Strategic Analysis of Nike, Inc.

Submitted to: A.J. Almaney, Ph.D. ISS 395 DePaul University Chicago, IL 60604 March 14, 2000

Submitted by: Group 1 Kim Enderle

Dan Hirsch Lisa Micka Brian Saving Sheetal Shah Tatiana Szerwinski

Executive Summary««««««««««««««««««««««««««.««««p.4 History««««««««««..«««««««««««««««««««««««««..p.6 Profile of CEO«««««««.«««««««««««««««««««««««««..p.7 Competitor¶s Profile««««.««««««««««««««««««««««««««.p.7 Industry Profile««««««««««««««««««««««««««««««««..p.8 Company Analysis«««««««««««««««««««««««««««««««p.9 Industry Analysis««««««««««««««««««««««««««««««......p.24 Top Competitor Analysis««««««««««««««««««««««««««««.p.25 Other External Forces«««««««««««««««««««««««««««««.p.26 Key Opportunity«««««««««««««««««««««««««««««..«.«p.27 Key Threat««««««««««««««««««««««««««««««««««p.27 Major and Subordinate Problems««««««««««««««««««««««.««p.28 Strategic Match«««««««««««««««««««««««««««««««...p.29 Primary Strategic Match Position««««««««««««««««««««««««.p.30 Strategic Plan««««««««««««««««««««««««««««««««..p.33 Conclusion«««««««««««««««««««««««««««««««««...p.38


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Sales Trends Graph«««««««««««««««««««««««««««««p.5 Net Income Trends Graph««««««««««««««««««««««««««.p.5 Nike Board of Directors Table««««««««««««««««««««««««...p.11 Table of Key Financial Ratios««««««««««««««««««««««««...p.22 Net Income Trend Graph«««««««««««««««««««««««««.«..p.24 Primary Strategic Match Position Chart««««««««««««««««««««..p.30 Industry Attractiveness Matrix««««««««««««««««««««««««..p.31 Business Strength/Competitive Position Chart«««««««««««««««««..p.32 Grand Strategy Chart«««««««««««««««««««««««««««« p.34 Marketing Short-term Strategy Chart«««««««««««««««««««««..p.35 Production Short-term Strategy Chart«««««««««««««««««««««.p.36 Research and Development Short-term Strategy Chart«««««««««««««..p.37 Human Resources Short-term Strategy Chart«««««««««««««««««...p.37 Finance Short-term Strategy Chart.««««««««««««««««««««««.p.38

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.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

Running Basketball Cross-Training Outdoor Activities

y y y y y y y y y y y y

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

Financially. Sharp decreases in 1998 and 1999 net income were due to restructuring charges. If these charges had not been incurred. We must maintain our inventory levels low enough that will allow us to adapt to quickly changing market trends. . net income increased by 13% over the prior year.* Obtained from Nike. Inc.8 million. Inc. As the graph below illustrates. Exhibit 2 * Obtained from Nike. Note that the largest growth rate was 43% in 1997 over the prior year with net income of $795. Efficiency in cost control and inventory management has allowed net income to increase while revenues decreased in 1999. income would have been flat for both years. 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. 1999 Annual Report Although revenues declined in 1999. we must remain conservative in our cost structure. net income has been volatile in the latter half of the 90's.

700 employees.000 of sales in their first year. and debuted itself at the 1972 Olympic trials. worked with Tiger to design the Cortez running shoe. 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. Knight wrote a paper about breaking the German dominance of the U. Knight visited Japan and engineered an agreement with the Onitsuka Tiger company. Nike surpassed the $2 billion mark in consolidated revenue with 5. In 1971. The shoes were bought by Blue Ribbon Sports (BRS). In 1990. In addition. athletic shoe industry with low-priced Japanese shoes. HISTORY Bill Bowerman and Phil Knight founded Nike Inc. Steve Prefontaine was the first prominent track star to wear Nike shoes. the formation of Nike International Ltd. Nike also expanded its product line to include specialty apparel for a variety of sports. a manufacturer of quality athletic shoes. 1972 marked the breakup of the BRS/Tiger relationship. we must proceed with caution and stealth in order to select an enduring strategy that will complement our existing distribution channels. Knight received the first shipment of 200 pairs of Tiger shoes to his parent¶s garage in Oregon. running market.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. we are challenged to respond to a market demand for fashionable athletic footwear and apparel.000 in capital. As the first company in our industry to offer e-commerce capabilities. referring to the Greek Goddess of Victory. A year later with 2. Inc. In 1966. The late 70¶s and early 80¶s also saw John McEnroe.S. we can capitalize on customers who are financially stronger. who had previously designed shoes for his university athletes. started manufacturing their own line of shoes. The shoe was a worldwide success for the Onitsuka Tiger Company and was sold at the first BRS store. we will succeed if we keep quality and performance at the core of our business. and the "Just Do It" campaign. With the gradual economic recovery in the Asia Pacific region. BRS. to be their sole distributor in the United States. In an attempt to realize his theory. Oregon. BRS soon changed its name to Nike. In this quest. Carl Lewis. Nike went public selling 2 million shares on the New York Stock Exchange. With added exposure. The Internet is a rapidly changing medium. . While attending Stanford University. Our sponsorship of the 2000 Olympic Games in Sydney. Australia. and the Swoosh trademark. the name of the partnership between Knight and Bowerman that they formed with only $1. as Blue Ribbon Sports in 1962.. Later that year. Nike popularity grew so much that in 1979 they claimed 50% of the U. Bowerman.S. revenues in excess of $1 billion. The 1980¶s were marked by the signing of Michael Jordan as a product spokesperson. In 1962. In 1973.300 employees worldwide. The Swoosh was meant to symbolize a wing of the Greek Goddess. the first BRS shoe was introduced. The partners began their relationship at the University of Oregon where Bowerman was Knight¶s track and field coach. and Joan Benoit sporting Nike shoes. The shoe was a soccer shoe that bore the Nike brand name. with creditor support. Knight peddled Tiger¶s shoes at local track meets grossing $8. we opened the Nike World Campus in Beaverton. A student designed the Swoosh trademark for a paltry fee of $35.

