NIKE

Agenda

• Industry overview• Nike’s overview and history• Vision and Mission• Core Values• SWOT Analysis• 5-Forces Analysis• Suggestions and recommendations

Industry Overview

• Over a span of more than 25 years, American consumers spent $300 billion on 7.5 billion pairs of athletic shoes.

• Reebok and Adidas became $ 3.5 Billion companies, while Nike Inc. became the first ever $ 9.5 Billion company

• Nike’s performance has been excellent in all the major countries:• 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.

• 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.

Nike Overview• Nike’s principal business activity is the design,

development and worldwide marketing of high quality footwear, apparel, equipment, and accessory product

• Distributed is spread 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.

Key Facts• 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

• Ranked 173 in the Annual ranking of America's largest corporations (Fortune 500 magazine)

Our Brands

NIKEA brief history

• Nike was created in 1971

• Began outsourcing in the mid 1970’s

• In 1975, Nike introduces the “Futures” program

• Nike’s patented AIR-SOLE technology is placed in Nike shoes for the first time in 1979

• In 1980, Nike begins negotiations with China to manufacture shoes there

• “Just Do It” slogan is introduced in 1988. It becomes one the most successful advertising slogans ever

• In 2001, Nike and i2 blame each other over lost revenues to Nike

• In an industry first Nike reveals their list of over 700 suppliers from all over the world

History1962: 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.

History Continued…

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.

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)

Mission Statement

• 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."

Core Values

• Authenticity

• Athletic

• Performance

• Uncompromised

Business Structure

• Operating Segments:

– Footwear

– Apparel

– Equipment

Operating Regions:– US

– Europe, Middle East and Africa (EMEA)

– Asia Pacific

– Latin America

The Grand Strategy Matrix

Potential Strategies:- Market Development- Market Penetration- Product Development- Backward Integration

- Forward Integration

Athletic Shoe Market Share

Manufacturing: Nationality of Contract Suppliers

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)

Evolution of the Swoosh Logo

SWOT Analysis

STRENGTHS:

• Strong brand recognition• Internet sales• Growing international presence• Superior research and development

department• Strong financial returns• Strong sense of culture in the working

environment• Great celebrity spokespersons• Automatic replenishment system• Successful experience being

competitive• Nike doesn’t own any factories• Successful marketing campaigns

WEAKNESSES:• Lack of stores catering to the

active females• Poor employment practices at

their international manufacturing sites giving a bad reputation

• Heavy dependency on footwear sales

• More expensive than competitor’s products

• Issues with Footlocker

SWOT AnalysisOPPORTUNITIES:

• Customer use of company’s products change from athletic purpose to a fashion item

• Development of international trade (GAAT and NAFTA)

• Generation Y children (born between 1979 and 1994) will reach 60 million

• General demand for clothing/footwear for leisure activities continues to increase

• Growing e-commerce’s positive effect since one of company’s competitive advantages is Internet sales

• Women demand for athletic footwear and clothing is increasing significantly

THREATS:• Competitors which copy company's

business model (high value branded product manufactured at a low cost)

• Reebok's strong presence with 204 factory direct stores

• Adidas-Salomon AG, top European competitor

• The impact of foreign currency fluctuation and interest rates, and political instability

• Labor and political unrest in the suppliers countries

• Cost orientated customers vs company’s higher-end market

PESTEL AnalysisPESTEL Analysis• PoliticalPolitical

– Political unrest in the production Political unrest in the production countries countries

– Terrorism in the home country Terrorism in the home country

• EconomicEconomic

– Slow down in the economy Slow down in the economy

– Barriers of entry to the EU Barriers of entry to the EU

– Contract manufacturing Contract manufacturing

• Socio-culturalSocio-cultural

– Brand conscious consumers Brand conscious consumers

– Change in buying habits in Change in buying habits in younger people younger people

– Generation Y prefers other Generation Y prefers other types of footwear types of footwear

– Increase in the female share of Increase in the female share of the market the market

