current ones to satisfypotential 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
  64. 64. 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 trendsrelated with women and kids products (Long-term)
  65. 65. References•http://finance.yahoo.com•Nike Annual Reports (2003 & 2007 )•Annual ranking of Americas largest corporations, Magazine: Fortune 500 (2007):cnn.money.com•www.nikebiz.com (Investor Relations)•www.bigcharts.com•www.businessweek.com•Strategic Management Concepts and Cases; Fred R. David, 10th Ed.
  66. 66. Thank You…

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