SALES AND DISTRIBUTION REPORT OF NIKE INDIA

SALES AND DISTRIBUTION REPORT ON NIKE INDIA

SALES AND DISTRIBUTION REPORT OF NIKE INDIA(sales and distribution project)

Submitted by:: Abhishek Sabat (13RM901) , Anupam Bhagwani (13RM911) , Ilamurugu kailasam(13RM916) , Kapil Batra (13RM918) , Manideep Nulu (13RM927) , Rakesh Palanimuthu (13RM935)

Group number 33/26/2014

Contents

Executive Summary......................................................................................... 2Nike and its history.................................................................................... 2Nikes presence in India...................................................................................4 Hierarchy of Nike India.................................................................................... 4 Nike India distribution network.......................................................................5 Distribution through E commerce....................................................................................................8Personal selling.............................................................................. .8 LEO Sales Corporation .............................................................................................................9Manufacturing and Buying .9Sales Force...10Sales Information Systems ..... 9

EXECUTIVE SUMMARY

Nike Inc. was founded in 1962 by Bill Bowerman and Phil Knight as a partnership under the name, Blue Ribbon Sports. Our modest goal then was to distribute low-cost, high-quality Japanese athletic shoes to American consumers in an attempt to break Germany's domination of the domestic industry. Today in 2000, Nike Inc. not only manufactures and distributes athletic shoes at every marketable price point to a global market, but over 40% of our sales come from athletic apparel, sports equipment, and subsidiary ventures. Nike maintains traditional and non-traditional distribution channels in more than 100 countries targeting its primary market regions: United States, Europe, Asia Pacific, and the Americas (not including the United States). We utilize over 20,000 retailers, Nike factory stores, Nike stores, NikeTowns, Cole Haan stores, and internet-based Web sites to sell our sports and leisure products. We dominate sales in the athletic footwear industry with a 33% global market share. Nike Inc. has been able to attain this premier position through "quality production, innovative products, and aggressive marketing."As a result, for the fiscal year end 1999, Nike's 20,700 employees generated almost $8.8 billion in revenue.. Nikes market share in India is comparatively very low when we consider its a global market leader but it owes it to the slightly different taste of Indian demographics and also due to the fact that India has never been a sports oriented country(except cricket may be) and also due to the fact that it had to collaborate with a local player when it entered indian market. Still the sales and distribution strategies of NIKE India is worth having a look at. It is slowly growing its market share in India and has one of the most solid distribution network in the country. This report is focused on NIKE Indias sales and distribution strategies and key components of the same.

NIKE AND ITS HISTORYNike , Inc. is a majorly publicly traded sportswear and equipment supplier based in the United states. The company is headquartered in the Portland metropolitan area of Oregan , near Beaverton . It is the worlds leading supplier of athletic shoes and apparel and a major manufacturer of sports equipment with revenue in excess of $16 billion USD in 2007. It employs 44,000 employees world wide . The company was founded as Blue ribbon sports by Philip Knight and Bill Bowerman . It officially became Nike, Inc. in 1978. The company takes its name from Nike , the greek goddess of victory. Nike markets its products under its own name as well as Nike Golf , Nike Pro , Nike plus , Nike Skateboarding and subsidiaries including Cole Haan , Hurley international , Converse and Umbro. Nike also owned Bauer Hockey (later renamed Nike Bauer) between 1995 and 2008 . In addition to manufacturing sports wear and equipment , the company operates retail stores under the name Niketown . Nike sponsors many high profile athletes and sports teams around the world , with highly recognized trademarks of Just do it and the Swoosh logo. The Just do it campaign is still regarded as one of the most successful ad campaigns and the swoosh logo rightly projects its athletic inclined products.

MISSION :: To bring inspiration and innovation to every athlete in the world.VISION :: Innovate for better world .It is quite clear from its vision and mission statements that Nike has always looked forward to innovation. The corporate strategy , the marketing strategy and the sales strategy are all planned accordingly to achieve or meet the objectives as defined by their mission and vision statements. Few such examples of innovation can be seen from its products such as Fuel band and Fly knit racer . While Fuel band is an electronic bracelet that measures movements in the body whether the person plays tennis , or just walk to work. Red color indicates inactive and green indicates goal being achieved. Fly knit racer is a series of feather light shoes created from knit threading.

The core values of the company are honesty , competitiveness and teamwork. Despite its size , Nike operates with a minimum of hierarchy . As a result there is a lot of collaboration and consensus decision making . Commonly held values are imperative in such a matrix organization.