The wholesale value of athletic shoes for the US market totaled $8. During that same period. up from $2 billion the prior year. as stated in our company web site. International revenues fueled a great portion of this growth with an 80% increase in 1991 from the prior year. He is not hesitant to make unilateral decisions. Reebok¶s financial woes are illustrated in their declining net sales. as a whole. Such growth continued throughout the 1990's as we continued to focus our marketing efforts on major sporting events like the World Cup. This is evident in their declining stock price.7 billion in 1998 down 8. is to become a truly global brand. In 1992 international revenues topped $1 billion for the first time and accounted for over one-third of our total revenues.8 billion. This mark would continue to grow throughout the 90¶s.5% from the year .In 1991. Lance Armstrong. is not entirely different from Nike. He has been an innovative visionary in the industry of athletic footwear and apparel. Knight practiced as a CPA and taught at Portland State University prior to founding the company known today as Nike. with revenues in 1999 reaching $8. such as Tiger Woods. Knight is 61 years of age and holds an undergraduate degree from the University of Oregon and an MBA from Stanford University. is the co-founder of Nike. Reebok¶s net sales declined 9% during the first three-quarters of fiscal year 1999. which has fallen by over 80 percent in the last four years.5% for Nike and Adidas respectively). Reebok¶s market share is a distant third in the footwear industry at 11. looking bleak. and the next generation of celebrity endorsers.4% and 15. but prefers to look to his trusted management team for their insight and ideas before choosing a course of action. Knight's decision-making style favors the participative approach. This mode is representative of an open-minded CEO. PROFILE OF THE CEO Phillip H. Taking these and other factors into account leaves Reebok¶s current financial position. Reebok is involved in the design and marketing of both athletic and non-athletic footwear and apparel. Knight's managerial mode is one that is characterized by strategic planning. Nike¶s goal. Knight. Nike pushed revenues to $3 billion. and the players of women's professional basketball (WNBA). net income declined 17%. as well as other various fitness projects. His efforts have helped to establish Nike as an industry leader in both national and international markets. Chairman and Chief Executive Officer. PROFILE OF THE INDUSTRY Industry Size In 1998. Reebok¶s financial position has been gradually slipping for a number of years. He has been the driving force behind our company's success since its inception in 1964 under the name Blue Ribbon Sports. These revenues grew based on improvements in shoe technology and successful marketing campaigns. Americans spent approximately $38 billion to purchase more than 1.1 billion pairs of shoes. Inc.2% (compared to 30. PROFILE OF THE COMPETITOR Reebok. At the end of the 90¶s. in terms of their products. one willing to take calculated risks and make conservative decisions based on careful analysis of external and internal environments.

Intense competition. The current domestic industry focus is on casual and comfortable shoes. Industry Cyclicality In fiscal year 1999. companies with strong brands will increasingly turn to international markets for growth. Although athletic footwear sales appear to be recovering. However. and a booming stock market will all contribute to healthy consumer spending. The footwear industry and its profitability are closely tied to economic cycles. Manufacturers are combating sluggish sales with radical new styles. Industry Entry and Exit Barriers Entry Barriers The athletic footwear industry is a very competitive and mature market. The theory behind the slowdown in sales is that growth in athletic footwear and apparel is cyclically sensitive to the Olympics. Many companies are also increasing profitability by transferring production to cheaper offshore facilities. The leaders of this industry are very well established. The global variance in our market balances the seasonal fluctuations. Industry Profitability The athletic footwear industry is a challenging and saturated market. This segment has reached a point of maturity in the domestic market and can look forward to only modest sales growth for the long term. Leaders like Nike and Reebok have made the industry what it is today. Modest inflation. sales in the athletic footwear industry remain stable throughout the year. Companies are looking for new ways to boost sales by capitalizing on direct Internet sales to consumers. consumers are spending less worldwide for athletic footwear. and price conscious consumers have slowed growth in this industry. Consequently. This switch is due to the increasing number of workplaces adopting casual dress codes. The outlook for increased sales trends is optimistic due to the upcoming Olympic Games slated for this year. years of the Olympic Games have demonstrated surges in growth followed by difficult sales periods. low unemployment. Historically. athletic footwear accounts for almost 35% of all footwear purchases. Typical trends in seasonality appear for spring apparel. In general. Therefore. demand is still leaning toward the "brown shoe" casual footwear with a comfortable and rugged design. and the Christmas holiday season. .before. along with offering more styles at lower price points. sales are improving slightly. the economy was relatively favorable for footwear manufacturers. fashion trends. the back-to-school season. According to the Sporting Goods Manufacturers Association. cross-trainers and basketball shoes. Industry Seasonality Overall. Nike can also look forward to a boost in demand from the World Cup events. especially in the areas of running shoes.

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. This cutthroat environment has hindered the entry of new competitors." Nike¶s board would be classified as an oversight board. making it more profitable to begin production. Lesserknown brands are viewed by retailers as being too risky to replace an established brand name like Nike or Reebok on the shelf. Board of Directors . These things are difficult to achieve without the resources of an established manufacturer.long-time competitors like Saucony and K-Swiss have been struggling for years just to keep their brands alive. These walls seem to be breaking down with the help of the Internet. playing an active role with regards to management¶s decisions in the area of strategy formulation. A company must also be cognizant of lawsuits filed by its stakeholders and claims made on any residual assets. In order to have an edge over the leaders. Exit Barriers When a company decides to exit from this industry it must be aware of things such as indebtedness and its ability to meet those obligations. provide another frame of reference and can assist the overall board in thinking "outside the box. The costs of overhead that come along with traditional brick and mortar retail distributors are being significantly diminished. Another key barrier to entry is the access of traditional distribution channels. Economies of scale also contribute to the lack of newcomers into this market. New entrants are now able to slide into markets without these high startup costs. the youngest member being 49 and oldest being 79. efficient production. When combing the shelves at stores like Sports Authority and FootLocker. companies must be able to compete at all levels such as reasonable pricing. COMPANY ANALYSIS Strengths and Weaknesses of the Corporate/Business Level Strategic Managers Board of Directors . it is evident that the leaders dominate the shelves. 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.Weakness The average age of Nike¶s board is 62. and high product quality.Strength Nike¶s board of directors consists of both management directors and independent directors. .

Inc. Clarke President and Chief Operating Officer. . OR Philip H. MA Ralph D. Nike. OR Douglas G. DeNunzio President.Exhibit 3 Nike. Partner ± Bullivant. 1999 Board of Directors* Thomas E. Newberg.. Donahue Vice Chairman of the Board. Houser Assistant Secretary.C. OR John E. Nike. Inc. Jaqua Secretary. Knight Chairman of the Board and Chief Executive Officer. Massachusetts Institute of Technology. Massachusetts Delbert J. P. Hayes. Inc... Inc. Houser. Bailey. Inc. Boston. Conway Visiting Scholar. OR Jill K. Eugene. Partner ± Jaqua & Wheatley. Harbor Point Associates. NY Richard K. Nike.. Attorneys.. Beaverton. Portland. Pendergrass & Hoffman Attorneys. Inc. New York City. Lowell. Nike.