• TechnologicalTechnological

– Speed of change of product Speed of change of product

– Design Ability Design Ability

– Speed of News reporting Speed of News reporting

• EnvironmentalEnvironmental

– Re use a shoe Re use a shoe

– Sustainability philosophy Sustainability philosophy

– Climate impact Climate impact

• LegalLegal

– Poor employment record Poor employment record

– Corporate social responsibility Corporate social responsibility

– Contract manufacturing and Contract manufacturing and copying of product (intellectual copying of product (intellectual property) property)

– Trade agreementsTrade agreements

Porter’s 5-Forces

Porter’s 5 forcesPorter’s 5 forces• Threat of Potential Entrants (LOW)

– Other sportswear manufacturers expanding their portfolio – Cheap copies from the Far East – Capital required to setup online shop is comparatively low– Switching cost is low for consumers

• Bargaining power of Buyers (HIGH)– Large number of buyers, companies differentiating brands to increase

sales– Price sensitive buyers and switching cost is low– The buyers of sports footwear have changed in the past decade. – There has been and increase in women purchasing the shoes– Generation Y has a different tastes and purchasing methods.

• Threat of Substitutes (LOW)– When required for professional use there is no substitute goods, but as

a fashion item there are many other goods that could be purchased.

Porter’s 5 forcesPorter’s 5 forces

• Bargaining power of Suppliers (LOW)– Large number of suppliers– Little differentiation among suppliers– Nike, Adidas have standardized their input procedures– Labor and suppliers cheap in far east, hence switching cost is low

• Competitive Rivalry (HIGH)– Reebok, offering more choice of shoe, introducing endorsement by

sports personalities, sponsoring sporting leagues – Adidas have recovered from the problems that plagued them, and have

a good product mix, covering a wide range of sports.– All major players have global reach, manufacturing units around the

world– Use of high speed internet and online stores– High capital expenditures, aggressive sales and marketing strategies,

and strong brand identity

Nike’s dispute with Oregon

• Nike announced not to donate to University of Oregon

• Nike’s subcontracted workers are working below U.S. working condition standards against which Oregon joined WRC (Worker Rights Consortium)

• Nike part of FLA (Fair Labor Association)• Conflicting positions and hence dispute

Recommended Solution

• Nike should buyout all subcontractors and create companywide standards for employee quality.

Strategic Implementation

• Start negotiations to buyout subcontractors.• Put together universal standards have both

internal Nike HR and external NGO representatives.

• Actually buy the subcontractors.• Nike ex-pats will manage our new mfg. plants.• Build manufacturing infrastructure and create

expertise in running plants, along with the logistics associated with shipping overseas.

• Increase shoe prices and lower endorsement offers.

Strategic Implications

• Increased costs• No managerial experience so we need to hire new managers with

expertise and know the Nike way.• Potentially lose market share.• Increased accountability for labor practices.• Profit margins will shrink.• Increase price $10 to $15 per shoe.• Competitors eat our lunch through potentially lower prices and get

better endorsees.• Loss of shareholders due to impatient capital.• Stock price will decline• Will improve public image with consumer market concerned with

human rights.• Demographic market could change.• Business model will be altered.

Recommended Strategy

• Distribution– Strengthen distribution in regions where Nike is

currently losing sales– Build more specialty stores or consignment – Give a more aggressive take on online stores

• Marketing– Push its products to its diverse target market– Sponsorship of kid-friendly programs to widen the

customer base– Aggressive in advertising through the internet and

music videos – Sponsor women empowerment programs

Recommended Strategy

• Management– Strengthen office relations by offering after

office programs and family social gatherings for the employees

– Observance in manufacturing managements (sweatshops)

– A quicker response to emerging social, economic, legal, and environment issues

Conclusion and Recommendation

• By catering to the target market’s specific needs in fields of sports, fashion, and lifestyle, Nike will be able to widen its consumer base and generate more revenue. This is done by closely monitoring the implementation of the proposed marketing and development strategies. There have also been management issues in the past, and Nike should strive to face these issues and prevent the occurrence of such. As a company being socially responsible, a quick response to emerging issues should also be consistently done.

Bibliography

• www.nike.com

• www.wikianswers.com

• www.en.wikipedia.org/wiki/

• http://classes.bus.oregonstate.edu/

Thank You!!!