In fiscal year 1999, the economy was relatively favorable for footwear manufacturers. The footwear industry and its profitability are closely tied to economic cycles. Modest inflation, low unemployment, and a booming stock market will all contribute to healthy consumer spending.The theory behind the slowdown in sales is that growth in athletic footwear and apparel is cyclically sensitive to the Olympics. Historically, years of the Olympic Games have demonstrated surges in growth followed by difficult sales periods. The outlook for increased sales trends is optimistic due to the upcoming Olympic Games slated for this year. Nike can also look forward to a boost in demand from the World Cup events.

NIKES PRESENCE IN INDIA

Nike has been present in India from 1996 and headquartered in Bengaluru . India is a cricket crazy nation , NIKE understood the importance of cricket and in December 2005, it tied up with coaching schools like the BCCIs National Cricket Academy . Now Nike became official kit sponsor for BCCI Indian cricket team . By paying Rs. 196 crore to BCCI , NIKE wrested the rights to become the kit sponsor. The first Just do it cricket ad also made its appearance during the champions trophy. SSIPL is the largest manufacturer of NIKE footwear in India. It also has the credibility to have manufactured the first pair of shoes for NIKE India in the year 1996. SSPILs head corporate office is in Bangalore. In 2005 , SSIPL became the first company in the industry to disclose the factory list , providing a complete list of contracted factories for NIKE brand. When it comes to footwear NIKEs market share in the world is 41% clearly a leader but in India its market share is 15%. The biggest hurdles for NIKE in India were its entry model and its lack of aggression . When the global sports major entered the Indian market in 1995-96 , government policy dictated that they had to have a local partner. Nike agreed to an exclusive distribution agreement with a Delhi based trading firm , Sierra , in early 1996. Reebok had the luxury of entering Indian market as a subsidiary with a 20% equity stake by Phoenix , a distribution and trading firm and Reeboks distribution partner.

HIERARCHY OF NIKE INDIA

Nike follows a matrix organizational structure which has become a must for all the global companies . While the Regional Managers report to country head , and trade and distribution manager reports to Regional managers , and the sales force (sales reps reporting to sales executive or sales managers) , it may seem like line reporting but more or less NIKE India follows a line and staff reporting. It helps NIKE india in closing deals with enterprises and institutional buyers like schools and colleges and also helps in empowering the sales reps with the adequate power to satisfy the needs of the aforementioned buyers. During training of new sales reps also NIKE India follows a line and staff reporting structure where in sales reps trainees report directly to Training managers instead of having to report to sales managers thereby saving time of sales managers and ensuring the training managers to focus on sales reps and develop sales force accordingly.

NIKE INDIA DISTRIBUTION NETWORK

Multi brand Outlets , shop in shops and institutional organizations like schools and colleges are covered by the regional distributors. Exclusive brand outlets are either company owned or SSIPL owned . There are 378 exclusive Nike stores across India. NIKE also has joined the e retail bandwagon supplying directly from the company to e retail websites like flipkart . The products either directly flows from the manufacturer to retailer via warehouse or flows directly to e retailer via warehouse. Nike also follows a distribution network where in Distributor takes the role of carrying products forward from warehouse and delivering it to either retailer or customer(schools or colleges or enterprises) through the manufacturers reps or sales agents.

Nike distributes most of its sneaker products to large chain retailers like Foot Locker. Nike, the shoe company, has to deliver its products to the retailers like Foot Locker. This is major task for Nike because a large majority of their sales is made at these retail locations, so getting product to them is vital to their survival as a company. In order to accomplish this, Nike makes sure it has several distribution centers and computer systems that track inventory, deliveries, and orders in their respected retail stores. From experience, Nike makes use of a POS computer program (point-of-sale) that is integrated into the cash registers and this allows sales to be monitored at the various retail locations. Retailers like Foot Locker and Lady Foot Locker can also order particular products from another retail location for a customer if they are out of their size in a certain product and have it sent directly to their home. Retailers place orders with the shoe companies in order to receive products to sell in the retail stores, usually found in mallsMost often, the type of channel Nike uses is a producer (Nike), then the producer sells to the retailer (Foot Locker), then the retailer sells to the consumer. Nike Shox can also be classified as utilizing selective distribution because they are found in places that match their target markets and positioning. They are found in retail stores that cater to athletic wear, including clothing and shoes. These retail stores are found in shopping malls or freestanding stores where consumers in this market can obtain them when they want to purchase a Nike Shox athletic shoe. It is selective distribution because the Nike Shox are not available everywhere, but they are not exclusive either. They can be found at major retailers catering to the target market of consumers needing athletic footwear but are not exclusive by any means(Armstrong and Kotler). They meet in the middle as far as distribution goes.