Philip H. Palo Alto. Robinson President.C. Inc. allowing for both risky and conservative decisions based on careful thought and analysis. Georgetown University. he has much knowledge and experience about the company and the industries in which it competes. Bowerman Director Emeritus * Nike. CA John R. As a result.Strength Co-founder. OR Charles W.Beaverton. has been with Nike since its inception. Knight¶s strategic planning managerial style serves as a strength in that his actions are planned and calculated. Former Head Coach. 1999 Annual Report Top Management . Robinson & Associates. Environmental Analysis Internal ± Strength . NM A. Michael Spence Dean. Santa Fe. D. Knight. Washington. His participative decision-making style can also be viewed as a strength such that Knight is willing to listen to others to generate ideas. Graduate School of Business. Jr. Stanford University. Thompson. He does not limit the company¶s options to one-sided ideas and decisions. William J.

Because of Nike¶s marketing research. our teammates." Nike¶s mission statement resembles a vision statement and is therefore a weakness. Nike has established corporate objectives in relation to our perceived corporate responsibility. External ." This corporate objective represents a weakness as it does not meet the two requirements of being measurable and having a time frame in which to complete or accomplish said objective. While the mission does broadly identify the business we are in. Our objective is to "lead in corporate citizenship through programs that reflect caring for the world family of Nike.Strength For our grand strategy.Weakness Nike's Corporate Mission Statement: "To be the world's leading sports and fitness company.Nike¶s management analyzes its internal environment and makes decisions based on that analysis. Nike utilizes innovation to produce top quality athletic footwear and apparel. however. As a result of devoting vast resources to the research and development of its products. our consumers. portray management¶s beliefs and values of our desire to be number one and maintain the leading position in the sports and fitness shoe and apparel industry. This lack of corporate objectives represents a weakness. it is not specific as to what products and services we provide. and those who provide services to Nike. namely the sports and fitness industry. the company has decided to revamp its apparel division to be more fashion savvy. 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. As a result of product and pricing research. Strategy Formulation Mission . Nike has captured the largest market share in the athletic footwear and apparel industry and continues to be the leader of quality products. It does. . Stakeholders should be well aware and informed of a company¶s corporate objectives to better understand the nature of the company and its direction. Nike¶s objective is immeasurable and broad lacking any time specifications for implementation of programs to meet this objective. Grand Strategies . Corporate Objectives ± Weakness Nike has no published corporate objectives in relation to the overall company. The mission statement also omits any mention of distribution channels and customers.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.

Nike has been striving towards an inner culture that reflects this mantra. All new employees view a video of sports highlights accompanied by a soundtrack that discusses the soul of the athlete and the competitive spirit. The new Nike is not just about shoes and slam-dunks. a 47 year-old head of its corporate education department states that.S." Nelson Ferris. Red "Swooshes" float across everything from screen savers to coffee cups at the company's headquarters in Beaverton. Since then.Strength Nike has created a corporate culture rich with employee loyalty and team spirit. but about promoting a lifestyle. Compete with yourself not your colleagues. In addition."2 Communication . It is not surprising that an athletic background helps a prospective employee.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. focusing more on an image rather than just product advertising. becoming highly motivated about selling sports and a "Nike way-of-life. "It stops being a job and starts to become a way that your are defining the way your are living on earth.Competitive Strategies . a strategy which led to the "Just Do It" mantra. look to extreme sports and retail outlets such as Ambercrombie & Fitch and Old Navy to find a sense of individual style. We realize that the teammentality that captured the spirit of athletics in the late 1980's and early 1990's has been replaced by a sense of individualism. "The Swoosh represents something other than just a company. even has a Swoosh tattooed above his ankle. Customers can select the color and design a monogrammed heel-insignia for our made-toorder athletic shoes. a longtime employee. It was then that we decided to reinvent our business and culture. In keeping with its sports approach Nike asks its players to work by two principals above all others -. a never-before seen element of fashion will receive a second-place priority built into our products and image. Nike was blindsided when Reebok developed its multicolored aerobic shoes. and often hosts spokespeople to motivate and thank its staff for contributions to the sports world." These terms go a long way to make the daily work experience less than dull for the lucky employees in Beaverton. Younger consumers especially. management sends weekly emails to update employees on the recent successes of Nike-sponsored athletes. an element of individualism is most obvious in our Web site. While retaining our company's long-standing tradition of placing performance through new-product development as a top priority. Employees are called "players." supervisors are "coaches" and meetings are "huddles. In addition. For the 1999 back-to-school season. The company chooses to call its headquarters a "campus" instead of an office. Employees are given an hour and a half for lunch to play sports or simply workout. thirteen years after the company was founded. and competition second. we conducted fashion shows in twelve U.Strength . In 1985. Strategy Implementation Corporate Culture . It represents a whole value system. Oregon."2 Ferris. cities." With this decision the company also restructured its marketing campaign. We are responding to this movement in a number of ways."Honesty first.

This style of leadership leads to relationships of trust and respect. will replace the 9600 BPS modems and provide for quicker processing times. upgraded their hardware and software. after the cost-reductions that took place in the fourth quarter of 1998 resulting in a reduction of the number of employees.Strength Nike¶s top management¶s leadership style can be characterized by the team management approach. return on equity. Leadership . Morale also fell as a result of bad media coverage over reports of substandard working conditions for our Asian factory workers. and sales reconciliation processing-efficiency will increase due to the addition of in-store databases.Strength 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. Strategy Control Establishment of Standards . These . Modems transmitting data at 56K BPS. is also being upgraded to the new operating platform. credit authorization. Our former technology offerings consisted of IBM 4690-series point-of-sale cash registers running on the OS/2 operating system. Motivation . Some of the areas in which our company has established standards are productivity of productions sites. Electronic journaling. competitive position in the United States relative to the global market. technological leadership in comparison to competitors and overall social responsibility and the public¶s perception. We have upgraded to PC-based systems running the more sophisticated Windows NT operating system. Top management consists of a committed group of executives all bringing together vast experience and knowledge. The company culture lends a hand to the fact that top management¶s teamwork style has spread throughout the organization. Evaluation of Performance . All of these innovations will allow executives at the corporate office and in other branches to better manage operations.. sales growth and asset growth. Corporate office communications capabilities with these branch locations will be improved dramatically.In late spring of 1999. we have had to place greater emphasis on motivation among the retained employees. earnings per share. this area remains a challenge to the company. but is capable and does work independently recognizing the common stake that each places in Nike. made by Sterling Commerce Inc. The group is team oriented. Nike utilizes standards such as net profit.Strength A comprehensive establishment of profitability standards has assisted Nike in our evaluation of individual performance as well as a comparison to other competitors. While initiatives have been set to increase overall employee morale. Connect: Remote. Sales and inventory data can be monitored in real-time.Weakness While Nike employees have been loyal and committed workers. return on investment. Nike's subsidiary consisting of the Nike Town shops and employee stores around the world. or even with digital technology. The software we have been using for the past few years called. Nike Retail. Performance standards are also established and checked regularly.

