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Marketing Analysis of Nike

Marketing Analysis of Nike

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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 equipmen t, 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 ut ilize 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. 1 Products Our primary product focus is athletic footwear designed for specific -sport and/or leisure use(s). We also sell athletic apparel carrying the same trademarks and brand names as many of our footwear lines. Among our newer product offerings, we sell a line of performance equipment under the Nike brand name that includes sport balls, timepieces, eyewear, skates, bats, and other equipment designed for sports activities. In addition, we utilize the following wholly -owned subsidiaries to sell additional sports -related merchandise and raw materials: Cole Haan Holdings Inc., Nike Team Sports, Inc., Nike IHM, Inc., and Bauer Nike Hockey Inc. Our most popular product categories include the following:
y y y y y y y y y y y y y y y y

Running Basketball Cross-Training Outdoor Activities Tennis Golf Soccer Baseball Football Bicycling Volleyball Wrestling Cheerleading Aquatic Activities Auto Racing Other athletic and recreational uses

Sales and Income Trends Revenues in the fiscal year ended May 31, 1999, declined by 8% over the prior year to $8.777 billion. As illustrated in the graph below, this marked the first time since 1994 that revenues have declined. Regardless of this year's decline, Nike Inc. achieved 300% revenue growth over a 10 -year period, rising from 1990 sales of $2.235 billion. Exhibit 1

* Obtained from Nike, Inc. 1999 Annual Report

Although revenues declined in 1999, net income increased by 13% over the prior year. As the graph below illustrates, net income has been volatile in the latter half of the 90's. Sharp decreases in 1998 an d 1999 net income were due to restructuring charges. If these charges had not been incurred, income would have been flat for both years. Efficiency in cost control and inventory management has allowed net income to increase while revenues decreased

in 1999. Note that the largest growth rate was 43% in 1997 over the prior year with net income of $795.8 million. Exhibit 2

* Obtained from Nike, Inc. 1999 Annual Report

Challenges Our greatest challenge in 2000 will be to maintain the operational and financial initiatives we worked so hard to implement in 1998 and 1999. We must maintain our inventory levels low enough that will allow us to adapt to quickly changing market trends. Financially, we must remain conservative in our cost structure. Cuts to operating expenses of almost $200 million this past year demonstrated that we are in a position to be nimble in light of our industry dominating size. With the gradual economic recovery in the Asia Pacific region, we can capitalize on customers who are financially s tronger. Our sponsorship of the 2000 Olympic Games in Sydney, Australia, and the 2002 World Cup in Japan and Korea will be the start of many opportunities to bring sports events into the mainstream for regional and global markets. With added exposure, we a re challenged to respond to a market demand for fashionable athletic footwear and apparel. In this quest, we will succeed if we keep quality and performance at the core of our business. The Internet is a rapidly changing medium. As the first company in our industry to offer ecommerce capabilities, we must proceed with caution and stealth in order to select an enduring strategy that will complement our existing distribution channels.

HISTORY Bill Bowerman and Phil Knight founded Nike Inc. as Blue Ribbon Sports in 1962. The partners began their relationship at the University of Oregon where Bowerman was Knight¶s track and field coach. While attending Stanford University, Knight wrote a paper ab out

breaking the German dominance of the U.S. athletic shoe industry with low -priced Japanese shoes. In an attempt to realize his theory, Knight visited Japan and engineered an agreement with the Onitsuka Tiger company, a manufacturer of quality athletic s hoes, to be their sole distributor in the United States. In 1962, Knight received the first shipment of 200 pairs of Tiger shoes to his parent¶s garage in Oregon. The shoes were bought by Blue Ribbon Sports (BRS), the name of the partnership between Knight and Bowerman that they formed with only $1,000 in capital. Knight peddled Tiger¶s shoes at local track meets grossing $8,000 of sales in their first year. In 1966, Bowerman, who had previously designed shoes for his university athletes, worked with Tiger to design the Cortez running shoe. The shoe was a worldwide success for the Onitsuka Tiger Company and was sold at the first BRS store. In 1971, BRS, with creditor support, started manufacturing their own line of shoes. Later that year, the first BRS shoe was introduced. The shoe was a soccer shoe that bore the Nike brand name, referring to the Greek Goddess of Victory, and the Swoosh trademark. A student designed the Swoosh trademark for a paltry fee of $35. The Swoosh was meant to symbolize a wing of the Greek Goddess. 1972 marked the breakup of the BRS/Tiger relationship. BRS soon changed its name to Nike, Inc. and debuted itself at the 1972 Olympic trials. In 1973, Steve Prefontaine was the first prominent track star to wear Nike shoes. The late 70¶s and early 80¶s also saw John McEnroe, Carl Lewis, and Joan Benoit sporting Nike shoes. Nike popularity grew so much that in 1979 they claimed 50% of the U.S. running market. A year later with 2,700 employees, Nike went public selling 2 million shares on the N ew York Stock Exchange. The 1980¶s were marked by the signing of Michael Jordan as a product spokesperson, revenues in excess of $1 billion, the formation of Nike International Ltd., and the "Just Do It" campaign. Nike also expanded its product line to inc lude specialty apparel for a variety of sports. In 1990, Nike surpassed the $2 billion mark in consolidated revenue with 5,300 employees worldwide. In addition, we opened the Nike World Campus in Beaverton, Oregon. In 1991, Nike pushed revenues to $3 billi on, up from $2 billion the prior year. This mark would continue to grow throughout the 90¶s, with revenues in 1999 reaching $8.8 billion. These revenues grew based on improvements in shoe technology and successful marketing campaigns. International revenue s fueled a great portion of this growth with an 80% increase in 1991 from the prior year. In 1992 international revenues topped $1 billion for the first time and accounted for over one -third of our total revenues. Such growth continued throughout the 1990' s as we continued to focus our marketing efforts on major sporting events like the World Cup, and the next generation of celebrity endorsers, such as Tiger Woods, Lance Armstrong, and the players of women's professional basketball (WNBA). At the end of the 90¶s, Nike¶s goal, as stated in our company web site, is to become a truly global brand.

Knight is 61 years of age and holds an undergraduate degree from the University of Oregon and an MBA from Stanford University. The wholesale va lue of athletic shoes for the US market totaled $8. Chairman and Chief Executive Officer. as well as other various fitness projects. one willing to take calculated risks and make conservative decisions based on careful analysis of external and internal environment s. PROFILE OF THE COMPETITOR Reebok. Reebok¶s financial position has been gradually slipping for a number of years.1 billion pairs of shoes. His efforts have helped to establish Nike as an industry leader in both national and international markets. consumers are s pending less worldwide for athletic footwear.7 billion in 1998 down 8. During that same period.2% (compared to 30. This switch is due to the increasing number of workplaces adopting casual dress codes.5% from the year before. Knight's decision -making style favors the participative approach. Reebok¶s financial woes are illustrated in their declining net sales. He is not hesitant to make unilateral decisions. Inc. Knight. is not entirely different from Nike. Reebok is involved in the design and marketing of both athletic and non -athletic footwear and apparel. Taking these a nd other factors into account leaves Reebok¶s current financial position.PROFILE OF THE CEO Phillip H. In general. This mode is representative of an open -minded CEO. as a whole. Knight practiced as a CPA and taught at Portland State Uni versity prior to founding the company known today as Nike. Kni ght's managerial mode is one that is characterized by strategic planning. Americans spent approximately $38 billion to purchase more than 1. net income declined 17%. Although athletic footwear sales appear to be recovering. Reebok¶s market share is a dista nt third in the footwear industry at 11. The current domestic industry focus is on casual and comfortable shoes. but prefers to look to his trusted management team for their insight and ideas before choosing a course of action. He has been an innovative visionary in the industry of athletic footwear and apparel. demand is still leaning toward the "brown shoe" casual footwear with a comfortab le and rugged design. Reebok¶s net sales declined 9% during the first three -quarters of fiscal year 1999. is the co -founder of Nike. looking bleak. He has been the driving force behind our company's success since its inception in 1964 under the name Blue Ribbon Sports. This is evident in their declining stock price. athletic footwear accounts for almost 35% of all footwear purchases. in terms of their products. which has fallen by ov er 80 percent in the last four years. According to the Sporting Goods Manufacturers Association. PROFILE OF THE INDUSTRY Industry Size In 1998. .5% for Nike and Adidas respectively).4% and 15.