Distribution through E-commerce Nike has taken the lead in e-commerce by being the first to market with its e-commerce web-site. Nike launched its e-commerce site in April 1999 by offering 65 styles of shoes to the U.S. market for purchase. Nike increased its e-commerce presence by launching NIKEiD in November 1999. NIKEiD enables online consumers to design key elements of the shoes they purchase. The program represents the first time a company has offered mass customization of footwear. Nikes future plans include opening an online shop for the Japanese market next year followed by global rollout. By being the first to market, Nike enables itself to become established while competitors rush to join us.

Personal selling

Nike utilizes a personal selling method in every one of their retail stores. The sales associates in these stores have direct contact and interaction with the buyers of Nike products. Because they are the individuals that directly communicate with the consumers who are interested in Nike products, they must be able to aid in the process of a successful sale. They are knowledgable of the brand and should be trained in asking customers the 'right' questions in order to figure out what they are looking for. To ensure optimal performance from the sales teams, Nike will often send Nike representatives to retail stores that sell their sneakers to give little presentations to keep the sales associates up-to-date on the products and the technology behind them. I know this from a first hand experience because of my job at a sneaker retail store. We recently had a Nike representative give us a mini training session on the Nike running shoes and then we discussed what the customers in our store looked for most of the time and then gave feedback on the Nike running shoes as well as some competitor brands.

Personal selling allows sales associates to create a relationship with the customer, though it may be brief. From the time a customer walks in a store until they leave, it is the sales associate's job to try to establish a relationship with that customer and figure out what he or she is looking to purchase. The sales force acts as a bridge between the customers and the company. The company looks for feedback from the sales associates about their customers, and the customers look to the sales associates to relay relevant and useful information about the product (Armstrong and Kotler).

In my opinion, Nike does a good job at their personal selling because they are the only company I have seen so far that has had represenatives travel to retail store locations to hold training sessions on their products. Also, often times Nike places a small insert in the running shoe boxes that gives some information on the particular product as well.

LEO SALES CORPORATION

It is headquartered in Agra and it has regional offices at Jaipur and Dehradun. It covers 400 MBOs across Rajasthan , Uttarakhand , Eastern and Western UP. It also covers SIS and schools like Doon Dehradun , Mayo Ajmer , DPS Jaipur , in this area. NIKE follows a selective distribution wherein they have control over their distribution network . This also prevents any intra brand competition between different retail formats selling NIKE products. Schools are provided with subsidized prices. This also facilitates legacy forming as NIKE follows a strategy that if the students or the young athletes are made to wear NIKE shoes and accessories at a young age representing in different sports , they will carry on this tradition further increasing sales for the rest of their lives. SIS are provided with extra discounts as compared to MBOs as they drive extra sales to the shops and also because of more visibility and exclusivity in a more organized manner. SIS does have to follow more rules and regulations as compared to MBOs . They have to submit daily sales reports and stock on hand reports on monthly basis.

MANUFACTURING AND BUYING

Nike shoes are manufactured in Dehradun , Bhagini , Chennai , Sonepat , Jalandhar . Apparels are mainly manufactured in Bengaluru. All the shoes are shipped to distributors from Bengaluru whether they are manufactured in India or imported from china and Vietnam. Merchandise buying is done on the basis of seasons (SPRING , SUMMER , FALL and HOLIDAY). Every quarter new collection is launched. Orders are placed 9-10 months in advance . In between active and inactive orders can also be placed. In active orders , certain fast moving items catalogues along with sizes and designs are sent to various retailers and distributors who can fastly move the items and depending on their choice , products are shipped. In inactive orders , they are restricted to the availability of the articles and their respective sizes as only cut sizes are provided during this.

Nikes facilities are located throughout Asia and South America. The locations are geographically dispersed which works well in our mission to be a truly global company. The production facilities are located close to raw materials and cheap labor sources. They have been strategically placed in their locations for just this purpose. In general, the facilities are located further from most customers, resulting in higher distribution costs. However, the cost savings due to the placement of our production facilities allows for cheaper production of our products despite the higher costs of transporting our products. As Nike continues to expand in the global economy and increase its market throughout the world, these dispersed facilities will prove to be beneficial.Newness of Facilities - WeaknessIts facilities abroad have attracted bad publicity in recent years. Though its facilities comply with local labor standards, generally, they have not met U.S. standards. NIKE want to be a leader and set a responsible corporate example for other businesses to follow. As part of Nikes new labor initiative, they commit to: Expanding our current independent monitoring programs to include non-governmental organizations, foundations and educational institutions. We want to make summaries of their findings public; Adopting U.S. Occupational Safety and Health Administration (OSHA) indoor air quality standards for all footwear factories; Funding university research and open forums to explore issues related to global manufacturing and responsible business practices such as independent monitoring and air quality standards.While establishing these policies is a step in the right direction for Nike, the difficult task at hand will be the implementation of the aforementioned goals to ensure the success of the program.