In 1998. Converse.4% in 1998.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. correction of discovered deviations has been a slower and less timely process. and the U. the 2002 World Cup in Japan and Korea. the closest competitor. and hats to stadium banners and walls. including the Nike name and the trademark Swoosh.Strength Nike has taken the lead in e-commerce by being the first to market with its e-commerce web-site. Nike¶s market share is expected to do especially well as a result of sponsoring the summer Olympics in 2000 in Sydney. Nike launched its e-commerce site in April 1999 by offering 65 styles of shoes to the U. By being the first to market. The remaining competitors.S. and New Balance.S. among others. are considered to represent one of the most recognizable brands in the world. Distribution through E-commerce . Nike's most recent brand-building endeavors are focused on strengthening our association with women¶s sports. Advertising and Promotion .2%. NIKEiD enables online consumers to design key elements of the shoes they purchase. Nike increased its e-commerce presence by launching NIKEiD in November 1999. Aggressive advertising campaigns. pants. Some . Correction of Deviation . Nike¶s future plans include opening an online shop for the Japanese market next year followed by global rollout. Despite a slight decline from prior years. Management¶s slow response time can be attributed to the careful analysis that is performed prior to making any decisions. Strengths and Weaknesses of the Functional Level Marketing Market Share . Timberland. Australia. The Nike name and associated trademarks have appeared everywhere from players' shirts. and quality products enhance the brand.Strength Nike¶s global market share was an impressive 30. market for purchase. Nike continues to have the greatest market share in the U. While in general this is a good policy to abide by. Nike enables itself to become established while competitors rush to join us.Strength Nike¶s brand images. branded athletic footwear market. Adidas.Strength Though Nike has established profitability and performance standards. 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. including Fila. The program represents the first time a company has offered mass customization of footwear. This brand power translates into bottom-line revenues. it is expected to increase with new products.5% of the market share while Reebok held 11. While Nike¶s market share is still in the lead. Asics. held 15. celebrity endorsements. each hold approximately 3-5% of the remaining market share.S. Utah. Speedskating team in the 2002 Winter Olympics in Salt Lake City. at times Nike would be better served by a management team that can react more quickly to given information.

Continuous marketing research could prove to be key in assessing the market. we have had to exit two manufacturing operations at our Bauer Nike subsidiary. Nike has not claimed to be leading the race among the apparel industry as a whole. at times our consumers may not agree. presenting another weakness with room for improvement. Had we anticipated the decline sooner.S. Pricing .Strength Though Nike leads the apparel division among industry competitors. Due to increased emphasis by consumers on fashion in relation to sportswear. perhaps gradual changes could have been made so that the end result may not have been as finite in nature. we are placing a renewed emphasis on emerging technology and innovation towards the development of new lower-price-point products.Weakness Nike has had much success as a result of collaborating with other companies within the sports and fitness industry. but also by clothing and accessories retailers such as Old Navy and Abercrombie & Fitch. Products . The desire to prevent situations such as these from continuing to occur. Our apparel line is not only being challenged by our typical industry competitors such as Adidas and Reebok. specifically the Nike Alpha Project. 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. We had to terminate 51 employees. Speedskating team in the upcoming 2002 Winter Olympics. We see much potential in the lower price points and plan to meet the needs of those markets. To mitigate any future problems in our high quality/high price lines. Marketing Research . Nike¶s products are considered to be of higher quality and as a result have higher prices relative to our competitors. Products . However. at times we expanded into markets for which we were not strategically suited. Despite the fact that in the past we may have overlooked the mid. This presents a weakness. As a result. While the prices are realistic given the nature of the products we offer to our consumers. we have initiated a more aggressive program to review product collaborations that are outside of our core basis of products. a revolutionary new line of athletic shoes. 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. we have had to make strides to appeal to a fashion savvy market.Weakness In general.Strength .examples are our sponsorship of the 1999 Women's World Cup Soccer Tournament and our sponsorship of the U. 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.

We want to make summaries of their findings public. our primary focus is directed towards applied research. Nike will be organizing the internal business by gender as opposed to sport category and conducting increasing amounts of research addressing the buying habits of men. The locations are geographically dispersed which works well in our mission to be a truly global company. they have not met U. The production facilities are located close to raw materials and cheap labor sources.S. and women.Strength Although Nike conducts continuous. resulting in higher distribution costs. . standards. and less risky due to the short-term nature. these dispersed facilities will prove to be beneficial. Production Location of Facilities . o 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. Because of such research.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. However. Newness of Facilities . we have decided to revamp our apparel division. foundations and educational institutions. Occupational Safety and Health Administration (OSHA) indoor air quality standards for all footwear factories. Applied research focuses on short-term initiatives such as successfully developing new product lines. the difficult task at hand will be the implementation of the aforementioned goals to ensure the success of the program. 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. we commit to: Expanding our current independent monitoring programs to include non-governmental organizations. with specifically targeted product lines.Weakness Our facilities abroad have attracted bad publicity in recent years. basic research that benefits numerous facets of the sports and fitness industry. o Adopting U. As part of Nike¶s new labor initiative.Strength Nike¶s facilities are located throughout Asia and South America.S. They have been strategically placed in their locations for just this purpose. who tend to be collection-driven. the facilities are located further from most customers. generally. Though our facilities comply with local labor standards. This proves to be a strength in that this method of research is less costly than basic research. an area in which we can still greatly improve. o While establishing these policies is a step in the right direction for Nike. We want to be a leader and set a responsible corporate example for other businesses to follow. Research and Development Focus . In general. who tend to be item-driven.

innovative ideas come into existence as a result of basic. for workers in all Nike footwear factories. Nike would benefit from increasing the amount of basic research we conduct with hopes of uncovering potential opportunities of which Nike could take advantage. In these instances.Successful projects can realize immediate profitability while unsuccessful projects may be discontinued without enduring materially large losses.Strength Our posture is primarily innovative. 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. and Thailand. Posture . Though more risky and expensive.000 families each in Vietnam. 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. We may also choose a catch-up strategy and mimic what is working well for other companies in the industry. Because of this and Nike¶s goal to be a responsible citizen of the corporate world.Weakness No successful company can exist and succeed without utilizing its human capital. and other times a catch-up stance. At times. o While establishing these policies is a step in the right direction for Nike. while at times adjusting to a protective position. Nike has committed to goals to better the problems as part of the aforementioned labor initiative: Increasing the minimum age of footwear factory workers to 18. accessories. Nike may choose a defensive strategy to remedy the current situation. and minimum age for all other light-manufacturing workers (apparel. Pakistan. Public Affairs Ethics ± Weakness . equipment) to 16. While Nike has had various policies in place. Many new. including junior and high school equivalency courses. o Increasing support of its current micro-enterprise loan program to 1. Due to the lead Nike possesses in the industry. 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 prides itself on being a premiere provider of high quality sports footwear and apparel. Human Resources Human Capital . weaknesses still exist in regards to labor policies in overseas locations. Innovation has been the key to aiding Nike in securing its position as the leader in the market. Indonesia. we need to adjust our posture in relation to a particular product line or area of products. unspecific research. o Expanding education programs. Focus ± Weakness Focusing on applied research can be a weakness as well.

