Industry Defined 20,000 retail accounts throughout the U. S. using independent distributors and also has contracts with 110 other countries Also has agreements with Internet companies and subsidiaries Operates within the sports footwear and apparel market. Originally designing and producing running shoes, their portfolio has broadened to include a wide range of sports and leisure wear. This is all endorsed by top sporting personalities
NAICS Codes North American Industry Classification System The standard used by Federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy The first two digits of code designate the sector, the third designates the subsector, the fourth digit designates the industry group, the fifth digit designates the NAICS industry, and sixth digit designates the U.S. detail industry
NAICS Codes ExampleNAICS Codes Name Classification Level 31-33 Manufacturing Sector Leather and Allied 316 Subsector Product Manufacturing 3162 Footwear Manufacturing Industry Group 31621 Footwear Manufacturing Industry Rubber and Plastics 316211 U.S. Detail Industry Footwear Manufacturing
Nike Products They design, develop, and market high quality active sports apparel, equipment, and accessory products Nike distributes one new shoe style every single day Nike’s critical factors for success are maintaining current standards, closer working relationships, and retaining customer loyalty by guaranteed standard of product
Nike Products Their products are made for men, women, and children of all ages. The company presently sells roughly 300 models of athletic shoes in 900 styles for 25 different sports. Nikes target market for their shoes is males and females between 18 and 35 years old.
Nike Products They not only see competition from Adidas and Reebok, but also with Old Navy and Abercrombie and Fitch Continuous marketing research is the key in assessing the market
Nike Expansion Nike has success as a result of collaborating with other companies within the sports and fitness industry But at other times, Nike expanded into markets for which it is not strategically suited Nike has realized to initiate more aggressive programs to review product partnerships that are outside of its core basis of products
Adidas Purpose: ◦ The production and distribution of apparel, footwear and equipment for sports and leisure as well as of products of adjoining fields, furthermore the commercialization of the registered trademark Adidas. Adidas Mission: ◦ To be the leading sports brand in the world. The Adidas brand attitude “Impossible is nothing” drives all of their brand communication initiatives and it helps them strengthen the Adidas brand’s bond with the consumer.
Reebok’s Mission: ◦ Always challenge and lead through creativity. At the core of the Reebok brand is the affirmation of the uniqueness of all people. Reebok Strategic Focus: ◦ to become a consumer-driven brand that reflects the emphasis on individuality. Athletes Endorsed by Reebok: ◦ Sidney Crosby ◦ Alexander Ovechkin ◦ Allen Iverson ◦ Yao Ming ◦ Thierry Henry Reebok Partnerships: ◦ NFL ◦ NHL ◦ MLB
TaylorMade’s Mission: ◦ To have the leading performance golf brands in the world. TaylorMade changed the game of golf by bringing the metalwood to the public 27 years ago, and today is the market leader in the metalwood category. Strive to continually extend their brands’ positions as leaders in the development and implementation of advanced performance technologies in all of their products including clubs, balls, footwear and apparel. Just to give you an idea of how well TaylorMade is doing, they currently endorse 55 professional golfers, one of which is Sergio Garcia, and as of February 17, 2009 he is ranked number two in world.
Adidas Group Financials Net Sales Nine Months Nine Months in Change 2008 2007 millions Adidas 6,004 5,465 9.9% Reebok 1,587 1,765 (10.1)% TaylorMade 614 609 0.8%
Growth in Recent Decades Nike and Reebok set the standard Nike gained popularity Lurking competitors ◦ Adidas Group ◦ Under Armour
Industry Weakening Internet skyrocketed sales in late 90’s Upcoming companies took advantage of new technologies Sales have slumped tremendously in past year Nike making 4% cut Under Armour stated that analyst’s estimates are far below earlier predictions
Threat of New Entrants Highly saturated and challenging industry Depend in large part on first mover advantage and scale economies Areas to focus: Technologies, pricing, and costs of production
Innovator Sports Apparel and Footwear industry relies mainly on innovations and creativity Innovative Ideas=Key success factor Company could have an advantage Without proper funding and resources a firm could be at a severe disadvantage Threat of new entrants based on first- mover advantage is minimal
Economies of Scale Difficult to compete with large economies of scale Hard to handle all levels, more experienced firms are able to disperse New entrants suffer a severe cost disadvantage Significant amount of assets needed
Bargaining Power of Buyers andSuppliers Power of buyers can be determined by supply vs. demand and number of buyers Price sensitivity effects demand Customers more affected by price Suppliers are more powerful when the ratio to buyers is more The vast range of products in the Athletic Apparel industry leads to a dissimilar amount of bargaining power for the supplier
Substitute products and services The threat of substitute products The existence of close substitute products increases the propensity of customers to switch to alternatives in response to price increases
Substitute products and services Substitutes are a threat because: 1) They are an attractive alternative product or service, which customers can easily shift to if there are low switching costs. 2) The availability of substitutes invites customers to make price, quality and performance comparisons 3) Competitively priced substitutes impose a maximum value on prices relevant industry can charge for its products or services
Substitute products and services 1) They are an attractive alternative product or service, which customers can easily shift to if there are low switching costs OR
Substitute products and services 2) The availability of substitutes invites customers to make price, quality and performance comparisons CAN I JUMP HIGHER? CAN I RUN FASTER? IS IT CHEAPER?