SALESFORCE

Nike follows a geographical based sales force structure which means different sales territories are assigned to different sales persons/executives. The sales people familiar with a particular area is assigned to that particular territory. In a diverse country like India geographical based sales force structure works best. They have around 30 employees in each territory. The sales managers look after sales person and sets quotas accordingly for each sales person party wise or store wise. Around 3 sales agents are responsible for each state. All employees are paid on a monthly basis.From a soccer specialty store in Italy to Macys and Footlocker - Nike Sales is the team that partners with retailers to deliver the stories, services and products that make Nike the preeminent sports brand. It all starts with the best sales team in the business. Nike sales reps excel at understanding consumers, the marketplace, and the Nike product. With a job on your Sales team, youll work closely with marketing, merchandising, and product engine teams and their retail accounts to create winning sales assortments for each season. They focus all of this knowledge on developing sustainable and mutually profitable relationships with Nikes retail partners. The key to their success is thinking like a retailer, and by being a true business and profitability consultant. Leo Sales follows a fixed pay for its sales force compensation. They also employ sales agents while dealing with institutional selling where in the contacts of sales agents comes into play . Sales managers get 35,000 40,000 Rs. , Operations manager 20,000 25,000 Rs. , and Sales person Rs. 15,000 25,000. Another reason for selecting sales agents for institutional selling is that it will cost less to NIKE as quantities less than the level of indifference is best served by third party sales agents .

SALES INFORMATION SYSTEMS

They use EDI (electronic data interchange) in their warehouse for flow of goods from manufacturer to warehouses for the smooth flow and ordering/reordering of the products. SAP is used for billing and inventory purposes. The new Business Intelligence and Data Warehouse system with a code name ARIS (Analytical and Reporting Information System) provides NIKE with complex information on the sales of Nikes products by providing links to retailer data, covering the fields of reporting, scorecarding, ad hoc analysis and budgeting.Business BenefitsThe project brings the benefits of implemented system that enables the staff of Nike to: Respond adequately to the market situation on an operational and strategic basis Optimize and better coordinate work with Nikes business partners Unify and simplify the process of reporting and ad hoc analysis Enable information exchange between local Nike office, Nike headquarters and its business partners Calendarize source data (divide weekly aggregations into days based on weights) Provide information access via various channels (intranet, MS Excel, email) Automate retrieval and cleansing of source data Use a strategic and secure technological platform that would enable the deployment of the solution to other Nikes offices in the CEMEA region

One reason for Nike's problems that everyone, including Nike, agrees on, has been the overproduction of some unpopular shoes and the underproduction of other popular designs. Nike blames both the new supply-chain software it installed and i2 Technologies Inc., the maker of that software, for these production errors.Dallas, Texas-based, i2 is a major supply-chain software vendor. The company has been highly successful, with many customers both large and small. I2's supply-chain software is designed to improve the management of inventory, production, shipping, and sales forecasting. Nike turned to i2 because it wanted to be able to respond more quickly to shoe market changes by being able to plan production schedules and begin production of a new line of shoes in one week rather than taking a full month after demand shifts. The system is supposed to help predict demand so that the company could better plan and control the production of existing products. Thus, Nike would be able more quickly to reduce the production of shoes that have gone out of style, leaving the company with fewer unwanted shoes, while increasing its production of shoe styles that are rising in demand.Nike had previously made a major commitment to this type of software by installing an SAP supply-chain management system in the late 1990s. However, the systems were problem ridden and, in Nike's view, inadequate, leading to Nike's second attempt, this time with i2. Nike, like most big corporations, has experience with major information technology projects, the previous one being the installation of an intranet in mid-1997. That project was meant to bring key people in many countries into close contact with the headquarters in order to improve global collaboration and so significantly reduce the time it took to make product design decisions. In that case also, Nike's goal was to respond rapidly to changes in style demands. But many vital employees seldom used the intranet. A later evaluation of the project showed that Nike had planned the project poorly, that key people had been left out, and that the staff was inadequately trained on both the system and its business value.The key element of the i2 project was to aid in speedily forecasting market changes. In addition it was also to automate and so make efficient the way Nike manufactures, ships, and sells its shoes, and thereby lowering operating costs. Even Federal Reserve Chairman Alan Greenspan, recognized the potential of that type of software when he said, "New technologies for supply-chain management can perceive imbalances in inventories at a very early stagevirtually in real time." He added it "can cut production promptly in response to the developing signs of unintended inventory building.".

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