This cutthroat environment has hindered the entry of new competitors. Historically. especially in the areas of running shoes. Modest inflation. the economy was relatively favorable for footwear manufacturers. The outlook for increased sales trends is optimistic due to the upcoming Olympic Games slated for this year. sales in the athletic footwear industry remain stable throughout the year. Nike can also look forward to a boost in demand from the World Cup events. Industry Entry and Exit Barriers Entry Barriers The athletic footwear industry is a very competitive and mature market. Therefore. Companies are looking for new ways to boost sales by capitalizing on direct Interne t sales to consumers. However. In order to have an edge over the leaders. Economies of scale also contribute to the lack of newcomers into this market. the back -to-school season. along with offering more styles at lower price points. The global variance in our market balances the seasonal fluctuations. and price conscio us consumers have slowed growth in this industry. This segment has reached a point of maturity in the domestic market and can look forward to only modest sales growth for the l ong term. The leaders of this industry are very well established. Industry Seasonality Overall. companies with strong brands will increasingly turn to international markets for growth. The theory behind the slowdown in sales is that growth in athletic footwear and apparel is cyclically sensitive to the Olympics. fashion trends. Many companies are also increasing profitability by transferring production to cheaper offshore facilities. long -time competitors like Saucony and K-Swiss have been struggling for years just to keep their brands alive.Industry Profitability The athletic footwear industry is a challenging and saturated market. sales are improving slightly. companies must be able to compete at all levels such as . The footwear industry and its profitability are closely tied to economic cycles. Typical trends in seasonality appear for spring apparel. and the Christmas holiday season. low unemployment. years of the Olympic Games have demonstrated surges in growth followed by difficult sales periods. Consequently. Leaders like Nike and Reebok have made the industry what it is today. and a booming st ock market will all contribute to healthy consumer spending. Industry Cyclicality In fiscal year 1999. cross -trainers and basketball shoes. Intense competition. Manufacturers are combating sluggish sales with radical new styles.

Exit Barriers When a company decides to exit from this industry it must be aware of things such as indebtedness and i ts ability to meet those obligations. efficient production. Board of Directors .Weakness The average age of Nike¶s board is 62. playing an active role with regards to management¶ s decisions in the area of strategy formulation. This constitutes a possible weakness in that there is a lack of younger members of the board who could serve to bring a new perspective to the company and assist in achieving Nike¶s goals. Lesser -known brands are viewed by retailers as being too risky t o replace an established brand name like Nike or Reebok on the shelf. When combing the shelves at stores like Sports Authority and FootLocker. COMPANY ANALYSIS Strengths and Weaknesses of the Corporate/Business Level Strategic Managers Board of Directors . the youngest member being 49 and oldest being 79. These things are difficult to achieve without the resources of an established manufacturer. provide another frame of reference and can assist the overall board in thinking "outside the box. 1999 Board of Directors* . Inc. New entrants are now able to slide into markets without these high startup costs. making it more profitable to begin production. These walls seem to be breaking down with the help of the Internet.reasonable pricing. Exhibit 3 Nike. A company must also be cognizant of lawsuits filed by its stakeholders and claims made on any residual assets.Strength Nike¶s board of directors consists of both management directors and independent directors. The combination of these two types of directors benefits Nike in that there is a presence of those directly involved with Nike as well as others indirectly involved who bring outside experience. Another key barrier to entry is the access of traditional distribution channels. and high product quality." Nike¶s board would be classified as an oversight board. it is evident that the leaders dominate the shelves. The costs of overhead that come along with traditional brick and mortar retail distributors are being significantly diminished.

Nike. Newberg. Conway Visiting Scholar. Nike. DeNunzio President. Clarke President and Chief Operating Officer. Eugene. Knight Chairman of the Board and Chief Executive Officer.C. NY Richard K. Massachusetts Delbert J. Robinson President. Inc.. Lowell. Hayes. New York City. Inc. Pendergrass & Hoffman Attorneys. Houser Assistant Secretary. Donahue Vice Chairman of the Board. P.. Beaverton. Inc.. Nike. OR Douglas G. Bailey. Nike. Partner ± Jaqua & Wheatley. NM . Houser. Beaverton. Harbor Point Associates. OR John E. Santa Fe.. OR Jill K.Thomas E. OR Philip H. Partner ± Bullivant. Jaqua Secretary. OR Charles W. Inc. Portland. MA Ralph D. Robinson & Associates. Attorneys. Boston. Inc.. Massachusetts Institute of Technology.

His participative decision -making style can also be viewed as a strength such that Knight is willing to listen to others to generate ideas.A. As a result of product and pricing research. Palo Alto. Inc. Nike has decided to continue to focus on the high end market while increasing its market share in the middle and low price ranges in an attempt to broaden Nike¶s product spectrum. Knight¶s strategic planning managerial style serves as a strength in that his actions are planned and calculated. Georgetown University. allowing for both risk y and conservative decisions based on careful thought and analysis. Former Head Coach. He does not limit the company¶s options to one -sided ideas and decisions.Weakness Nike¶s failure to foresee problems in relation to labor and factory conditions at production locations has resulted in bad publicity and declining sales as society and consumers call for more "socially responsible" companies. has been with Nike since its inception. Michael Spence Dean. the company has decided to revamp its apparel divisio n to be more fashion savvy. 1999 Annual Report Top Management .C. William J. As a result. Environmental Analysis Internal ± Strength Nike¶s management analyzes its internal environment and makes decisions based on that analysis. . Bowerman Director Emeritus * Nike. Stanford University. Because of Nike¶s marketing research. Jr. D. he has much knowledge and experience about the company and the industries in which it competes. CA John R. Washington. Knight.Strength Co-founder. External . Philip H. Graduate School of Business. Thompson.