" The policy includes. product sales. United States President. improving safety and health conditions. Due to our ability to quickly turnover inventory. In addition. 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. The policy shows Nike¶s commitment to responding to the concerns of consumers. shows that Nike is inline with the industry concerning ease of converting assets to cash to cover short-term obligations.34. while not a major strength." alludes to the fact that Nike was present on this list. The current ratio.43 is above the industry average of 1. However. The Policy outlined on our web-site has the following mission. and. our teammates. One such example of questionable behavior relates to Vietnam and the trade embargo placed on the communist country as a result of United States POWs/MIAs. Table of Key Financial Ratios on page 22) Management of Cash . White House documents have revealed large donations to the Democratic National Committee by companies with an interest in seeing the embargo lifted. but is not limited to. The image of profitability being more important than American POW/MIAs has led to an unfavorable image with armed forces. combined with the "sweatshop" operations in Nike facilities in Vietnam and other countries. and developing programs to provide educational programs.32 exceeds the industry average of 4. and those who provide services to Nike. The fact that we are not leaders is ultimately a weakness. While the worst is over. as well as a commitment to our employees around the world.S.Accusations of unethical behavior. as a result.Strength Nike¶s inventory turnover of 7. Management of Inventories . reduced storage costs. received an accurate picture of the situation. This. Social Responsibility . In 1993. extending a commitment to the environment.Strength In response to accusations by consumer groups over unfair labor practices. just slightly below the industry average of 2. Finance/Accounting (For the following. Reducing inventory levels was a key initiative for Nike in fiscal year 1999. whether or not they are true. Whether true or not. "To lead in corporate citizenship through operations that reflect caring for the world family of Nike. Nike has developed a Corporate Responsibility Policy that discusses how we will improve working conditions for our international employees. two years later President Clinton normalized trade relations to the dismay of the POW/MIA families involved. "Nike¶s Dirty Little Secret. the following initiatives: raising age limits in factories to 18 years. The author of the article.17. families and Americans as a whole. The quick ratio of 1. Bill Clinton. Nike benefits from greater cash flows. 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. quick turnover reduces Nike¶s . only serve to injure Nike¶s image. securing independent monitoring for our factories. has negatively impacted Nike¶s image. see Exhibit 4.28. Nike is still working on initiatives to change the current situations throughout factories. yet to the delight of the corporations operating in Vietnam.Weakness Our company¶s current ratio is 2. our consumers.26. and less spoilage. Neither the current or quick ratio exceeds the industry average substantially enough to be considered a true strength. promised to keep the embargo in place until the U.

This can be interpreted as a strength as we do not rely as heavily as our competitors on debt financing.88 indicates that the industry as a whole is in a slightly better position to cover its interest charges. Our collection period calculates to 63. or other changes as top management sees fit. Management of Accounts Receivable . The industry average of 21.54% in relation to the industry mean of 18. research and development. "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. However. Steps are being taken to alleviate the problem of collecting accounts receivable in a more timely fashion. Management of Debt . We have just recently changed our collection period from 90 days to 60 days as an attempt to encourage faster payment. this was in part due to a reduction of our marketing budget by $100 million and terminating 7% of our employees. Our ratio of 19.69%. Nike¶s low ROE can be linked to the dropping stock price as a reflection of stockholder confidence in our company. Our profit margin of 5.71 days.inventory of out-of-style shoes and clothing. our times interest earned ratio is weaker than the industry average.Strength Our debt-to-total-assets ratio is 15.77 indicates that Nike is realizing a lower percentage of earnings on stockholders¶ investment.Weakness Nike¶s profitability is wavering in comparison to the industry average. Our collection procedures have been lax compared to others in the industry resulting in slow payers and defaulting customers.Weakness Despite the lower percentage of assets that are borrowed to finance Nike. Nike is not as leveraged as competitors in the industry and uses less debt financing to finance firm operations. Company management stated." Inventory levels are being reduced due to increased sales in the company's own branch retail stores. Exhibit 4 Table of Key Financial Ratios RATIO: Formula: Calculation : (in millions) NIKE: Industry : . Management of Debt . Our return on equity of 13. Profitability . Though net income did increase from 1998 to 1999. which is far below the industry average of 40.43 reflects the number of times funds available from earnings can cover interest payments.17 days while the industry average is only 7.Weakness Nike does permit sales in cash.36%.69% is partially due to decreasing sales. cash equivalents and on credit. our highly liquid position gives us the ability to increase debt financing should we need or desire additional capital for company operations.14% to the industry¶s 5.

4 =13.9 3264.69% Return on Equity Net income/net worth 451.7 =40.71 days Leverage Debt to total assets Total debt/total assets 806.77 % Distinctive Competency .67 times 5247.36% 5247.4 =5.9 =1.9 =2.43 times 44./Average sales per day Sales/total assets 1540.8 =19.69% Times interest Net operating earned income/Interest expense 856.54% 3334.Liquidity Current Current assets/current liabilities Current assetsInv.88 times Profitability Profit margin Net income/net sales 451.9 = 5.9 =1.26 times 1446.28 times Quick/acid test Activity Inventory turnover Collection period Total assets turnover Sales/inventory 8776.69 times =7.17 times =2.2 =15.9 =18.43 times 1446.3 =4./current liabilities 3264.17 days 8776.1 =21.9/360 8776.9-1199.14% 8776.3 =1.9 =7.34 times Accounts Rec.7 =1.32 times 1199.1 =63.

