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Nike Nike: Dustin Nadeau, Donatas Sumyla, David Deprey and Jaime Rodriguez Bus 411, May 2006
Nike Nike: Dustin Nadeau, Donatas Sumyla, David Deprey and Jaime Rodriguez Bus 411, May 2006
Dustin Nadeau, Donatas Sumyla, David Deprey and Jaime Rodriguez Bus 411, May 2006
Case-Study Overview
Internal:
History, Nike overview, Key Facts, Our Brands and Stock Information Nike Actual & Proposed Vision and Mission Economic Performance Evolution of Financial Ratios Strengths and weaknesses Analysis: IFE
Analysis
SWOT Matrix SPACE BCG IE matrix Grand Strategy Matrix QSPM
External:
Industry overview and comparison of financial ratios Manufacturing Opportunities and threats Analysis: EFE Competitors Market Share Analysis: CPM
History
1962: Phillip Knight, a Stanford University business graduate and former member of the track team, arranges to import athletic shoes from Japan and sell them in the U.S.. Knight created Blue Ribbon Sports as a cover name for his smallscale shoe-selling operations 1964: William Bowerman becomes a partner by matching Knight's investment of $500. 1965: Hires a full time employee, and annual sales reach $2,000. 1966: Blue Ribbon Sports, also known as BRS, rents its first retail space; employees can now stop selling shoes from their cars. 1969: It now has several stores and 20 employees; sales are close to $300,000. 1971: Nike, capitalizing on the Greek goddess of victory. The first Nike product sold with the new symbol is a soccer shoe. 1970 1975: Steve Prefontaine was turned to the University of Oregon by Bill Bowerman and wore Nike products.
History
1976: The popularity of jogging increases revenue to $14 million. 1978: The company changes its name to Nike. 1980: Nike goes public, offering 2 million shares of stock. 1990: Nike files suit against competitors for copying the patented designs of its shoes, and also engaged in a dispute with the U.S. Customs Service over import duties on its Air Jordan basketball shoes. 1997: Feb., Stocks reaches a high of $76 per share. 1998: Sept., Stocks tumbles to $31 per share. 2000: The National Football League declines to renew its exclusive apparel licensing arrangement with Nike. 2001: Nike opens its first Nike Goddess store, a unit targeting women, in Newport Beach, CA. 2003: Nike purchases Converse Inc. for $ 305 million.
Nike Overview
Nikes principal business activity is the design, development and worldwide marketing of high quality footwear, apparel, equipment, and accessory product Distributed in over 160 countries around the world: (Asia, Australia, Canada, Europe, Latin America, and the United States) Nike is the largest seller of athletic footwear and athletic apparel in the world. Fiscal year ended May 2003: Revenues of $10,697 million (increase of 8.1% against 2002) Employees: 26,000 worldwide. 650,000 in Nike contracted factories around the globe. Facilities: in Oregon, Tennessee, North Carolina and The Netherlands. Also operates leased facilities for: * 14 Niketowns, * Over 200 Nike Factory Stores, * 12 NikeWomen stores * Over 100 sales and administrative offices.
Our Brands
Cole Haan, based in Maine, sells dress and casual footwear and accessories for men and women under the brand names of Cole Haan, g Series, and Bragano.
Nike Bauer Hockey, based in New Hampshire, manufactures and distributes hockey ice skates, apparel and equipment, as well as equipment for in-line skating, and street and roller hockey.
Hurley International, based in California, designs and distributes a line of action sports apparel for surfing, skateboarding and snowboarding, and youth lifestyle apparel and footwear.
Converse, based in Massachusetts, designs and distributes athletic and casual footwear, apparel, and accessories.
Vision Statement
To bring inspiration and innovation to every athlete* in the world
(* If you have a body, you are an athlete Bill Bowerman, co-founder)
Mission Statement
Nike is the "largest seller of athletic footwear and athletic apparel in the world. Performance and reliability of shoes, apparel, and equipment, new product development, price, product identity through marketing and promotion, and customer support and service are important aspects of competition in the athletic footwear, apparel, and equipment industry. We believe we are competitive in all of these areas." The company aims to " lead in corporate citizenship through proactive programs that reflect caring for the world family of Nike, our teammates, our consumers, and those who provide services to Nike."