and those who provide services to Nike. We are responding to this movement in a number of ways. Nike utilizes innovation to produce top quality athletic footwear and apparel. look to extreme sports and retail outlets such as Ambercrombie & Fitch and Old Navy to find a sense of individual style. While retaining our company's long -standing tradition of placing .Weakness Nike's Corporate Mission Statement: "To be the world's leading sports and fitness company. Nike has captured the largest market share in the athletic footwear and apparel industry and continues to be the leader of quality products. The mission statement also omits any mention of distribution channels and customers. Stakeholders should be well aware and informed of a company¶s corporate objectives to better understand the nature of the company and its direction. It does. This lack of corporate objectives represents a weakness.Strength The competitive strategy that Nike introduced at the end of the 1990's concentrates on honing the focus of our marketing strategies and product offerings through product differentiation. We realize that the team -mentality that captured the spirit of athlet ics in the late 1980's and early 1990's has been replaced by a sense of individualism. portray management¶s beliefs and va lues of our desire to be number one and maintain the leading position in the sports and fitness shoe and apparel industry. it is not specific as to what products and services we provide. Competitive Strategies . namely the sports and fitness industry." This corporate objective represents a weak ness as it does not meet the two requirements of being measurable and having a time frame in which to complete or accomplish said objective. our teammates. Grand Strategies . As a result of devoting vast resources to the research and development of its products. Younger consumers especially. however. Corporate Objectives ± Weakness Nike has no published corporate objectives in relation to the overall company." Nike¶s mission statement resembles a vision statement and is therefore a weakness. Nike has established corporate objectives in relation to our perceived c orporate responsibility. Nike¶s objective is immeasurable and broad lacking any time specifications for implementation of programs to meet t his objective. our consumers.Strength For our grand strategy. While the mission does broadly identify the busine ss we are in.Strategy Formulation Mission . Our objective is to "lead in corporate citizenship through programs that reflect caring for the world family of Nike.

we conducted fashion shows in twelve U."Honesty first. Customers can select the color and design a monogrammed heel -insignia for our made-to-order athletic shoes. In addition. a strategy which led to the "Just Do It" mantra. and often hosts spokespeople to motivate and thank its staff for contributions to the sports world.S. upgraded their hardware and software. but about promoting a lifestyle. For the 1999 back-to-school season. In addition." Nelson Ferris. a 47 year -old head of its corporate education department states that. Our former . a never -before seen element of fashion will receive a second -place priority built into our products and image. and competition second. an element of individualism is most obvious in our Web site." 2 Communication . "It stops being a job and starts to become a way that your are defining the way your are living on earth. Nike Retail. It represents a whole value system." These terms go a long way to make the daily work experie nce less than dull for the lucky employees in Beaverton." With this decision the company also restructured its marketing campaign. even has a Swoosh tattooed above his ankle. Nike was blindsided when Reebok developed its multicolored aerobic shoes. Employees are given an hour and a half for lunch to play sports or simply workout. It is not surprising that an athletic background helps a prospective employee. In keeping with its sports approach Nike asks its players to work by tw o principals above all others -. beco ming highly motivated about selling sports and a "Nike way -oflife. Nike's subsidiary consisting of the Nike Town shops and employee stores around the world. Employees are called "players.performance through new -product development as a top priority. thirteen years after the company was founded. Nike has been striving towards an inner culture that reflects this mantra." supervisors are "coaches" and meetings are "huddles."2 Ferris. Oregon. The company chooses to call its headquarters a "campus" instead of an office. cities. Red "Swooshes" float across everything from screen savers to coffee cups at the company's headquarters in Beaverton. focusing more on an image rather than just product advertising.Strength In late spring of 1999. a longtime employee. Since then. Compete with yourself not your colleagues. It was then that we decided to reinvent our business and culture. A ll new employees view a video of sports highlights accompanied by a soundtrack that discusses the soul of the athlete and the competitive spirit. Strategy Implementation Corporate Culture . In 1985. "The Swoosh represents something other than just a com pany.Strength Nike has created a corporate culture rich with employee loyalty and team spirit. management sends weekly emails to update employees on the recent successes of Nike -sponsored athletes. The new Nike is not just about shoes and slam -dunks.

Morale also fell as a result of bad media coverage over reports of substandard working conditions for our Asian factory workers. Motivation . but is capable and does work independently recognizing the common stake that each places in Nike. credit authorization.Strength Nike¶s top management¶s leadership style can be characterized by the team management approach. made by Sterling Commerce Inc. or even with digital technology. sales growth and asset growth. Evaluation of Performance . Nike utilizes standards such as net profit.Weakness While Nike employees have been loyal and committed workers. We have upgraded to PC -based systems running the more sophisticated Windows NT operating system. and sales rec onciliation processing-efficiency will increase due to the addition of in -store databases. Strategy Control Establishment of Standards . Leadership . will replace the 9600 BPS modems and provide for quicker processing times. While initiatives have been set to increase overall employee morale. This style of leadership leads to relationships of trus t and respect. Top management consists of a committe d group of executives all bringing together vast experience and knowledge. return on investment. this area remains a challenge to the company. is also being upgraded to the new operating platform.Strength . Electronic journaling. The software we have been using for the past few years called. Some of the areas in which our company has established standards are productivity of productions sites.Strength A comprehensive establishment of profitabil ity standards has assisted Nike in our evaluation of individual performance as well as a comparison to other competitors. after the cost -reductions that took place in the fourth quarter of 1998 resulting in a reduction of the number of employees. Corporate office communications capabilities with these branch locations will be improved dramatically.technology offerings consisted of IBM 4690 -series point-of-sale cash registers running on the OS/2 operating system. The company culture lends a hand to the fact that top management¶s teamwork style has spread throughout the organization.. earnings per share. The group is team oriented. Connect: Remote. Modems transmitting data at 56K BPS. Performance standards are also established and checked regularly. competitive position in the United States relative to the global market. return on equity. technologica l leadership in comparison to competitors and overall social responsibility and the public¶s perception. Sales and inventory data can be monitored in real -time. All of these innovat ions will allow executives at the corporate office and in other branches to better manage operations. we have had to place greater emphasis on motivation among the retained employees.

Nike¶s market share is expected to do especially well as a result of sponsoring the summer Olympics in 2000 in Sydney. each hold approximately 3 -5% of the remaining market share.Strength Nike has taken the lead in e -commerce by being the first to market with its e -commerce web-site. Utah. Nike enables itself to become established while competitors rush to join us. This brand power translates . The program represents the first time a company has offered mass customization of footwear. Strengths and Weaknesses of the Functional Leve l Marketing Market Share . Management¶s slow response time can be attributed to the careful analysis that is performed prior to making any decisions. NIKEiD enables online consumers to design key elements of the shoes they purchase. Nike launched its e -commerce site in April 1999 by offering 65 styles of shoes to the U. Correction of Deviation . By being the first to market. The remaining competitors. correction of discovered deviations has been a slower and less timely process. the 2002 World Cup in Japan and Korea. including the Nike name and the trademark Swoosh. market for purchase. These standards are important to Nike as a comparison of past performance to present performance as well as in our attempt to forecast future results in these areas. Timberland.S . at times Nike would be better served by a management team that can react more quickly to given information. it is expected to increase with new products. Distribution through E -commerce . Despite a slight decline from prior years. and the U. Nike¶s future plans include opening an online shop for the Japanese market next year followed by global rollout. including Fila.4% in 1998. While Nike¶s marke t share is still in the lead. and New Balance. While in general this is a good policy to abide by.Nike thoroughly examines and compares the aforementioned performance standards to the actual results that have occurred as a result of implementing strategies to meet or exceed performance standards. the closest c ompetitor. are considered to represent one of the most recognizable brands in the world. Australia. Nike continues to have the greatest market share in the U.5% of the market share while Reebok held 11. Asics. Speedskating team in the 2002 Winter Olympics in Salt Lake City.S.Strength Though Nike has established profitability and performance standards. among others.S.Strength Nike¶s global market share was an impressive 30. Advertising and Promotion . branded athletic footwear market. Converse. Nike increased its e -commerce presence by launching NIKEiD in November 1999.2%.Strength Nike¶s brand images. held 15. Adidas. In 1998.