Substitute products and services 3) Competitively priced substitutes impose a maximum value on prices relevant industry can charge for its products or services What is worth ?
Rivalry Among Participants Competitive rivalry This is the major determinant of the competitiveness of the industry. Sometimes rivals compete aggressively and sometimes rivals compete in non- price dimensions such as innovation, marketing, etc.
Rivalry Among Participants Generally competitive rivalry will be high if: There is little differentiation between the products sold between customers. Competitors are approximately the same size of each other If the competitors all have similar strategies. It is costly to leave the industry hence they fight to just stay in High fixed or storage costs, which encourages fast turnover of inventory.
Rivalry Among Participants Market of Competitive Rivalry
Nike vs. The Economy As the economy slows, consumer purchases are down. The biggest threat for Nike would be economic recession. Asian economic crisis also affects Nike since its goods are manufactured in Asia. ◦ The labor costs and material prices are going up. Nikes growth is not just affected by the local economy but also in the international economy. ◦ A weak Euro and an Asian recession could mean weak sales for Nike.
Nike vs. Ethics In 1996, the ethical issue of child labor came to the surface regarding the hiring of young employees by Nike’s Asian and Latin subcontractors whose ages ranged from very young to teenagers. The teen workers would have not been so controversial; however, there were no regulations or work permits issued.
Nike vs. Ethics Without proper management leading and planning in the Nike Corporation, the company would have suffered from the child labor issue. Nike has made a true bounce-back from the negative media attention, and continues to be successful due to their strong business ethic philosophy.
Nike vs. Society People are more health conscious nowadays. Consequently, more and more people are joining fitness clubs. There is an accompanying growth for demands of fitness products particularly exercise apparels, shoes and equipment. Nike naturally is at the forefront of this surge in demand as people are looking for sports shoes, apparels and equipment.
Nike vs. Society The largest among Nike’s objectives, the women’s athletic market will be a top priority in the next ten years. The number of women collegiate athletes have increased from a few thousand in the 1960’s to almost one million today.
Technology Product technology must evolve as fitness evolves, in order to give competitors an advantage Nike introduced Nike Shox, which revolutionized the cushioning foam used in shoes Nike also collaborated with Apple and is launching new apparel and footwear that will easily carry the consumer’s iPod
Technology Product innovation is an ongoing process and is vital to stay ahead of competition Companies in this industry invest money in R&D to keep up with the new demands of today’s athletes Nike employs many specialists including engineers, athletes, biomechanics, and industrial designers to work together in the design process
Competition The top 3 firms in this industry are Nike, Adidas, and Puma The industry is relatively old, so firms must fight for market share rather than relying on market growth
Areas Firms Compete On Product offerings Technologies Marketing Expenditures (endorsements and advertising) Pricing Costs of Production Customer Service
Competition Firms in athletic footwear and apparel also compete with firms that provide other substitutes (such as leisure and casual wear) Skechers, K Swiss, New Balance, and Aasics Nike has created their own lines of casual shoes to compete in these markets as well ◦ Example: Converse
Competition During hard economic times, people consume less retail goods such as clothes and footwear Bureau of the Census estimates that retail and food service sales for January 2009 are 9.7% below a year ago Consequently, the industry has turned to emerging markets to continue sales growth ◦ China ◦ Russia ◦ Latin America
Geography Production is outsourced to plants in Asia, Latin America, and Africa ◦ This reduces costs because labor is cheaper ◦ Puts sources of production closer to where they will be sold Firms who outsource lose the ability to closely monitor product quality and working conditions Although some people find this unethical, firms cannot afford to keep production close to home and still compete on profit margins
Geography Plants are also located in many different countries, rather than being concentrated in one area Diversification of production plants reduces the risk that a firm will greatly be affected by a problem in any particular country ◦ Example: Nike’s largest footwear factory accounts for only 6% of the total footwear production ◦ Nike claims it can recover from any loss in production within one year’s time
Overview of the Industry• In this industry there is intense competition, fashion trends, and price conscious consumers that have slowed growth in this industry.• This creates difficult situations for companies to produce a brand image that appeals to consumers that want to shop for cheaper apparel, but also apparel that has quality.
Where the Industry is Now Financially, the company must be aware that economies are not up to par and that costs must be kept low to bring in the revenue. With the internet being a huge entry to Nike’s products, the company must find a way to keep their consumers to see them as being more user friendly as compared to their competitors.
Cont. Ways for Nike to do this is to keep the site simple, fresh, and easy to use. By using new designs and better deals for orders made online for the customers, it has the potential to bring in more revenue, as well as improve the relationship between the company and its clients.
Industry Forecast Technology is always changing, and if Nike can create apparel and athletic equipment that the competitors cannot match, then Nike will grow even higher than its rivals. Technology can be based around anything from softer and more durable running shoes, to a baseball bat with a new metal to make the ball go further.