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

Spending is high and is expected to result in sales growth industrywide. Inc. The strong departments will surely capitalize on the trends of tomorrow if their efforts are successful. Nike¶s net income has increased for fiscal year 1999. Athletic shoes and apparel have become a staple in wardrobes worldwide.* Nike. such as Adidas. In fiscal year 1998. This creates a sense of security for the companies that have been able to create a niche. Competition is fierce at all levels in within the industry. y y y . This is due to both the increasing numbers of people exercising and the trend towards casual apparel. the labor controversy has been the biggest factor in the changes shown. 1999 Nike Annual Report As a result of reducing our marketing budget by $100 million and eliminating 7% of our employees. Increasing financial recovery in overseas markets proves to be an area of expansion for the athletic footwear and apparel industry. INDUSTRY ANALYSIS Opportunities y y y The athletic footwear and apparel industries will benefit from the currently strong economic backdrop in the United States. especially among the leaders. As noted above. 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. Overall. the company incurred a one-time restructuring charge to better align our overall cost structure and planned revenue levels. Cost cutting due to restructuring of operations will give many companies the chance to price products more competitively. One area in the industry that is ever changing is research and development. This could be a key time during which other companies in sound financial condition. could utilize their resources in an attempt to overshadow our existing and new product lines. Nike is recovering from a large decline in 1997¶s numbers.

S. Consumers may be scanning the market for new and different footwear and apparel products. Reebok remains out of sight and out of mind. we can protect our market share among female consumers within the industry by targeting some of our promotions to female consumers. While other athletic shoe companies bombard the airwaves with commercials pushing their product lines. or customer-designed internet merchandise. While style and technology in athletic apparel and footwear has reached a leveling-off point. Reebok has managed to hold the loyalty of a large portion of the industry¶s female consumers market. female consumers have. Can Nike protect itself against this threat? Yes. many of the key manufacturers in this industry have been around for many years. Reebok¶s shortcoming in the area of marketing is their key weakness. economy. individual product designs have come and gone. If Reebok can expand their appeal to incorporate female consumers who are not currently Reebok customers. reasons for optimism remain. Reebok could expand their market share and take customers away from Nike products. thus eliminating the "middle-man" distributors and allowing for increasing profitability. While Reebok¶s competitors are known by familiar slogans like Nike's "Just Do It. which may spark a cutback in consumer spending. . as a group. TOP COMPETITOR ANALYSIS Distinctive Competency . Can Reebok use this distinctive competency to inflict damage on Nike? Yes. is threatening the traditional distribution channels. remained loyal to Reebok and their products. Inflation is looming over the U. Nike¶s sponsorship of the 1999 Women¶s World Cup Soccer Tournament was a great example of how Nike is appealing to female athletes." Reebok¶s.y E-tailing. While Reebok¶s spending on advertising has fluctuated. Reebok can use their distinctive competency to wound our company. Threats y y y y The industry has reached a level of maturity.Marketing (Consumer Loyalty) Despite the tough times Reebok has recently come upon. the important aspect now is for companies to differentiate their lines. "Are You Feeling It. Consumers are becoming savvier and may lean towards discounted items. In terms of market saturation. Competitor·s Key Weakness ² Marketing ² (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.

part of the next generation of Nike loyalists. Reebok¶s chances of growing their market share are slim as long as their advertising endeavors remain to be so unsuccessful. these existing customers will continue to be loyal to Nike. For that reason.Can Reebok¶s key weakness damage their competitive position? Yes. The older generation of Nike brand purchasers have the power to influence their children . In addition. This means that our customers are not as athletic as they may have been in the past. Continuing our successful marketing programs should allow Nike to court the customers Reebok fails to draw in with their weak marketing initiatives. Nike is not keeping up with the latest trends and styles like some of its competitors have been. they will have to improve the quality of their overall marketing operations. by marketing different types of shoes to this market. Pressure groups Opportunity . In addition. Can Nike take advantage of our competitor¶s key weakness? Yes. Examples include such manufacturer-retailers as The Gap and Old Navy. For Reebok to rebound from their current economic woes. OTHER EXTERNAL FORCES Demographics Opportunity Nike's once loyal market is currently aging. Nike can take advantage of Reebok¶s marketing woes by doing one of the things we do best: marketing. In the current market there are a number of other competitors that are not mainly athletically oriented. 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. Their clothing and shoes are competing with Nike's. However. this poses as an opportunity for Nike because they have the ability to influence the next generation of Nike customers. the newer generation is attracted by Adidas and Tommy Hilfiger.

However. In addition. and African Americans than there was before. By disregarding the voice of concerned citizens. there is little room for them to expand. Inc. one of our most important stakeholders. is market saturation. there is very little room for new companies. not responding to these consumer activist groups poses a threat to Nike. but we need to focus on the younger market of consumers. currently is the booming economy of the United States. but if we want to keep the lead in market share. Nike is strong in many foreign countries.An opportunity produced by pressure groups is the ability to react in a positive manner to concerns of the public as well as customers. Now. Inc. There are currently many areas in which Nike is not paying attention. There is a much higher proportion of Hispanics. If all of . To exploit this opportunity. Consumer watch groups are paying especially close attention to Nike's use of sweatshops and child labor to produce our products. we are disregarding our customers. Since Nike is currently holding the lead in the market as far as market share. The problem is that the athletic shoe market is already full of different brands and companies. Nike has been doing a great deal of research and development. Also. the world economy is recovering currently. KEY THREAT The key threat for Nike. We have not catered to a large portion of the new generation that demand the latest trends and styles. we must hold onto our market share because if anything it is ours to lose. 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. Also. Inc. Inc. Nike has capitalized on the recent economic boom with higher sales and income. In fact. The negative publicity that Nike has received thus far has lowered its image to that of being an ethical company. Nike must take into account the changing demographics in this country. Nike needs to focus on who the next generation of loyal customers will be and cater to their needs. we must look at trends while maintaining our high standards of quality. is now competing with other athletic companies as well as companies that just sell clothing or other types of shoes. There is also very little room for new product innovation and growth of market share for companies like Nike. Asians. we are not using our resources to the fullest degree. KEY OPPORTUNITY The key opportunity for Nike. Nike. by responding to such consumer activism. we are portraying a positive image in that we are promoting ethics even while we are trying to be efficient and economical. which allows Nike to make an impression in foreign markets as well. Threat In the same manner. Currently the company has the ability and the resources to exploit this opportunity. These groups have somewhat different tastes that Nike should be able to satisfy. Such publicity has the potential to ruin a company permanently.

