Nike corporation


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Nike corporation

  1. 1. NIKE CORPORATIONIntroductionNIKE, world’s major public trader of athletic footwear and apparel, currently enjoys a 42%market share of the domestic footwear industry, with sales of $3.77 billion is dominating the USathletic shoe market.It designs and sells wide range of footwear and uniforms for variety ofsports. The company has more than 700 retail stores worldwide and about 23000 retail accountsin US. Most of the manufacturing units are located in Asia, including Indonesia, China, Taiwan,India, Thailand, Vietnam, Pakistan, Philippines, and Malaysia.Major CompetitorAdidas AG is the major competitor of Nike Inc. Adidas, is not completely different from Nike interms of products they offers.Adidas is into the manufacturing and marketing of athletic as wellas non-athletic footwear and apparel. Nike has a notable advantage when it comes to economiesof scale. Adidas Group is second only to this company in terms of sales and market share. Itenjoys 22% of the worldwide athletic footwear and apparel market. Source: Daily FinanceNike earned 42% rises in its total net income in the year 2010 from 1486.7 to 1907.7Mrespectively (Nike income statement, 2010).On the other hand, Adidas Group had total sales of$15,889.1M in 2010 (Adidas income statement, 2010) which was remarkably low as comparedto the sales of Nike Corporation.Inventory Management
  2. 2. Nike’s inventory turnover ratio is 4.4 (Nike Inc,NYSE:NKE)which exceeds the industry averageof 4.34 (Weygandt, 1996). A slight Reduction in the inventory level is required. Inventoryturnover management will benefit Nike greater cash flows, reduced storage costs and lessproduct spoilage. It can also reduce Nike’s inventory of out-of fashion shoes and clothing. Nikeemployed MRP software helps the store managers to keep the track of the materials to bepurchased through an online exchange result in significant cost and time saving to the company(Shah, 2009).Demand Forecasting Nike’s global operations were divided into 5 geographical regions which made theSupply Chain practices at Nike highly inadequate. Nike implemented the Supply Chain Softwareto forecast the demands. Its main purpose was to match the supplies with demand. But thecompany announced fall in company profits in the third quarter of fiscal year 2001 blamingentirely the supply chain software implemented in June 2000. The system of demand management was a collective effort of over hundreds ofinformation specialists within the company. It was designed to run the future program of Nikeintroduced by Nike in 1970’s to manage the inventory more efficiently. The system managed theretail partners of Nike who placed the orders six month prior to the delivery date. Trying toforecast too far out ahead, was the major reason of this system’s failure, followed by inadequateinformation and centralized processes. The software company reengineered the existing processes at Nike and by the end of2003 the processes made considerable progress. Nike shifted its focus to SAP and ERP systemwhich depends on order and invoices than. Current system at Nike closely monitors themovement of goods from raw materials to the finished products. Nike converted its supply chainprocesses from make –to-sell to make-to-order that resulted in the record sales in 2005.Logistics Logistics at Nike is of multiplex nature which involves three product lines; footwear,apparel and equipment that are managed via four company’s logistics service providers’ networkwithin four regions. This setup is a collaborative process between the regions and Nike’s logisticgroup. APL Logistics and Maersk Logistics are responsible for all the processes ranging fromhandling to unloading of cargo and the collection of documents.Nike controls its logistics in-house rather than outsourcing to the third party.Large volume of cargo is shipped directly to thecustomers than to Nike facilities in US region, making Nike in constant contact with customersregarding dates and freight movement.
  3. 3. ReferencesAdidas: Income statement (2010). Retrieved on May 20, 2011 from, G. &Vijayashanker, N. (2009) Adidas: Sprinting Ahead of Nike, Retrieved on May20, 2011 from V. S. (1998). The Manufacturing Practices of the Footwear Industry: Nike vs. theCompetition, UNC - Chapel Hill, INTS 092Dw Staff, (2006).EU Approves Adidas-Reebok Merger Retried on May 20, 2011 from,,1870303,00.htmlHarps, H. L., (2004). Nike maintains control, inbound logistics, Retrieved on May 25, 2011 from, S. (2006). Adidas’ World Cup Shutout: U.S. Fans of Soccer’s Big Event Will See OnlyAdidas Ads on Television. Nike’s Response: A MySpace-style Site for Soccer Nuts. BusinessWeek, pp. 106-107Karnitschnig, Matthew & Kang.(2005, August). Leap Forward: For Adidas, Reebok Deal CappsPush to Broaden Urban Appeal; Known for Its Engineering, German Company takes on Nike inLifestyle Market; Teaming Up with Missy Elliot. Wall Street Journal, p. A1Konicki, S. (2001). Lower Profit At Nike Blamed On i2 Software, Information Week. Retrievedon May 25, 2011 from (NKE) stock quote, Retrieved on May 20, 2011 from Stock Performance, Daily Finance Retrieved on May 20, 2011 from Income statement (2010). Retrieved on May 20, 2011 from Inc,NYSE:NKE| ratios and returns, Retrieved on May 20, 2011 from, J. (2009, May). Supply Chain Management: Text and Cases, Prentice HallWeygandt, J. J., Kieso, D. E., &Kell, W. G. (1996). Accounting Principles (4th ed.). New York,Chichester, Brisbane, Toronto, Singapore: John Wiley & Sons, Inc.