WEAKNESSES:
Lack of stores catering to the active females Poor employment practices at their international manufacturing sites giving a bad reputation Heavy dependency on footwear sales Issues with Footlocker
IFE Matrix
Industry Overview
Athletic footwear manufactures captured nearly one-third of the total footwear market in the early 1970s. Over a span of more than 25 years, American consumers spent $300 billion on 7.5 billion pairs of athletic shoes. Reebok international Ltd. and Adidas became $ 3.5 Billion companies, while Nike Inc. became the first ever $ 9.5 Billion company. By 1996 the number of establishments had dropped to about 52, with 12 factories closing since 1995. China's imports increase by 6 percent to 1.26 billion pairs in 2003 . Brazil's share increased 2.3 percent to 83.5 million pairs in 2003. Vietnam's share jumped 91.9 percent to 23.5 million pairs in 2003. The US markets continue to be dominated by imports from countries with low-cost labor. From 1997 to 2001, the value of industry shipments declined from $ 219.6 million to $106.5 million. U.S. shoe manufacturing plants declined by 775 between 1967 and 2001, the number of new plants opening dwindled to nearly zero.
THREATS:
Competitors which copy company's business model (high value branded
product manufactured at a low cost) Reebok's strong presence with 204
factory direct stores Adidas-Salomon AG, top European competitor The impact of foreign currency fluctuation and interest rates, and political instability Labor and political unrest in the suppliers countries Cost orientated customers vs companys higher-end market.
EFE Matrix
SWOT Analysis
SPACE Matrix
* Y axis: - Financial Strength: - Environmental Stability: * X axis: - Competitive Advantage: - Industry Strength: +4 -1 -2 +5 => Y coordinate: +3 => X coordinate: +3
STRATEGY: AGRESSIVE
Business Structure
Operating Segments:
Footwear Apparel Equipment
Operating Regions:
US Europe, Middle East and Africa (EMEA) Asia Pacific Americas
BCG Matrix
Stars
Question marks
Cash-Cow
Dogs
IE Matrix
Potential Strategies: - Market Development - Market Penetration - Product Development - Backward Integration - Forward Integration - Concentric Diversification
Matrix Analysis
QSPM
Decisions
Primary: Focus on finding the most promising customers (kids
and women) and introduce more products or improve current ones to satisfy potential increase in demand
Alternative:
Keep expanding into current and future foreign markets by being aggressive and the worldwide leader of the footwear industry Accelerate funding for numerous marketing campaigns in order to get to specific markets or customer groups Focus on improving working conditions and human rights at international manufacturer centers and at the same time increasing their productivity Implement product diversification with companys newest technologies so resulting increased earnings could be reinvested into R&D plans
Implementation
Actions: Women:
Open 25 specific stores specialized only for women Increase R&D expenses by 7% in women products Increase Marketing expenses by 10%, designing a specific campaign for women using female endorsements Create a new logo for women market which would be associated with fashion trends and introduce new products
Kids:
Increase R&D expenses by 7% in kids products Increase Marketing expenses by 10%, designing a specific campaign for kids Introduce more soccer and basketball products targeting potential youth market
Research in international market to find out what are the new trends related with women and kids products (Long-term)
Evaluations
Nike annual financial reports Sales and profits reports (on-line and off-line) based on Women stores and Kids products Frequent management meetings between VP Global Brand Management (US), VP Global Footwear, VP Global Apparel, and VP Subsidiaries and New Business Development Evaluation reports
Update: 2004-2006
2004: Nike introduces Swift technology.
Nike Swift increases track times by up to 1.13%. Football (soccer) wear becomes #1 in Europe. Nike SHOX footwear introduced in other footwear types and continues to boom.
2005: Profits recover, growing nearly 30% to reach $1.2 billion on unprecedented revenue of $ 13.7 billion.
Nike has 8 NikeWomen stores in key cities in the U.S.. Nike Pro Apparel introduced into NFL and MLB. Greatly expands SHOX running footwear August: Main competitors have joined with the recent announced acquisition of Reebok by Adidas
References
http://finance.yahoo.com Nike Annual Reports (2003 & 2005) Annual ranking of America's largest corporations, Magazine: Fortune 500 (2005): cnn.money.com www.nikebiz.com (Investor Relations) www.bigcharts.com www.businessweek.com Strategic Management Concepts and Cases; Fred R. David, 10th Ed.
Thank you!
Questions? Comments?