2. Poor management foresight in predicting consumer and fashion trends moving away from athletic shoes. 3. Causes: 1.g. MAJOR AND SUBORDINATE PROBLEMS Major Problem: Finance Symptom: Declining stock market price Causes: 1. Poor reception of these ads by consumers. focusing on relating Nike to a non-related item. Old Navy). Nike¶s product offerings are limited to athletic footwear and apparel. Declines in net income of $344M from 1997 to 1999.these other companies merely gain a small percentage of the market. 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. Cyclicality in footwear and apparel industries. Competitive Strategies Symptom: Loss in market share for shoes and apparel to non-traditional athletic companies (e. we would focus on keeping our market share and making sure that competitors like Old Nay do not steal away our market share. An over reliance on Michael Jordan as a central marketing figure. his departure caused a decline in sales. Subordinate Problem: Strategy Formulation. Nike will be one of the main companies to start losing market share. 3. 2. We will do this by focusing our efforts on a broader market. Subordinate Problem: Marketing Symptom: Drop in sales revenues in 1999 from 1998. . 2. In response to this threat. Declines in sales revenues of $410M from 1997 to 199912. This would include the younger generation that is interested in sports as well as extreme sports. Recent declines in market share in the United States. Causes: 1. Recent marketing campaigns are vague. 4. Operating in a mature market with minimal opportunity for growth.

Additionally. STRATEGIC MATCH 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: . This choice is also consistent with finance being identified as our company¶s key weakness (see page 23). 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. marketing campaigns.Subordinate Problem: Public Affairs Symptom: Public outrage over manufacturing and labor practices. 2. financial performance effects the public perception of Nike in the marketplace. Foreign wages paid are considered unjust when compared to U. 3. wages. Poor work environments in foreign operations reported in the national media. and capital improvements required by our production activities. Causes: 1. Future positive cash flows are required to invest in research & development. we chose finance as our major problem.S. Underage employment in foreign operations discovered by consumer watch groups. For these reasons.

54 .08 1.04 .05 .10 .24 .46 Against Reebok Rating** 4 3 3 2 3 X 4 3 3 4 X 4 3 4 Score .30 .28 .72 . Market Share y Breadth of Product Line y Sales Distribution Effectiveness y Price Competitiveness y Advertising Effectiveness y Facilities location and 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 Weight .15 .32 3.20 .03 X* .42 X .30 .05 .18 .40 .18 .17 * X means that the criterion is not applicable .00 Against Adidas Rating** 5 5 4 3 5 X 5 4 4 5 X 5 5 5 Score .12 X .70 X .07 .15 X .25 .20 .40 4.14 X* .20 .16 .50 .35 .Ý Poor Competitive Strategy Ý Changing Demographics PRIMARY STRATEGIC MATCH POSITION Business Strength/Competitive Position Matrix Exhibit 6 Success Factors 1.25 .10 .06 .10 .30 .

20 .01 .18 .03 .08 .12 .06 .12 .36 .30 .06 .05 .10 .02 .20 .10 . Industry Growth y Size y Profitability y Cyclicality y Seasonality y Entry/exit barriers y Customers y Competitors y Suppliers y Government Regulations y Labor unions y Demographics y Culture y Economy y Politics y Technology y Pressure groups Weight .16 .24 .03 .08 .09 .02 .09 .02 .06 .12 .** 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 1.08 .08 .08 .60 .16 .02 .04 Ranking 2 4 2 3 3 2 4 2 3 2 4 3 2 5 4 3 2 Weighted Score .04 .

00 Average Business Strength/Competitive Position Index = 3.TOTAL 1.82 Industry Attractiveness Index = 3.00 Exhibit 8 Business Strength/Competitive Position Low High Industry Attractiveness Average High Leverage Constraint .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 3.

customers. Nike¶s management believes that our success lies in the hands of our teammates. shareholders and the communities in which we operate. mail order and our company web site. We will maintain our position by providing quality footwear. apparel and equipment to institutions and individual consumers of all ages and lifestyles. We pledge to make our products easy available worldwide through the use of retail outlets.Average Maintenance Low Vulnerability THE STRATEGIC PLAN Mission Statement Our mission at Nike is to be a company that surpasses all others in the athletic industry. We vow to keep this in mind with the execution of every decision within our company. .

Increase earnings per share to $2. we will continue to meet the ever-changing needs of our customers. which is reflected in our compensation and human resource policies.'s 5-Year long-term corporate objectives: o Continue our improvement in stockholders' return on equity to achieve a 20. This would be an increase of almost 6. and the fight against pollution. We will continue to produce the quality products that we have provided in the past. We are also committed to making sound decisions in regards to our environment. (Sheetal) ***THE WINNER«Second Place is for Losers (Dan) Long-Term Corporate Objectives The following are Nike Inc. (Lisa) Give yourself an edge. our vision is to remain the leader in our industry. through product innovation.70 per diluted share by 2004 in an overall effort to bolster the long-term resilience of our stock's value. Nike is continuously making efforts to ensure that all employees and members of its surrounding communities are treated in a manner that is inline with our mission. We are committed to treating our employees with the utmost respect. Most importantly. (Brian) For the top athlete in all of us. Vision Statement At Nike. a step ahead of the rest! Alternative Marketing Slogans y y y y Nike.0% return in 2004. Alternative Strategic Slogan Nike«as always.'s short-term corporate objectives for fiscal year 2000: . Nike has made many alliances with human rights organizations in an attempt to ensure labor rights for employees of the industry overseas. This would surpass our 1997 record high. try to catch us. resources.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. (Kim) Finish First.5% from 1999. o Short-Term Corporate Objectives The following are Nike Inc.

culture.Structured Approach Concentration Weighted Score*** 1. Exhibit 9 Evaluating Leverage/Maintenance Strategies -.60 3. Market development is a third strategy for consideration due to Nike's ability to geographically expand our product offerings. to a value that approximates its 52-week average of $50 per share.25 .40 Market Development Weighted Score*** 1. concentration is an alternate strategy.80 . and demographics. apparel. The three strategies are very closely linked.25 .40 product development surpasses second place.60 .75 1. o Grand Strategy Nike Inc.35 . Because Nike has such a strong history of effective marketing in key global regions. Culture 3. This 22% increase from 1999 is realistic in light of combined 1st & 2nd Quarter income already 32% higher compared to the same time last year.00 Product Development Weighted Score*** 1.00 . and accessories markets. The table below concludes that focusing on product development will allow Nike to continue to build upon our founding tenant that has secured us a position that borders on leverage and maintenance within the athletic footwear. To determine which would prevail as our overriding strategic position. Demographics Total Weight* .45 Evaluation Criteria 1. Distinctive Competency 2. market development. four evaluation criteria were weighted according to each strategy: distinctive competency. Recover the market price of our stock from its 52-week low of $26.40 1. concentration.80 4. timing. Timing 4. can utilize the complete structured approach to select a grand strategy in carrying out the above corporate objectives.20 . 2000. and third place.05 1.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.20 1.00 Rating** 4 4 4 4 Rating** 5 5 3 4 Rating** 3 4 4 3 * 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) .80 4.80 . With a total weighted score of 4.50 per share on February 8.00 .

