PGDM – B

Group – 6

Avishek Singh 113Mohammad Shadab 129

Pratik Akerkar 139Somjeet Dutta 152

2

NIKE– Introduction

Major publicly traded clothing, footwear, sportswear, and equipment supplier based in the United States

Headquartered near Beaverton, Oregon, in the Portland metropolitan area

Revenue in excess of US$19 billion in its fiscal year 2010

Employs more than 34,400 people worldwide as of May 2010

3

Nike sells

Shoes Running Basketball Soccer Sport-inspired

urban shoes Children’s shoes

Miscellaneous Bags Socks Sports balls Eyewear Timepieces Apparels Bats Gloves Protective

equipments

4

Nike – History

Originally known as Blue Ribbon Sports (BRS)

Founded by University of Oregon track athlete Philip Knight and his coach Bill Bowerman in January 1964

Initially operated as a distributor for Japanese shoe maker Onitsuka Tiger (now ASICS)

Launched its own line of shoes branded as Nike in 1971

.The Swoosh was first used by Nike on June 18, 1971, and was registered with the U.S. Patent and Trademark Office on January 22, 1974

5

5 Forces Analysis: US & Developed Markets

Internal Rivalry (Low)Fierce Competition

Mature IndustryMostly Non-Price competition

Differentiation strategyIndustry in consolidation

phase

Threat of New entrants(Low)

High Barriers to EntryCapital Intensive

Strong Brand FollowingEconomies of scale

High Marketing & R&D CostsIndustry in consolidation

phaseBargaining Power of

Buyer (Low)End user brand loyaltyPrice sensitivity issues

Retail and vendor consolidations

Growing power of retail chains

Good Infrastructure

Threat of Substitutes (Low)

Other types of shoesOther sport apparel

Bargaining Power of Supplier (Low)

Abundantly available raw materials

Cheap resources-commodity item

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5 Forces Analysis: India & Developing Markets

Internal Rivalry (High)Fierce Competition from

global brandsLocal players with cultural

advantage

Threat of New entrants(High)

Less/Not explored MarketsUn-Sophisticated market

needsLess Capital Intensive

No major brand followingLocal players advantage

Bargaining Power ofBuyer (High)

Consumer needs to be educated

Retailers need to be educatedHigh Price sensitivity

Brand image to be re-established

Lack of proper infrastructure

Threat of Substitutes (High)

Bare foot, walking with slippers e.g. India

Leather boots and slippers

Bargaining Power of Supplier (Low)

Inexpensive laborAbundantly available raw

materialsCheap resources-commodity

item

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6th Force: Complementors

Infrastructure: free space, good roads, jogging parks

Sports equipments: Backpack, balls, bats, rackets, etc.

Partnerships with other products are widening the domains of complementors for sportswear products. E.g. Nike+iPod Sports kit

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Industry Life Cycle Analysis

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Market share

10

Sale technique

The company sells its products to retail accounts, through its owned retail stores, and through a mix of independent distributors and licensees, as well as through internet website ‘www.nikestore.com’

It has 4 major subsidiaries:

Converse

Cole Haan Holdings

Nike Bauer Hockey

Hurley International

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Competitive Advantage Technology in Products– Historically had some of the most

cutting-edge products on the market. E.g. Nike + iPod

Manufacturing Skills– Use of low cost contract manufacturers, based outside USA, for its manufacturing

Strength of patents Nike Air

Nike Zoom

Nike Air Max

Nike Shox

Economies of scale

Application of IT– Nike relies heavily on IT in order to manage its supply chains

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Core Competency

Marketing– Nike is a marketing company

Research & Development– Nike’s R & D lab evaluated as “far & away the best” in the industry. Large number of patents testimony to its commitment to R & D.

Extensive SCM capabilities– has attained competency in leveraging low cost countries like China & Vietnam as its manufacturing hub. Sources its products from 900 factories spread across 50 countries.

13

Marketing– Nike’s Distinctive Competency

Nike’s distinctive competency lies in the area of marketing, particularity in the area of consumer brand awareness and brand power.

While the reasons that Nike is successful in marketing products are numerous, this key distinctive competency towers over its competitors.

As a result, Nike’s market share is number-one in the athletic footwear industry. Catch phrases like, "Just Do It," and symbols like the Nike "Swoosh," couple with sports icons to serve as instant reminders of the Nike Empire.

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Brand Power

Nike brand is the most valuable among sports businesses

Of the company's $18.4 billion in revenues in 2009, 90% was attributable to merchandise emblazoned with either the Nike or Nike Golf logos.

Nike’s brand value is US$ 18.6 billion in 2012, comprising more than 52% of its enterprise value*

30th most powerful brand in the world, and the number one in its industry. Its nearest rival Adidas is ranked at distant 135, while Reebok is ranked at 408.

* source: Brandirectory, 2012.

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Resource Based ViewNike’s key resource evaluated on RBV framework

The test of inimitability: Nike’s brand value cannot be duplicated or matched in the short-term.

The test of durability: By continually investing significantly in brand building exercise, Nike has maintained and increased its brand value. Nike spent more than US$ 3 billion in 2010 on marketing.