An example is the decrease in brands made available due to declining sales of in -line skating and roller hockey products at Bauer Nike Hockey. However. The Nike name and associated trademarks have appeared everywhere from players' shirts. Some examples are our sponsorship of the 1999 Women's World Cup Soccer Tournament and our sponsorship of the U. Nike demonstrated an example of Nike¶s brand presence at the 1999 NCAA Basketball tournament when 42 of the 64 teams participating wore shoes provided. Nike has not claimed to be leading the race among the apparel industry as a whole. and quality products enhance the brand. Speedskating team in the upcoming 2002 Winter Olympics. celebrity endorsements. Products . we have had to exit two manufacturing operations at our Bauer Ni ke subsidiary.Weakness Nike has had much success as a result of collaborating with other companies within the sports and fitness industry. we have had to make strides to appeal to a fashion savvy market. Nike's most recent brand-building endeavors are focused on strengthening our association with women¶s sports. Nike is planning on initiating five structures within the apparel division to focus on the following areas: o o o o o Women Men Kids sports graphics and caps strategic response independently We are also spending more time on continuing to support and develop programs to gain a better understanding what our customers would like to see in the market. Continuous marketing research could prove to be key in assessing the market.Strength Though Nike leads the apparel division among industry competitors. at times we expanded into markets for whic h we were not strategically suited. pants. Our apparel line is not only being challenged by our typical industry competitors such as Adidas and Reebok. Products . We had to terminate 51 employees. perhaps gradual changes could have been made so that the end result may not have been as finite in nature. Pricing . but also by clothing and accessories retailers such as Old Navy and Abercrombie & Fitch. As a result. Had we anticipated the decline sooner.into bottom-line revenues. The desire to prevent situations such as these from continuin g to occur. and hats to stadium banners and walls. Aggressive advertising campaigns. Due to increased emphasis by consumers on fashion in relation to sportswear.Weakness . we have initiated a more aggressive program to review product collaborations that are outside of our core basis of products.S.

Nike will be organizing the internal business by gender as opposed to sport category and conducting increasing amount s of research addressing the buying habits of men.S. resulting in higher distribution costs. Newness of Facilities . We see much potential in the lower price points and plan to meet the needs of those markets.Strength Nike primarily conducts marketing research on a continual basis to assist in maintaining our company¶s position as the leader in the athletic footwear and apparel industry. Because of such research. presenting another weakness with room for improvement. generally. As Nike continues to expand in the global economy and increase its market throughout the world. we commit to: . In general. The locations are geographically dispersed which works well in our mission to be a truly global company. a revolutionary new line of athletic shoes.Weakness Our facilities abroad have attracted bad publicity in recent years. the facilities are located further from most customers. While the prices are realistic given the nature of the products we offer to our consumers. they have not met U. Nike¶s products are considered to be of higher quality and as a result have higher prices relative to our competitors. Production Location of Facilities . who tend to be item -driven. 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. we are placing a renewed emphasis on emerging technology and innovation towards the development of new products. Marketing Research . at times our consumers may not agree. with specifically targeted product lines. standards.Strength Nike¶s facilities are located throughout Asia and South America. Despite the fact that in the past we may have overlooked the m id. we have decided to revamp our apparel division. Though our facilities comply with local labor standards.In general.to lower-price-point products. these dispersed facilities will prove to be beneficial. However. This presents a weakness. specifically the Nike Alpha Project. who tend to be collection -driven. We want to be a leader and set a responsible corporate example for other businesses to follow. an area in which we can still greatly improve. As part of Nike¶s new labor initiative. To mitigate any future problems in our high quality/high price lines. The production facilities are located close to raw materials and cheap labor sources. and women. They have been strategically placed in their locations for just this purpose. we are dedicating our time and money to better develop our competitive position at all price points to build strengths at each of these levels.

Strength Our posture is primarily innovative. Focus ± Weakness Focusing on applied research can be a weakness as well.o o o Expanding our current independent monitoring programs to include non governmental organizations. we can afford to look long -term and place a greater emphasis on innovation as opposed to other companies with a short-term outlook attempting to improve upon existing products and services. We want to make summaries of their findings public. At times. We may also choose a catch -up strategy and mimic what is working well for other companies in the industry. innovative ideas come into existence as a result of basic. Though more risk y and expensive. Research and Development Focus . Successful projects can realize immediate profitability while unsucce ssful projects may be discontinued without enduring materially large losses.S. foundations and educational institutions. the difficult task at hand will be the implementation of the aforementioned goals to ensure the success of the program. and less risky due to the short -term nature. Applied research focuses on short-term initiatives such a s successfully developing new product lines. our primary focus is directed towards applied research. Nike prides itself on being a premiere provider of high quality sports footwear and apparel. Posture . Nike may choose a defensive strategy to remedy the current situation. Adopting U. unspecific research. basic research that benefits numerous facets of the sports and fitness industry. While establishing these policies is a step in the right direction for Nike. Many new. Due to the lead Nike possesses in the industry. we need to adjust our posture in relation to a particular product line or area of products. Nike would benefit from increasing the amount of basic research we conduct with hopes of uncovering potential opportunities of which Nike could take advantage. while at times adjustin g to a protective position. and other times a catch-up stance. Occupational Safety and Health Administration (OSHA) indoor air quality standards for all footwear factories. In these instances. This proves to be a strength in that this method of research is less costly than basic research. . Innovation has been the key to aiding Nike in securing its position as the leader in the market.Strength Although Nike conducts continuous. 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.

Weakness No successful company can exist and succeed without utilizing its human capital. and Thailand. product sales. equipment) to 16. . Because of this and Nike¶s goal to be a responsible citizen of the corporate world. Nike has comm itted to goals to better the problems as part of the aforementioned labor initiative: o o o Increasing the minimum age of footwear factory workers to 18. yet to the delight of the corporations operating in Vietnam. While establishing these policies is a step in the right direction for Nike. Bill Clinton. However. We received much bad publicity as well as experienced a decrease in sales as a result of poor labor policies and lack of policies established abroad. accessories.S. Indonesia. White House documents have revealed large donations to the Democratic National Committee by companies with an interest in seeing the embargo lifted. Nike is still working on initiatives to change the current situations throughout fact ories. The author of the article. and. two years later President Clinton normalized trade relations to the dismay of the POW/MIA families involved. The image of profitability being more important than American POW/MIAs has led to an unfavorable image with armed forces. Expanding education programs. received an accurate picture of the situation. the difficult task at hand will be the implementation of the aforementioned goals of the new labor initiative to ensure the success of the program. "Nike¶s Dirty Little Secret. combined with the "sweatshop" operations in Nike facilities in Vietnam and other countries. as a result. Public Affairs Ethics ± Weakness Accusations of unethical behavior. for workers in all Nike footwear factories. only serve to injure Nike¶s image. While the worst is over. United States President. whether or not they are true. While Nike has had various policies in place. Whether true or not. One such example of questionable behavior relates to Vietnam and the trade embargo placed on the communist country as a res ult of United States POWs/MIAs.Human Resources Human Capital . Increasing support of its current micro -enterprise loan program to 1. promised to keep the embargo in place until the U. has negatively impacted Nike¶s image. and minimum age for all other light -manufacturing workers (apparel. including junior and high school equivalency courses. In 1993. families and Americans as a whole. This.000 families each in Vietnam." alludes to the fact that Nike was present on this list. Pakistan. weaknesses still exist in regards to labor policies in overseas locations. the company still suffers from this unethical image and must sway the minds of the consumer and give them a renewed faith in the responsibility of Nike.

