Nike Internal Analysis

Editor's Notes

• #3 Travis$17.3 billion industry within the U.S. in 2007 Nike aims for 50% increase over next 5 yrs, while footwear industry is expected to increase 20%Company/Industry SlideNike athletic shoes: largest seller of athletic apparel and footwear worldwide  Product market performance 2008: $18.6 billion total revenue, $9.7 billion from athletic shoe sales, which accounts for 52% of total revenue. Nike accounts for 31% of global market for footwear  
• #4 Travis  pass to jeffThis chart is prior to Under Armour entering the footwear market which they did in later 2006
• #5 Travis  pass to Liz- Any synergies within the company among divisions ???***Company Divisions Slide52% footwear, 28% apparel, 6% equipment, 14% other Footwear includes: running, cross training, basketball, soccer, and sport inspired casual footwear like the Air Force Ones. Apparel includes: running shorts, t-shirts, and licensed apparel (with logos of college and pro sports teams). Equipment: balls, protective equipment, golf clubs Other: Nike Golf, Cole Haan, Hurley International, Umbro Inc. Our company’s division, footwear, is essential because it accounts for over half of the total revenue generated by the company. Here is the link. This site has some really good graphs for Nike as well as the entire industry. **http://www.wikinvest.com/stock/Nike_(NKE)segway into Nikki’s slide on competitors
• #6 Travis  pass it to JeffPerformance line chart compared to competitors based on profit, revenue??  Here is the link. This site has some really good graphs for Nike as well as the entire industry. **http://www.wikinvest.com/stock/Nike_(NKE)*** possible performance graph compared to competitorsAdidas (net) profit of 551 million euros in 2007
• #7 Jeff  pass to NikkiIntlUse of the iconic “Swoosh” to gain global market saturationHuman rights and child labor questions in Asia puts negative light on Nike in mid ‘90s Use of sponsorships contracts worldwide in a wide range of sports to take control of athletic footwear global market share Model of worldwide production without ownership of factoriesArizona-fake nike air jordans found $16 million, 135,000 pairs
• #8 NikkiKey competitor: Adidas-Reebok U.S. market share of 8.9% prior to Reebok merger as opposed to 36% by Nike merged with Reebok in 2005The two companies, which jockey for No. 2 and No. 3 slots behind Nike, view their prospects for competing against the Beaverton, Ore., behemoth asbetter together than apart. Nike had surpassed Adidas in Europe as the leading seller of soccer shoes. Reebok 12.2% 46% of their total sales comes from footwear vs Nike’s 52%____________________________________________________________________________________________________________________________________The U.S. ranks as the world's biggest athletic-shoe market, accounting for half of the $33 billion spent globally each year on athletic shoes. Nike’s strength above competition lies in its ability to differentiate and its popular brand image
• #9 Service DifferentiationBoth online services offered by Nike and AdidasNike id 2001 - more variety of color choices - can customize 109 different shoes AND can customize nike’s other products, including: apparel and equipment - ave price of Nike id shox $120 vs regular nikeshox $ 120Miadidas 2009 (shoes ONLY)- in some cases a customer can order a pair of shoes with each foot being a different size and the width can be customized for each foot - offer only 17 shoes designs that can be customized - adidas has exclusive rights partnership with the NBA, so you’re able to incise your favorite professional team’s emblem onto your creation. The brand offers about 12 NCAA emblems, too that Adidas exclusively sponsors - ave price of mi adidasmicrobounce $140 vsmicrobounce $ 100 Adidas in store cube 2006 - only in large flagship stores… mainly in Europe - provides more of an experience to the customer than an online customization program does - high use of technology - jogs on a computerized catwalk. Sensors embedded in the track can record the exact pressure on specific parts of the foot while running. This data, combined with the customer’sexact shoe size—measured with painstaking accuracy—is used to ensure a perfect fit. - price is $40-65 more expensive than buying a noncustomizable shoe __________________________________________________________________________________________________________Product Differentiation By using the Nike id service, the customer can create their personalized product. Nike makes shoes for football, basketball, running, combat sports, tennis, soccer, golf, cross training,skateboardingbaseball, cycling, volleyball, wrestling, cheerleading, aquatic activities, auto racing and other athletic and recreational uses. Compared to Adidas producing only for …_________________________________________________________________________________________________________________________________continued innovation (like its lightweight Flywire technology and its Lunar Foam cushioning system) “We believe that our research and development efforts are a key factor in our past and future success. Technical innovation in the design of footwear, apparel, and athletic equipment receive continued emphasis as NIKE strives to produce products that help to reduce injury, enhance athletic performance and maximize comfort.