Determine what factors motivate their athletic footwear and apparel 3/1 Completion Date* 5/1 Budget $400. Utilizing this strategy will also allow us to capitalize on our key opportunity. 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. specifically the booming market of Japan. Our products in the past have been concentrated in the higher end of the pricing category. Nike is known for its technologically advanced products. We will now make an entrance into lower price categories with our quality products. Operational (Functional) Strategies Marketing Objectives Long-Term: Increase our market share in the Asia Pacific region from 26% to 30% by 2004. technologically advanced. Our products will be able to better withstand the risk of passing fads.The core of our business is our products. Competitive Strategy In the past. As our reputation dictates. We are the leaders in this area.000 Savings . our company has utilized product differentiation as our competitive strategy. Exhibit 10 Short-Term Strategy Start Date Market Research 1. we will continue to place our emphasis in this area. The two alternate marketing strategies will be just as necessary in order to incorporate our products into the shopping habits of consumers. Our focus also allows us to maintain a somewhat narrow niche that enables us to effectively capture the needs and wants of our consumers. which allows our products to stand out from the rest. and fashionable will allow us to achieve our corporate objectives of profitability and shareholder value. This will enable us to capture an even greater hold on market share. Hire a market research firm familiar with Asia. Producing merchandise that is high in quality. Short-Term: Increase our market share in the Asia Pacific region from 26% to 27% by fiscal year end 2000. Nike will also focus on making a strong effort in price leadership. to study the buying habits of Asian consumers. Incorporating fashion into our products is one way to achieve this strategy. it has made us the success that we are today. Nike has built its business on providing products that rise above all others.

amateur. 3/1 5/1 $80. Offer rebates and discounts for certain late-model shoes to encourage sales and inventory turnover. 4/1 3/1 5/31 3/1 $5. and collegiate teams. 2.000. Include sponsorship of the 2002 World Cup in Korea and Japan. magazines. competition. Run advertisements in the most popular forms of regional media: television.000 $1. newspaper.000 5/31 3/1 $10. as well as our prototypes.000 Total * completion date based on a 5/31 fiscal year end. . and/or radio.000 Pricing 1. 2. Conduct focus groups in Asia to get feedback on our existing products.000. Advertising and Promotion 1. and currency valuation.580. 3.000 5/31 3/1 5/1 3/1 $100.000. Determine price points for our Asian product offerings that are properly adjusted for regional buying power. billboards. Conduct fashion shows at top retail venues to display our latest merchandise offerings to consumers and the media.000 3 months $16. Sponsor regional sporting events for professional. 4.purchases.

Work with 3rd party shipping agents to manage the flow of orders from factories to distribution centers. processes.59% to 62% in fiscal year 2000.000. and finished goods.000 Savings $30.000. Short-Term: Decrease our cost of sales from 62.000 Long-Term: Maintain a range of R&D expenditures that does not fluctuate more than 1.000 $91.000.000. work-inprocess.000 3/1 Completion Date* 5/1 Budget $10. and Layout of Facilities 1. 2. Hire independent industrial engineers and analysts to work with manufacturing facilities in order to maximize efficiency of operations: shop layout. Newness.000.Production Objectives Long-Term: Decrease our cost of sales from 62. Research & Development Objectives 3 months $20.000 $20. Exhibit 11 Short-Term Strategy Start Date Location. 5/31 3/1 5/31 3/1 $1.000 $40.59% of sales to 59% of sales by fiscal year end 2004.000.5% or less than .000 5/31 3/1 $10. etc. 3. Inventory 1.000.000. Reduce inventory at all levels of production: raw materials. Work with suppliers to implement the next generation of electronic data interchange (EDI) technology in an attempt to achieve just-in-time inventory.000 Total * completion date based on a 5/31 fiscal year end.

. 3/1 4/1 $15. Total * completion date based on a 5/31 fiscal year end. Human Resource Objectives Long-Term: Increase availability of educational assistance programs for world-wide manufacturing employees from 50% of factories to 100% by 2004. Exhibit 12 Short-Term Strategy Start Date Focus 1. Shift funding to applied research in "up-and-coming" sports.000. in addition to shifting current budgetary allocations.2% of projected revenues in fiscal year 2000 to achieve increased market share. Short-Term: Increase availability of educational assistance programs for world-wide manufacturing employees from 50% of factories to 70% by 2000.000 3/1 Completion Date* 5/31 Budget Savings 3 months $15. Budget 1.75% of projected sales in the next 5 years. Infuse new funding. Experiment with cutting-edge fashion.000 . Short-Term: Increase spending on R&D to 1.000. for researching sports that could be popular in the future.

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. write. Offer general education classes for factory workers who want to learn how to read.000 $13.000 5/31 $3.Exhibit 13 Short-Term Strategy Start Date Recruitment and Selection 1.000. Compensation 1.000. Hire factory workers who express an interest in educational programs.000 . These employees would achieve the maximum benefit from educational assistance programs by being more loyal and productive. or fill any gaps in their childhood education. Training and Development 1. 2.000.000. 3/1 3/1 Completion Date* 5/31 Budget Savings 5/31 3/1 $5.000 5/31 3/1 Total 3 months $5.

Nike still operates on this philosophy today. It is one that has helped athletes and stakeholders alike to realize athletic and financial greatness.000 $50.000 CONCLUSION Nike. They did know that product quality and innovation would help athletes to achieve greater goals. Inc.000.000.000 $95. Hire 10 additional employees in the corporate Accounts Receivable Department to maintain and collect aging accounts. Implement stricter credit terms with retailers to minimize bad debt expense. Total * completion date based on a 5/31 fiscal year end. Short-Term: Increase net income 22% to $550 million in fiscal year 2000. Despite a changing marketplace for athletic .000 3 months $700. Exhibit 14 Short-Term Strategy Start Date Management of Accounts Receivable 1. is a company rooted in competition. 3/1 3/1 Completion Date* 5/31 4/1 $400.000 Management of Total Assets 1. Sell non-productive equipment or buildings to reduce depreciation and maintenance expenses.000 $25. Phil Knight and Bill Bowerman probably could not have imagined in 1962 to what degree their $500 investments would yield in 2000.* completion date based on a 5/31 fiscal year end. From equipping athletes with the finest sports equipment in the world to continuously improving our own financial performance.000 Budget Savings $20. 2. Finance Objectives Long-Term: Increase net income 70% to $767 million by fiscal year end 2004.000. 3/1 5/31 $300. Nike dominates its competitors.000.

we will continue to expand our product lines and marketing reach to become a more powerful global brand.footwear. .