improving safety and health conditions. The quick ratio of 1. but is not limited to. Table of Key Financial Ratios on page 22) Management of Cash . Nike has developed a Corporate Responsibility Policy that discusses how we will improve working conditions for our international employees.Strength Nike¶s inventory turnover of 7. Due to our ability to quickly turnover inventory. Company management stated. Nike benefits from greater cash flows. just slightly below the industry average of 2. "To lead in corporat e citizenship through operations that reflect caring for the world family of Nike. Neither the current or quick ratio exceeds the industry average substantially enough to be considered a true strength. securing independent monitoring for our factories. Management of Inventories . cash equivalents and on credit." Inventory levels are being reduced due to increased sales in the company's own branch retail stores. and developing programs to provide educational programs. shows that Nike is inline with the industry concerning ease of converting assets to cash to cover short -term obligations. quick turnover reduces Nike¶s inventory of out -of-style shoes and clothing. extending a commitment to the environment.Social Responsibility .Weakness Nike does permit sales in cash.34. The Policy outlined on our web -site has the following mission. and less spoilage. the following initiatives: raising age limits in factories to 18 years. reduced storage costs.32 exceeds the industry average of 4. our consumers. In addition.Strength In response to accusations by consumer gro ups over unfair labor practices. our teammates. Management of Accounts Receivable ." The policy includes. and those who provide services to Nike.26. The fact that we are not leaders is ultimately a weakness. while not a major strength.28. "We put a considerable amount of effort into improving product buying power patterns and as a result the composition and levels of inventory resulted in improved gross margins relative to a year ago. as well as a commitment to our employees around the world. The policy shows Nike¶s commitment to responding to the concerns of consumers. Finance/Accounting (For the following. The current ratio. see Exhibit 4.Weakness Our company¶s current ratio is 2.43 is above the indus try average of 1. Reducing inventory levels was a key initiative for Nike in fiscal year 1999. Being slightly above the industry indicates that we could sell less of our inventory than what other companies in the industry would have to sell to meet current obligations. Our collection procedures have been lax compared to others i n the industry resulting in slow payers and defaulting .17.

Weakness Nike¶s profitability is wavering in comparison to the industry average. Management of Debt .36%.26 times 1446.9 =2. or other changes as top management sees fit.17 days while the industry average is only 7. this was in part due to a reduction of our marketing budget by $100 million and terminating 7% of our employees.71 days. Exhibit 4 Table of Key Financial Ratios RATIO: Formula: Calculation : (in millions) Liquidity Current Current assets/current liabilities 3264.77 indicate s that Nike is realizing a lower percentage of earnings on stockholders¶ investment. which is far below the industry average of 40.Strength Our debt-to-total-assets ratio is 15. Our collection period calculates to 63.88 indicates that the in dustry as a whole is in a slightly better position to cover its interest charges. We have just recently changed our collection period from 90 days to 60 days as an attempt to encourage faster payment. This can be interpreted as a strength as we do not rely as heavily as our competitors on debt financing.9 =2. Though net income did increase from 1998 to 1999. The industry average of 21.28 times NIKE: Industry : .54% in relation to the industry mean of 18.69%. Our return on equity of 13.43 reflects the number of times funds available from earnings can cover interest payments.customers. Steps are being taken to alleviate the problem of collecting accounts receivable in a more timely fashion.Weakness Despite the lower percentage of assets that a re borrowed to finance Nike. Our profit margin of 5. Nike is not as leveraged as competitors in the industry and uses less debt financing to finance firm operations. Management of Debt . Our ratio of 19. Nike¶s low ROE can be linked to the dropping stock price as a reflection of stockholder confidence in our company.14% to the industry¶s 5. research and development. However. our times interest earned ratio is weaker than the industry average. our highly liquid position gives us the ability to increase debt financing should we need or desire additional capital for company operations.69% is partially due to decrea sing sales. Profitability .

34 times Accounts Rec.8 =19.88 times Profitability Profit margin Net income/net sales 451.17 times Activity Inventory turnover Collection period Total assets turnover Sales/inventory 8776.14% 8776.9 =1.36% 5247.77 % Distinctive Competency Nike¶s distinctive competency lies in the area of marketing. particularity in the area of consumer brand awareness and brand power.7 =1.9 = 5.54% 3334.1 =21. Nike¶s market share is number -one in the athletic footwear industry." and symbols like the Nike "Swoosh.9-1199.9 =7.9 =18.9 =1.1 =63.67 times 5247.69% Times interest Net operating earned income/Interest expense 856. .3 =1./Average sales per day Sales/total assets 1540. As a result.Quick/acid test Current assetsInv.43 times 1446.9/360 8776.71 days Leverage Debt to total assets Total debt/total assets 806.3 =4.69 times =7.4 =13./current liabilities 3264." couple with sports icons to serve as instant reminders of the Nike empire. this key distinctive competency towers over our competitors.32 times 1199. Catch phrases like. "Jus t Do It.7 =40. While the reasons that Nike is successful in marketing our products are numerous.4 =5.43 times 44.17 days 8776.2 =15.69% Return on Equity Net income/net worth 451.

and our presence in the 2000 Sydney Olympic games will also aid in sales growth." with marketing campaigns that emphasize fitness. The premise of a trademark and a slogan is that they are a company¶s fingerprints. This image is something that competing companies can not easily duplicate by simply enhancing the physical characteristics of their products. consumers identify their purchases with the prospect of achieving greatness. resides in our financial status. Younger consumers especially benefit f rom this positive influence.and long-run. our brand power becomes increasingly difficult to replicate. and debt. Inc. We have many areas challenging our continued success such as increasing our profitability and bet tering our management of cash. accounts receivable. Nike's recent alliance with Fogdog Sports. Since then. Nike suffered a blow to sales and revenue sparked by bad publicity in 1997 about our international labor policies. These initiatives. in addition to the stabilization in the Asian financial picture. While we are not in financial trouble. "Just Do It. Few companies have such a recognizable image and the resources to promote it. we recognize that strengthening the financial well being of the company can only assist our company in the short . This ultimately translates into added value for consumers. The public benefits from the strength of Nike¶s image at the point of purchase. Key Weakness The key weakness of Nike. Duri ng 1999. For decades. will combine to fuel the recovery that Nike expects in the near future. Nike is able to capitalize on its unique identity due to our industry -leading financial strength. consumers have come to associate the Nike image with quality products. By associating star athletes and motivational slogans like.Two key attributes of a distinctive competency are its inability to be easily replicated and the value or benefit it offers to consumers. competition. an Internet sporting goods retailer. the company made some changes in its products and deeply cut costs. we have attempted to overcome the bad press by raising and enforcin g minimum age requirements for employees in overseas factories. Nike reaches millions of consumers through large -scale marketing campaigns made possible by significant budgetary appropriations. As Nike becomes a more integrated part of American and world culture. Exhibit 5 . Nike attempted to regain its mid -90's momentum as shown in 1998¶s recovery. but the loss of Michael Jordan as our spokesman and the Asian financial crisis put a damper on gains that year. and sportsmanship.