The test of appropriability: Since a lot of value that Nike creates is owing to its brand value, it derives maximum benefit from the value creation process.

The test of substitutability: Brand as a resource is intangible. The only way it can be trumped is by creating a stronger rival brand (something that can take years to build and leverage) or by diluting Nike’s brand value

The test of competitive superiority: Forbes ranked Nike as the top-most sports brand for a number of consecutive years. Its brand value is 10 times that of Reebok and more than 50% greater than that of Adidas.

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Core Business Unit

1. Athletic Footwear ▪ 54 % of total revenue▪ Casual Footwear Line

2. Apparel▪ 27 % of total revenue

3. Rest▪ Equipment▪ Sports related business

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Nike’s Global Business Strategy

“To distribute low-cost, high-quality Japanese athletic shoes to American consumers in an attempt to break Germany’s domination of the domestic industry”

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Nike’s Global Business Strategy

Quality Products

Constant Innovation

Aggressive Marketing

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Nike’s Global Business Strategy

180 Countries

34.1

28.7

17.3

6.7

Total Revenue

USEuropeMiddle EastAfrica

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Segmentation Strategy

High-end, High Income Level between the age of 16-55

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Marketing Strategy

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Branding Strategy

Sports Attitude Lifestyle

Just do it

You don’t win silver, You lose gold

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Selling Strategy

Flag Ship stores

Nike Town shops

NikeId

Big Retail Discount Stores

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Manufacturing Strategy

26

Organizational Strategy

departments by both geographic divisions and product categories

created overlapping management responsibilities and a fluid leadership structure

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Human Resources Management Strategy

Sweat Shop debacle, 1990s Diversity and Inclusion

Cultivate diversity and inclusion to develop world-class, high-performing teams

Ignite change and inspire critical conversations around diversity, inclusion and innovation

Create venues and environments for open dialogue, diverse opinions and a multitude of perspectives

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Value Chain

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Tetra Threat Framework

THREAT OF HOLDUP

THREAT OF SLACK

THREAT OF SUBSTITUTIO

NTHREAT OF IMITATION

ADDED VALUE

VALUEAPPROPRIATED

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Threat of Imitation Barriers to Imitation

Economies of scale

▪ Shared distribution channels and efficient production reduces costs

Patents & copyrights

▪ Nike has around 3775 patents in the sports shoes, apparels and the equipments domain e.g. Nike AIR technology, self lacing shoes, etc.

Innovation

▪ Strong emphasis on R&D and product development through new designs(more than 300 designs a year)e.g. recycled polyester for jerseys

Brand reputation and Image

▪ Celebrity endorsements & sponsorships of sports events

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Threat of Substitution

Responses to substitution Customization of footwear▪ Online customization of footwear

Aggressive advertising ▪ ‘Just Do It’ campaign

Mergers and Acquisition▪ Umbro, Converse, etc.

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Threat of Holdup Responses to Holdup

Multiple sourcing and Contracting

▪ Contract suppliers in China, Vietnam, Indonesia and Thailand; Argentina, Brazil, India, and Mexico

Building relationships with complementors

▪ Tie up with Apple for the ‘Nike + iPod’ sports kit

Increase Bargaining power

▪ ‘Just Do It’ advertising campaign

Forward Vertical Integration

▪ Opened Discount stores in rural areas and flagship stores in urban areas

Building Trust

▪ Improving working conditions through various programse.g. Joining FLA & GAWC, transparency through publishing monitoring results on the website

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Threat of Slack

Responses to Slack Performance based incentives Pay dividends to the shareholders Nike encourages outsiders to become

part of board, in order to avoid bias connected with “corporate conformism”

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Recommendations Nike’s current policy of constantly widening the range of sports which

they produce could be continued and further expanded. Nike could look into different markets, for example Fishing, Hiking, etc.

Nike could attempt joint ventures or acquisitions with companies to expand their product portfolio and also achieve economies of scale and access to markets.

Nike could take their collaboration with Apple one step ahead by forming exclusive gamepads featuring games like soccer, cricket, golf, NHL, NBA, etc.

Focus on different segments as well e.g. Age group 50+ with shoes specially meant for walking, custom footwear for women athletes.

Nike should start ‘Ethical’ campaign against the counterfeit production to improve on its image.

Nike could get into partnerships with other firms and setup sporting academies in developing markets as a brand building exercise.

Nike could make available online training videos of sporting stars and give their access to customers complementary along with certain range of products.

Nike could also get into sporting accessories like sunglasses which are highly profitable and are complementary in nature.

Nike could cut down on the contracting in order to avoid threat of imitation and future competition.

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Recommendations Economies of scale Brand reputation and Image New designs and technology (recycled polyester for jerseys) Customization of footwear Relationships Aggressive advertising Sub brands ( Cole Haan, Converse, Hurley International,

Hurley International, and Umbro Inc) Competition is non priced based on differentiation Celebrity endorsements and sporting event sponsorships Just do it campaign – signifies attitude, sports and lifestyle Flagship stores for selling Partnerships with retail discount stores like walmart Contract suppliers in China, Vietnam, Indonesia and Thailand.

And also in Argentina, Brazil, India, and Mexico Nike + ipod Nike for women campaign