2. 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
3. History
1962: 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 operations
1964: William Bowerman becomes a partner by matching
Knight's 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. History
1976: 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. 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)
7. 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.
8. 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 America's largest
corporations (Fortune 500 magazine)
10. • 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.
11. • 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.
12. • 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.
13. • Converse, based in Massachusetts,
designs and distributes athletic and casual
footwear, apparel, and accessories.
14. 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
17. Vision Statement
“To bring inspiration and innovation to
every athlete* in the world”
(* “If you have a body, you
are an athlete”
Bill Bowerman, co-founder)
18. Proposed Vision Statement
Continue to bring inspiration to present
and future athletes, while maintaining the
company's standard of quality for its
products.
19. Mission Statement
Nike is the "largest seller of athletic footwear and
athletic apparel in the world. Performance and reliability
of shoes, apparel, and equipment, new product
development, price, product identity through marketing
and promotion, and customer support and service are
important aspects of competition in the athletic footwear,
apparel, and equipment industry. We believe we are
competitive in all of these areas."
The company aims to " lead in corporate citizenship
through proactive programs that reflect caring for the
world family of Nike, our teammates, our consumers,
and those who provide services to Nike."
20. Proposed Mission Statement
To continue to offer quality products with increasing
growth in the industry and expanding globally. Our
mission has always been to provide a competitive edge
by developing the most technological products. Keeping
in mind fair labor practices in all our suppliers’ factories,
while maintaining a competitive advantage, with the
shareholders interests, and company profits in mind. We
also believe our employees are one of our most
important assets. To increase the responsibility towards
the environment by evaluating the impact of day to day
operation and attempts to change operations that have a
negative impact.
23. Internal strengths and weaknesses
STRENGTHS: 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
25. 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.
• China's imports increase by 6 percent to 1.26 billion pairs in 2003 .
• Brazil's share increased 2.3 percent to 83.5 million pairs in 2003.
• Vietnam's 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.
30. External Opportunities and
Threats
OPPORTUNITIES: THREATS:
• Customer use of company’s • Competitors which copy company's
products change from athletic business model (high value branded
purpose to a fashion item product manufactured at a low cost)
• Development of international trade •Reebok's strong presence with 204
(GAAT and NAFTA) factory direct stores
• Generation Y children (born •Adidas-Salomon AG, top European
between 1979 and 1994) will reach competitor
60 million • The impact of foreign currency
•General demand for fluctuation and interest rates, and
clothing/footwear for leisure activities political instability
continues to increase • Labor and political unrest in the
• Growing e-commerce’s positive suppliers countries
effect since one of company’s • Cost orientated customers vs
competitive advantages is Internet company’s higher-end market.
sales
•Women demand for athletic footwear
and clothing is increasing significantly
35. SPACE Matrix
* Y axis: - Financial Strength: +4
- Environmental Stability: -1 => Y coordinate: +3 STRATEGY: AGRESSIVE
* X axis: - Competitive Advantage: -2 => X coordinate: +3
- Industry Strength: +5
36. Business Structure
Operating Segments: Operating Regions:
– Footwear – US
– Apparel – Europe, Middle
– Equipment East and Africa
(EMEA)
– Asia Pacific
– Americas
42. 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
43. 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
44. Implementation
Actions:
• 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)
46. 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
47. 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
48. References
• http://finance.yahoo.com
• Nike Annual Reports (2003 & 2005)
• Annual ranking of America's 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.