Inc. Cost cutting due to restructuring of operations will give many companies the chance to price products more competitively. y . especially among the leaders. Athletic shoes and apparel have become a staple in wardrobes worldwide. This could be a key time during which other companies in sound financial condition. the labor controversy has been the biggest factor in the changes shown. Overall. Competitors can exploit our financial weakness by emphasizing their own individual strengths and attempting to gain greater shares in the market while we are revamping processes from within. such as Adidas. INDUSTRY ANALYSIS Opportunities y y y The athletic footwear and apparel industries will benefit from the currently strong economic backdrop in the United States.* Nike. In fiscal year 1998. This is due to both the increasing numbers of people exercising and the trend towards casual apparel. Nike¶s net income has increased for fiscal year 1999. Nike is recovering from a large decline in 1997¶s numbers. Competition is fierce at all levels in within the industry. This creates a sense of security for the companies that have been able to create a niche. As noted above. could utilize their resources in an attempt to overshadow our existing and new product li nes. the company incurred a one -time restructuring charge to better align our overall cost structure and planned revenue levels. Spending is high and is expected to result in sales growth industry -wide. 1999 Nike Annual Report As a result of reducing our marketing budget by $100 million and eliminating 7% of our employees.

Nike¶s sponsorship of the 1999 .S. Consumers are becoming savvier and may lean towards discounted items. economy. thus eliminating the "middle -man" distributors and allowing for increasing profitability. remained loyal to Reebok and their products. Reebok could expand their market share and take customer s away from Nike products. Reebok has managed to hold the loyalty of a large portion of the industry¶ s female consumers market. While style and technology in athletic apparel and footwear has reached a leveling -off point. Can Reebok use this distinctive competency to i nflict damage on Nike? Yes. as a group. the important aspect now is for companies to differentiate their lines. TOP COMPETITOR ANALYSIS Distinctive Competency . reasons for optimism remain. y Threats y y y y The industry has reached a level of maturity. The strong departments will surely capitalize on the trends of tomorrow if their efforts are successful. Inflation is looming over the U. individual product designs have come and gone.Marketing (Consumer Loyalty) Despite the tough times Reebok has recently come upon. Consumers may be scanning the market for new and different footwear and apparel products. we can protect our market share among female consumers within the industry by targeting some of our promotions to female consumers. E-tailing. Can Nike protect itself against this threat? Yes. many of the key manufacturers in this industry have been around for many years. If Reebok can expand their appeal to incorporate female consumers who are not currently Reebok customers. While Reebok¶s spending on advertising has fluctuated.y y One area in the industry that is ever changing is resea rch and development. or customer-designed internet merchandise. Increasing financial recovery in overseas markets proves to be an area of expansion for the athletic footwear and apparel industry . Reebok can use their distinctive competency to wound our company. In terms of market saturation. female consumers have. which may spark a cutback in consumer spending. is threatening the traditional distribution channels.

Continuing our successful marketing programs should allow Nike to court the customers Reebok fails to draw in with their weak marketing initi atives. "Are You Feeling It. Nike can take advantage of Reebok¶s marketing woes by doing one of the things we do best: marketing. While other athletic shoe companies bombard the airwaves with commercials pushing their product lines. Can Nike take advantage of our competitor¶s key w eakness? Yes." Reebok¶s. This means that our customers are not as athletic as they may have been in the past.part of the next generation of Nike loyalists. they will have to improve the quality of their overall marketing operations. this poses as an opportunity for Nike because they have the ability to influence the next generation of Nike customers. Can Reebok¶s key weakness damage their competitive position? Yes.Women¶s World Cu p Soccer Tournament was a great example of how Nike is appealing to female athletes. In addition. . Reebok¶s chances of growing their market share are slim as long as their advertising endeavors remain to be so unsuccessful. Reebok¶s sho rtcoming in the area of marketing is their key weakness. these existing customers will continue to be loyal to Nike. OTHER EXTERNAL FORCES Demographics Opportunity Nike's once loyal market is currently aging. by marketing different types of shoes to this market. Reebok remains out of sight and out of mind. For Reebok to rebound from their current economic woes. The older generation of Nike brand purchasers have the power to influence their children . Competitor¶s Key Weakness ± Marketing ± (Advertising/Promotion) The leading cause of Reebok¶s recent tumbles stemmed from problems relating to poor marketing." does not equate to their brand name in the eyes of most consumers. While Reebok¶s competitors are known by familiar slogans like Nike's "Just Do It. However.

The negative publicity that Nike has received thus far has lowered its image to that of being an eth ical company. not responding to these consumer activist groups poses a threat to Nike. Consumer watch groups are paying especially close attention to Nike's use of sweatshops and child labor to produce our products. Pressure groups Opportunity An opportunity produced by pressure groups is the ability to react in a positive manne r to concerns of the public as well as customers. There is a much higher proportion of Hispanics. we are not using our resourc es to the fullest degree. Nike is not keeping up with the late st trends and styles like some of its competitors have been. We have not catered to a large portion of the new generation that demand the latest trends and styles. Such publicity has the potential to ruin a company permanently. one of our most important stakeholders.Threat The phenomenon of the aging of our most loyal market segment questions whether there is a threat that the new generation will not be exclusively loyal to Nike. and African Americans than there was before. In the current marke t there are a number of other competitors that are not mainly athletically oriented. currently is the booming economy of the United States. Nike must take into account the changing demographics in this country. Also. by responding to such consumer activism. we are disregarding our customers. Threat In the same manner. By disregarding the voice of concerned citizens. Their clothing and shoes are competing with Nike's. the newer generation is attracted by Adidas and Tommy Hilfiger. we are portraying a positive image in that we are promoting ethics e ven while we are trying to be efficient and economical. . These groups have somewhat different tastes that Nike should be able to satisfy. For that reason. Examples include such manufacturer -retailers as The Gap and Old Navy. Asians. Nike has capitalized on the recent economic boom with higher sales and income. Currently the company has the ability and the resources to exploit this opportunity. Also. In addition. Inc. Nike's opportunity lies in being able to show the consumer force that we are indeed taking steps to reduce and eventually eliminate sweatshops and child labor through new policies and strict implementation procedures. There are currently many areas in which Nike is not paying attention. KEY OPPORTUNITY The key opportunity for Nike. However.

is market saturation. In response to this threat. Competitive Strategies . In addition. Operating in a mature market with minimal opportunity for growth. we would focus on keeping our market share and making sure that competitors like Old Nay do not steal away our market share. Nike will be one of the main companies to start losing market s hare. we must hold onto our market share because if anything it is ours to lose. 4. Subordinate Problem : Strategy Formulation. is now competing with other athletic companies as well as companies that just sell clothing or other types of shoes. Since Nike is currently holding the lead in the market as far as market share. the world economy is recovering currently. we must look at trends while maintaining our high standards of quality. there is very little room for new companies. Declines in sales revenues of $410M from 1997 to 1999 12. If all of these other companies merely gain a small percentage of the market. but we need to focus on the younger market of consumers. The problem is that the athletic shoe market is already full of different brands and companies. Inc. 3. In fact. MAJOR AND SUBORDINATE PROBLEMS Major Problem: Finance Symptom: Declining stock market price Causes: 1. Nike needs to focus on wh o the next generation of loyal customers will be and cater to their needs. but if we want to keep the lead in market share. Declines in net income of $344M from 1997 to 1999. Inc. Nike. KEY THREAT The key threat for Nike. We need to make sure that we not only stay abreast of the athletic shoes market but also are competitive in the athletic apparel market. This would include the younger gener ation that is interested in sports as well as extreme sports. Nike is strong in many foreign countries. Recent declines in market share in the United States. which allows Nike to make an impression in foreign markets as well. Inc. Now. Nike has been doing a great deal of research and development. 2. There is also very little room for new product innovation and growth of market share for companies like Nike. there is little room for them to expand.To exploit this opportunity. We will do this by focusing our efforts on a broader market.