“***How much nike spends on innovation vsadidas innovation New flywire techA revolutionary technology, its high-strength threads work like cables on a suspension bridge with support engineered precisely where a foot needs it. Flywire allowed Nike to make its lightest and strongest footwear ever, transforming how footwear is engineered by reducing the amount of material required for the upper of a shoe to the bare minimum. Thanks to this innovation, track spikes with Flywire are now under 100g – a weight never before achieved – without compromising on durability or integrity and support. lunar foam cushioning systemLunar Foam, a material that was originally created by NASA, has been incorporated into a new cushioning system by Nike. Lunar Foam offers the most impact protection of any shoe on the market today. During initial testing, runners reported less fatigue and quicker recovery times after long runs.30% lighter than the next leading cushioning system, Phylon, which is also by Nike - nike free tech - 2004 Nike free first introduced - simulates barefoot running while wearing a shoe - allows the muscles in the foot to gain strength by providing less constriction -adidas has nothing comparable Shox introduced in 2000 - Nike claims not only absorb impact from heel strike while running; they also \"spring back\" and add more power to a runner's stride - A3 2002… adidas cubed cushioning system - 2006, Nikefiled a patent infringement suit against rival Adidas, claiming that a range of their trainers replicated its technologyShox were found to be “more refined, comfortable, lower-profile and more aggressive looking than the A3. However, functional wise, both technology were surprisingly similiar in terms of cushioning.”Nike Sports Research Lab, a 12,500-sq.-ft. facility packed with $1.5 million in equipmentstaff of 24 researchers, eight with Ph.D.s, develop the criteria for the product engineers who build the prototypes. When extra brainpower is needed for a project, the lab can turn to any of its six university research partners in Canada and Germany.rely upon specialists in the fields of biomechanics, exercise physiology, engineering, industrial design and related fields, as well as research committees and advisory boards made up of athletes, coaches, trainers, equipment managers, orthopedists, podiatrists and other experts to develop and test cutting edge performance products.***How much $$ does Nike spend on R&Dvsadidas??- Adidas spent 98 million Euros on research and development in 2006 - 63 million euros in 2005
• #10 Nikki Shoe in class example of nike id shox
• #11 Nikki  pass to MonicaBrand awarenessUnlike its rival companies, Nike presents itself to many different audiences in different ways through different mediums. It's a marketing strategy born from a sophisticated understanding of how people respond to images of lifestyle. Also, a lot of Nike advertisements are seen on tv as commercials during sporting events or on sports channels. Adidas tends to stick to print media within sports magazines (Impossible is Nothing is their newst slogan) Nike offers something for everyone. They target different markets using different means while keeping the same nike “just do it” image.These 2 videos are examples of how they reach women vs males. They also differentiate their advertising on a sport by sport basis and over all lifestyle differences among their consumers. First movie: Maria Sharipova: directly targets women and empowers them as athletesSecond video: Tomlinson (AA)and Palamallu (somoan); directly targets men, aspiring athletes, and minority groups In the 2007 annual Interbrand/Business Week ranking of the Top 100 Global Brands, - The ranking, which measures the value of brands over the next five years based on sales and profit outlookUnlike its rival companies, Nike presents itself to many different audiences in different ways. It's a marketing strategy born from a sophisticated understanding of how people respond to images of lifestyle.
• #12 Monica  pass back to nikkicreating customer recognition and loyalty;  creating long-term shareholder valueNike shows passion for their company, products, and athletes. They are determined to provide consumers with comfort and assurance. They also find ways to innovate and create. They adhere to their five brand principles namely: inspire, innovate, focus, connect, and care.Keeping the Nike Swoosh conservative and consistent allows it to become a unifying device across channels such as TV, print or WebNike is performance minded. And wants to create as complete an experience as possible whether in a NikeTown store or on the Web.http://www.hypergene.net/ideas/nike.html
• #13 Nikki to Liz__________________________________________________________________________________________________________________________AdvertisingIn 2008, Nike spent $2.8 billion on advertising (including endorsements), 12.4% of revenue. Nike increased U.S. ad spending $702.9 million in 2007, according to Advertising Age estimates The increase was largely due to the Olympics, Nike's advertising expenses jumped 39% because of higher marketing efforts surrounding the Olympics.In 2008, adidas spent about $1.8 billion on advertising Nike has earned admiration from the advertising industry. Hugh Baillie, group business development manager at the advertising agency BBH said: \"Nike has set itself up as operating outside the establishment and is independent and slightly irreverent in its approach… Nikestill leads the way by its creation of an affinity for the famous \"swoosh\" label through events” Adidas is considered to be too glossy and commercial by Hugh BailliePrint and CommercialsAdidas focuses on print media, while nike focuses on the entertainment value its tv commercials bring to its consumers, while presenting the audience with its new marketing campaign or productSporting venues and eventsThe olympics 1996 Michael Johnson and his gold nike running cleats received a lot of attention 2008 Phelps and Bolt not sponsored by Nike and received the most press and attentionNike also sponsors events like Hoop It Up (high school basketball) and The Golden West Invitational (high school track and field). Nike uses web sites as a promotional tool to cover these events._