Cyclicality in footwear and apparel industries. Additionally. financial performance effects the public perception of Nike in the marketplace. 2. For these reasons. Foreign wages paid are considered unjust when compared to U. Old Navy). Underage employment in foreign operations discovered by consumer watch groups. Causes: 1. An over reliance on Michael Jordan as a central marketing figure. STRATEGIC MATCH . Poor work environments in foreign operations reported in the national media. Future positive cash flows are required to invest in research & development. marketing campaigns. 2. wages. 3. Why Finance? We choose finance as our major problem because continuing success for Nike is based on our ability to generate future cash flows by producing higher revenues and net income. 3. Poor management foresight in predicting consumer and fashion trends moving away from athletic shoes. 2. This choice is also consistent with finance being identified as our company¶s key weakness (s ee page 23).Symptom: Loss in market share for shoes and apparel to non -traditional athletic companies (e. Causes: 1. Subordinate Problem : Marketing Symptom: Drop in sales revenues in 1999 from 1998.S. focusing on relating Nike to a non -related item. Causes: 1. Nike¶s product offerings are limited to athletic footwear and apparel. Poor reception of these ads by consumers. we chose finance as our major problem. Subordinate Problem: Public Affairs Symptom: Public outrage over manufacturing and labor practices.g. his departure caused a decline in sales. and capital improvements required by our production activities. Recent marketing campaigns are vague.

30 .14 X* Against Adidas Rating** 5 5 4 3 5 X Score .07 .28 . Market Share Weight .50 .70 X Against Reebok Rating** 4 3 3 2 3 X Score .35 .10 .42 X y Breadth of Product Line y Sales Distribution Effectiveness y Price Competitiveness y Advertising Effectiveness y Facilities location and .30 .20 .06 .Leverage Strength: Opportunity: Ý Effective Marketing Ý Recovering International Economies Constraint Weakness: Opportunity: Ý Declining Profitability Ý Robust Economy Maintenance Strength: Threat: Ý Largest Market Share Ý Market Saturation Vulnerability Weakness: Threat: Ý Poor Competitive Strategy Ý Changing Demographics PRIMARY STRATEGIC MATCH POSITION Business Strength/Competitive Position Matrix Exhibit 6 Success Factors 1.18 .24 .10 .

25 .16 .01 .03 .00 5 4 4 5 X 5 5 5 .72 .15 X .54 .09 .04 .09 .18 .08 .30 .05 .20 .40 .05 .06 .16 y Size y Profitability y Cyclicality y Seasonality y Entry/exit barriers y Customers y Competitors .08 1.newness y Production Capacity y Relative Product Quality y R & D position y Caliber of top management y Customer Service y Experience Curve y Corporate Culture y Profitability Ratios TOTAL .12 .15 .24 .25 .10 .40 4.03 X* .02 .20 .46 4 3 3 4 X 4 3 4 .05 .12 X .08 Ranking 2 4 2 3 3 2 4 2 Weighted Score .20 .17 * X means that the criterion is not applicable ** 1 means that the firm¶s competitive position is very weak 5 means that the firm¶s competitive position is very strong Exhibit 7 Industry Attractiveness Matrix Evaluation Criteria 1.03 .16 .06 . Industry Growth Weight .32 3.

y Suppliers y Government Regulations y Labor unions y Demographics y Culture y Economy y Politics y Technology y Pressure groups TOTAL .12 .00 Exhibit 8 Business Strength/Competitive Position Low High Average .60 .82 Industry Attractiveness Index = 3.10 .02 .04 3 2 4 3 2 5 4 3 2 .00 * X means that the evaluation criterion does not apply to the particular industry ** 1 means that the evaluation criterion (or the industry condition) is very unattractive 5 means that the evaluation criterion is very attractive Primary Strategic Match Position Average Business Strength/Competitive Position Index = 3.08 1.00 3.12 .18 .02 .36 .30 .02 .10 .08 .08 .06 .04 .20 .

Industry Attractiveness High Leverage Constraint Average Maintenance Low Vulnerability .

Nike¶s management believes that our success lies in the hands of our teammates. apparel and equipment to institutions and individual consumers of all ages and lifestyles. customers. We are also committed to making sound decisions in regards to our environment. try to catch us. through product innovation. mail order and our company web site. Alternative Strate gic Slogan Nike«as always. We pledge to make our products easy available worldwide through the use of retail outlets. Nike has made many alliances with human rights organizations in an attempt to ensure labor rights for employees of the industry overseas. Nike is continuously making efforts to ensure that all employees and members of its sur rounding communities are treated in a manner that is inline with our mission. shareholders and the communities in which we operate. and the fight against pollution. Values Statement Nike will focus its commitment to all stakeholders by continuing to make strides towards being a company that sets the precedents in social responsibility. (Lisa) Give yourself an edge.THE STRATEGIC PLAN Mission Statement Our mission at Nike is to be a company that surpasses all others in the athletic industry. We will continue to produce the quality products that we have provided in the past. (Kim) Finish First. (Brian) For the top athlete in all of us. we will continue to meet the ever-changing needs of our customers. which is reflected in our compensation and human resource policies. resources. a step ahead of the rest! Alternative Marketing Slogans y y y y Nike. We vow to keep this in mind with the execution of every decision within our company. Vision Statement At Nike. Most importantly. (Sheetal) ***THE WINNER«Second Place is for Losers (Dan) . We will maintain our position by providing quality footwear. We are committed to treating our employe es with the utmost respect. our vision is to remain the leader in our industry.

Market development is a third strategy for consideration due to Nike's ability to geographically expand our product offerings. timing. Recover the market price of our stock from its 52 -week low of $26.Structured Approach Concentration Weighted Score*** Product Development Weighted Score*** Market Development Weighted Score*** Evaluation Criteria Weight* Rating** Rating** Rating** . The table below concludes that focusing on product development will allow Nike to continue to build upon our founding tenant t hat has secured us a position that borders on leverage and maintenance within the athletic footwear.5% from 1999. Because Nike has such a strong history of effective marketing in key global regions. to a value that approximates its 52 -week average of $50 per share. This 22% increase from 1999 is realistic in light of combined 1 st & 2nd Quarter income already 32% higher compared to the same time last year. can utilize the complete structured approach to select a grand strategy in carrying out the above corporate objectives.40 product development surpasses second place. With a total weighted score of 4. To determine which would prevail as our overriding strategic position. Exhibit 9 Evaluating Leverage/Maintenance Strategies -.0% return in 2004. Increase earnings per share to $2.'s short -term corporate objectives for fiscal year 2000: o Increase net income to $550 million by the end of fiscal year 2000 in order to reach our long -term goals of improved return on equity and higher EPS.70 per diluted share by 2004 in an overall effort to bolster the long -term resilience of our stock's value. This would surpass our 1997 record high. culture. This would be an increase of almost 6. concentration. apparel. and accessories markets. 2000.50 per share on February 8. o Short-Term Corporate Objectives The following are Nike Inc. The three strategies are very closely linked. concentration is an alternate strate gy.Long-Term Corporate Objectives The following are Nike Inc. market development.'s 5 -Year long-term corporate objectives: o Continue our improvement in stockholders' return on equity to achieve a 20. four eva luation criteria were weighted according to each strategy: distinctive competency. o Grand Strategy Nike Inc. and demographics. and third place.