____________________________________________________________________________________________________________________________SponsorshipsAccording to researchandmarkets.com/reports as of summer of 2008“purchasing choice is frequently determined by the sportsman or woman you admire, or the team that you follow and therefore the brand that you aspire to wear” Nike by far spends the most on endorsements.Athletes In 2006, Nike spent $476 million for endorsements by celebrity athletes, about 1/3 of the company's $1.7 billion advertising budget for that year. Money spent on endorsements has hit an all time high of $3.4 billion dollars as recent as march 2008Nike's first professional athlete endorser was Romanian tennis player IlieNăstase, and the company's first track endorser was distance running legend Steve Prefontaine. Prefontaine was the prized pupil of the company's co-founder Bill Bowerman while he coached at the University of Oregon. Besides Prefontaine, Nike has sponsored many other successful track & field athletes over the years such as Carl Lewis, Jackie Joyner-Kersee. signing of basketball player Michael Jordan in 1984. the success it had with Michael Jordan, the NBA superstar who helped the company virtually invent modern-day sports marketing. Although Jordan retired three years ago, Nike products that carry his brand still account for about 7% of sales.Nike's elite endorsers -- Tiger Woods, LeBron James, Michael Jordan, Ronaldinho, Maria Sharapova, and Lance Armstrong -- lend instant credibility to the Nike brand. Despite the occasional criticism, Nike has done an impressive job in scouting athletic talent. Woods has won five consecutive Professional Golf Association tournaments and 12 majors over the past decade. James is living up to the incredible hype that accompanied his jump from an Akron, Ohio, high school to the No. 1 pick in the 2003 NBA draft. And Maria Sharapova, who is paid $6 million a year by Nike, claimed her first U.S. Open tennis title earlier this month wearing a black Nike tennis dress.Four years ago, as the shoe giant launched its “Witness” campaign when James made the playoffs for the first time, he was so inspired by the theme that he had the word “Witness” tattooed on his right leg. So a Nike slogan, is now tatooed on an iconic basketball player. Nike is developing a promotional campaign out of one of James’ well-known moves. In the Christmas Day game of 2008 Nike will debut a “chalk” version of James’ signature shoe. It will feature — on the tongue of the shoe — a silhouette of his well-known ritual of tossing chalk or rosin into the air before games.““It is not just an endorsement deal. We feed off each other. If we think something will be hot or people can relate to it, we work on that.” –Lebron JamesNot only are these athletes walking billboards for Nike (literally with Lebron’statoo), the fact that they compete at such a high level, aspiring athletes associate Nike with their athletic ability and are persuaded to purchase Nike to be more like their mentors and idols. The 2008 Wimbledon tennis championship match between stars Roger Federer and Rafael Nadal, each cloaked in Nike, was in essence a five-hour Nike commercial. The sponsorship evaluation firm Joyce Julius & Associates estimated that the Nike Swoosh received 35 minutes of airtime during the riveting five-set match, valued at about $10.6 million -- more than three full-price Super Bowl ads at prices for this year's game. Just by sponsoring such high profile athletes,nike receives “free advertising” Other Celebrities NikeNike focuses more on its athletic shoe sector than specifically on its fashion shoes. Even though Nike doesn't do as much direct marketing to the urban market as its competitors, it is still a force with that audience. AdidasReebok and Adidas have been targeting NBA players and hip-hop artists for endorsements and product identity co-branding. Adidas-singer Missy Elliott, while Reebok-rap stars Jay-Z and Fifty-Cent. Adidas tends to use non athlete celebrities to endorse their fashion athletic shoes rather than their sport specific shoes. While Reebok and Adidas build product lines and marketing campaigns around rappers, Nike reaches out to the hip-hop world with deals smaller in scope but just as effective. Nike partners with designers and record labels for special-edition sneakers in its Air Force 1 and Dunks lines. For example, Hip-hop artist Nelly wrote a song about his Nike Air Force 1's that was not commissioned by Nike. So, Nike’s management of its fashion shoe sector is not a high priority compared to its athletic shoes. NCAA teamscollege athletics has become a major battleground. Sponsorship contracts place the companies’ logos on jerseys and provide exclusive rights to merchandise sales. Both Nike, Adidas and others are seeking colleges not necessarily with the most wins, but those with the most loyal fans for ex jersey sales.In 1994, the University of Michigan signed a sponsorship contract with Nike that was nearly unprecedented at the time. Even though their products surfaced in every part of college sports, the athletic footwear and apparel companies hadn't yet officially joined hands with college sports teams. Nike sponsors about 83 collegiate teams. \"I don't think the customer base is buying because of who wins games,\" said Paul Swangard, managing director of the Warsaw Sports Marketing Center at the University of Oregon. \"They're buying because of loyalty. So, you don't want the school with the most wins, you want the school with the most fans.“Example of logo exposure and evidence that Nike targets good teams, as well as teams with a lot of fans Of the 8 colleges represented at the elite 8, 7 teams were sponsored by Nike, while only one was sponsored by adidas (louisville) The on- and off-campus fans remain some of the most passionate throughout sports, so Nike wants to capture the fan favorite teams. Not only do they capture fans early, athletes that attend schools sponsored by Nike for example, get used to training and competing in that gear and become accustomed to using that brand. Being an athlete at Mizzou, I came into college being a huge adidas fan and at first resisted nike. Then I received a lot of nike dry fit and shox and I turned to Nike and now ONLY buy nike sports products, especially nikeathetlic shoes. Professional teamsGoes hand and hand with sponsoring pro athletes. Consumers will purchase Nike products because their favorite team is sponsored by them or they want to embody the athletic capabilities of the pro team by wearing what the pros wear. Reebok sponsors NFLNike signed a five-year agreement with Major League Baseball, beginning in the spring, to become the official supplier to all 30 teams of performance apparel to be worn under uniforms_______________________________________________________________________________________________________________________In response to a questioning “is it worth spending so much on advertising and endorsements?”Nike President Charlie Denson replied, “You know one of the cornerstones of this brand has always been our ability to show up, I guess is the way to say it, on the field of play. And what it does from a credibility standpoint and authenticity standpoint, and even an exposure and marketing standpoint has always been a point of debate since Phil [Knight, Nike’s founder] and I gave the first pair of shoes away. So we continue to believe in it. We continue to see the benefits of it.”
• #14 Liz  pass to DanielleThink we need to re-do this slide… info on slide kind of negates what we have just said on the differentiation slide Internal analysis frameworkOur company/line of business is very good at:Our capability/core competence is:BrandingThis is VRIN (or not) because…+ Valuable: Neutralizes threats & exploits new opportunities- Rare: Branding common in shoe industry+ Costly-to-Imitate: Developed over time, based on + relationships+ Nonsubstitutable: No strategic equivalent
• #15 Danielle  pass it on to JeffCurrent Nike Portfolio   *Converse   *Cole Haan   *Hurley International LLC    *NIKE Golf    *Umbro Ltd Low level of related diversification with the dominant business   
• #16 Danielle  to JeffMergers and alliances examples
• #17 Jeff (KS: outsourcing a form of alliance, if a long term or contract deal. Do these help the VRIN? If so they can probably go there to support that—eg why is control important? It’s probably costly. If they are a differentation co, why are costs so important?)Outsourcing & Value ChainStrong management team and good corporate strategy in both North American and overseas marketsFirst movers advantage in e-commerceStrong control over its own distribution channelBrand recognition and reputationUse of outsourcing to cut manufacturing costs
• #18 SamCorporate governanceManagement of the company is very strong. Mark Parker has been CEO for the last 3 years and has been with the company since 1979. The president is Charlie Denson, another long time Nike employer. Don Blair is the CFO. He has been with Nike since 1999, and previously worked for Pepsi (PEP). Co-founder Phil Knight is the Chairman of Board and the company’s largest shareholder. All of these men are immersed in the Nike culture and understand the importance of building the brand.__________________________________________________________________________________Slide 1 = Corporate GovernanceBoard composed of 10 members8 independent non-managementNotable Board MembersPhil Knight – Cofounder and Chairman of the BoardMark Parker – CEO of NikeAlan Graf – also CFO of FedExOrin Smith – former President and CEO of StarbucksAlso on Washington Mutual and Disney boardsJohn Thompson – former Georgetown basketball CoachSlide 2 = Board Committees6 board committees oversee specific policies and proceduresAudit, Compensation, Corporate Responsibility, Executive, Finance, and Nominating & Corporate GovernanceBoard is self-evaluated by Nominating and Corporate GovernanceAlso oversees election of board members and board compensationCompensation Committee responsible for performance evaluation of CEOSlide 3 = Corporate Responsibility CommitteeEstablished in 2001 to review significant policies and activities regarding labor and environmental practicesExecutive team attends meetingsCreated code of ethics called Inside the LinesFor actual Nike employeesCode of ConductCovers contractors who manufacture Nike Branded Products
• #19  Better management of their fashion shoe sector Pull back the extreme spending on endorsements Gain a stronger presence in China Gain a more positive global image, especially regarding labor laws