technologically advanced.35 . This will enable us to capture an even greater hold on market share.80 . We will now make an entrance into lower price categories with our quality products. Utilizing this strategy will also allow us to capitalize on our key opportunity. Timing 4. We are the leaders in thi s area. we will continue to place our emphasis in this area.40 3 4 4 3 1. Our products will be able to better withstand the risk of passing fads. Producing merchandise that is high in quality. Culture 3. Nike will also focus on making a strong effort in price leadership. Our focus also allows us to maintain a somewhat narrow niche that enables us to effectively capture the needs and wants of our consumers. Nike has built its business on providing products that rise above all others. As our reputation dictates.25 . Demographics Total . our company has utilized product differentiation as our competitive strategy. Incorporating fashion into our products is one way to achieve this strategy.00 .80 .60 .80 4. Nike is known for its technologically advanced products.60 3. Our products in the past have been concentrated in the higher end of the pricing category. Operational (Functional) Strategies .25 .45 * represents the value of the criteria to Nike ** effectiveness of strategic option in terms of its ability to satisfy the criteria: 1 = undesirable 5 = desirable *** (weight) x (criteria) The core of our business is our products. The two alternate marketing str ategies will be just as necessary in order to incorporate our products into the shopping habits of consumers.80 4.20 . The global economy is becoming so strong that by improving our products in order to extend their life cycle we will be making a long -term investment in this financial boom. it has made us the success that we are today. Competitive Strategy In the past.40 1.75 1.05 1.00 5 5 3 4 1. and fashionable will allow u s to achieve our corporate objectives of profitability and shareholder value. which allows our products to stand out from the rest.00 .1. Distinctive Competency 2.00 4 4 4 4 1.20 1.

newspaper. 3.000. and/or radio. as well as our prototypes.000 5/31 . and collegiate teams. competition. Run advertisements in the most popular forms of regional media: television. and currency valuation. magazines.000 Pricing 1. billboards. specifically the booming market of Japan. Exhibit 10 Short-Term Strategy Start Date Market Research 1. to study the buying habits of Asian consumers. Short-Term: Increase our market share in the Asia Pacific region from 26% to 27% by fiscal year end 2000. amateur. Include sponsorship of the 2002 World Cup in Korea and Japan. 4/1 3/1 5/31 3/1 $5.Marketing Objectives Long-Term: Increase our market share in the Asia Pacific region from 26% to 30% by 2004. Sponsor regional sporting events for professional. Hire a market research firm familiar with Asia. 2. Advertising and Promotion 1. Offer rebates and discounts for certain late-model shoes to encourage sales and inventory turnover. 2. Conduct focus groups in Asia to get feedback on our existing products.000 Savings 5/1 3/1 $80. Determine price points for our Asian product offerings that are properly adjusted for regional buying power. Determine what factors motivate their athletic footwear and apparel purchases. 3/1 Completion Date* 5/1 Budget $400.

Production Objectives Long-Term: Decrease our cost of sales from 62. and Layout of Facilities 1.000 Savings $30.000.000 .59% to 62% in fiscal year 2000. etc. work-inprocess. 3/1 $10.000 5/31 3/1 5/1 3/1 Total * completion date based on a 5/31 fiscal year end.4.000 $16. Hire independent industrial engineers and analysts to work with manufacturing facilities in order to maximize efficiency of operations: shop layout. Work with 3rd party shipping agents to manage the flow of orders from factories to distribution centers.000. 5/31 3/1 5/31 3/1 $1. processes. Reduce inventory at all levels of production: raw materials.59% of sales to 59% of sales by fiscal year end 2004. Inventory 1. Short-Term: Decrease our cost of sales from 62.000 5/31 3/1 $20. Conduct fashion shows at top retail venues to display our latest merchandise offerings to consumers and the media. and finished goods.000 3/1 Completion Date* 5/1 Budget $10.000 3 months $100.580.000. 3.000. Newness.000.000. Work with suppliers to implement the next generation of electronic data interchange (EDI) technology in an attempt to achieve just-in-time inventory.000 $1. 2.000 $40.000. Exhibit 11 Short-Term Strategy Start Date Location.

000. Shift funding to applied research in "up-and-coming" sports.2% of projected revenues in fiscal year 2000 to achieve increased market share. 3/1 4/1 $15.000 Long-Term: Maintain a range of R&D expenditures that does not fluctuate more than 1.000.5% or less than . Exhibit 12 Short-Term Strategy Start Date Focus 1. for researching sports that could be popular in the future. Research & Development Objectives 3 months $20.000 .000.75% of projected sales in the next 5 years. Budget 1. Human Resource Objectives Long-Term: Increase availability of educational assistance programs for world-wide manufacturing employees from 50% of factories to 100% by 2004.000 $91. Total * completion date based on a 5/31 fiscal year end.$10. Infuse new funding. Short-Term: Increase spending on R&D to 1. Experiment with cutting-edge fashion. in addition to shifting current budgetary allocations.000 Total * completion date based on a 5/31 fiscal year end.000.000.000 3/1 Completion Date* 5/31 Budget Savings 3 months $15.

write. Offer general education classes for factory workers who want to learn how to read.000 5/31 $3.Short-Term: Increase availability of educational assistance programs for world-wide manufacturing employees from 50% of factories to 70% by 2000. These employees would achieve the maximum benefit from educational assistance programs by being more loyal and productive. Hire factory workers who express an interest in educational programs. Compensation 1.000. 2. Conduct seminars and workshops for supervisors in factories so that they may improve their production and management skills. Increase salaries of factory workers who are promoted as a result of completing our educational assistance programs. or fill any gaps in their childhood education. Exhibit 13 Short-Term Strategy Start Date Recruitment and Selection 1.000. Training and Development 1. 3/1 3/1 Completion Date* 5/31 Budget Savings 5/31 3/1 $5.000 .

000 Long-Term: Increase net income 70% to $767 million by fiscal year end 2004.000 $25. Hire 10 additional employees in the corporate Accounts Receivable Department to maintain and collect aging accounts.000.000.000 3 months $700. Finance Objectives 3 months $13.000.000. 3/1 3/1 Completion Date* 5/31 4/1 $400. 2.000.000. Implement stricter credit terms with retailers to minimize bad debt expense.000 * completion date based on a 5/31 fiscal year end.000 Budget Savings $20.000 Management of Total Assets 1.000 $95. CONCLUSION . Sell non-productive equipment or buildings to reduce depreciation and maintenance expenses. Short-Term: Increase net income 22% to $550 million in fiscal year 2000. Total 3/1 5/31 $300.000 Total * completion date based on a 5/31 fiscal year end.000 $50. Exhibit 14 Short-Term Strategy Start Date Management of Accounts Receivable 1.5/31 3/1 $5.

Nike dominates its competitors. Phil Knight and Bill Bowerman probably could not have imagined in 1962 to what degree their $500 investments would yield in 2000. we will continue to expand our product lines and marketing reach to become a more powerful global brand. They did know that product quality and innovation would help athletes to achieve greater goals. Nike still operates on this philosophy today. is a company rooted in competition.Nike. Inc. Despite a changing marketplace for athletic footwear. From equipping athletes with the finest sports equipment in the world to continuously improving our own financial performance. . It is one that has help ed athletes and stakeholders alike to realize athletic and financial greatness.

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