CASE STUDY ANALYSIS ON NIKE CORPORATION

Nike Corporation Management Principles

CASE STUDY ANALYSIS ON NIKE CORPORATION Case Study Analysis on Nike Corporation 1. Introduction History Nike is a major US footwear, clothing and sportswear supplier based in

Beaverton, Oregon. The company operates in more than 160 countries and employs over 44000 people across six continents. Nikes revenue totalled $20.862 billion in 2011 with total equity of $9.843 billion. Today Nike is considered the worlds leading supplier of athletic shoes and apparel and one of the worlds most famous and strongest brands. The company was founded in 1964 as a footwear distributor Blue Ribbon Sports by Bill Bowerman (track and field coach at the University of Oregon) and Phil Knight (middle-distance runner from Portland). Initially, the company operated as a distributor for Onitsuka Tiger, the Japanese shoe maker. Most of the sales were made out of Knights automobile. In 1967 the first retail store was opened. In 1972 the jump was made to manufacturing companys own brand of athletic shoes and the Swoosh brand mark was created. The first self-manufactured companys shoes used Bowermans waffle design. They became extremely popular among the runners: they had special waffle-type nubs for traction and at the same time they were lighter than traditional athletic shoes. In 1979 Nike Air technology was successfully launched and by 1980 the company already attained 50% of national athletic shoe market. In 1982 Nike started to cooperate with Portland-based advertising agency Wieden+Kennedy. Many successful advertising campaigns were mutually launched and even Nikes famous slogan Just Do It was designed by agencys co-founder Dan

CASE STUDY ANALYSIS ON NIKE CORPORATION

Wieden. Throughout the 1980s, the company expanded its product lines and went global, encompassing new regions and sports. By November 2008 Nike already owned four major subsidiaries: Hurley International, Cole Haan, Umbro and Converse Inc. The companys CEO Mark Parker said: At NIKE, Inc. we run a complete offense, and its based on a core commitment to innovation. Thats how we stay opportunistic, serve the athlete, reward our shareholders, and continue to lead our industry. The Purpose of This Research The purpose of this paper is to research and analyze the theories of management that apply to Nike Corporation. The emphasis is made on companys strategic planning, organization peculiarities, leadership, management, innovation and change. Among the main tasks are: defining companys core competencies, inner strengths and weaknesses, opportunities and threats that the companys environment poses; identifying how the company is organized, showing its structure and decision-making process; defining the companys leadership style and communication environment; analyzing managerial controls and the role of Information Technology within the company; describing innovative management processes and corporate responsibility issues. 2. Strategic Planning The mission of Nike corporation is: to bring inspiration and innovation to every athlete in the world. Companys main goal (vision) is to carry on its founders legacy of innovative thinking, whether to develop products that help athletes of every level of ability reach their potential, or to create business opportunities that set Nike apart from the competition

CASE STUDY ANALYSIS ON NIKE CORPORATION and provide value for its shareholders. The companys current financial goal is to grow sales to $27-billion up to the year 2015. SWOT analysis SWOT analysis is an established instrument that helps to analyze companys internal and external environment. According to this method, companys strategy is formulated on the basis of internal strengths and weaknesses and external opportunities and threats. SWOT analysis is an extremely powerful tool because it helps to identify priorities and create a common vision of achieving the goals set. Also, only by taking

into consideration the components of general environment: economic environment, social environment, political environment, legislation and pressure groups, a company will be able to adopt the particular way of action, which will assure its performance and advantages on present and potential competitors (Gasparotti, 2009). Below is the SWOT analysis for Nike Corporation: Strengths: - Nike is a very professional and competitive company with strong management; - It possesses no physical factories and can move its production to any location that is more cost effective; - Very strong brand and generally good publicity; - It is a global brand that sells its products worldwide; - Nike uses special materials like LunarLight foam to make shoes of high quality and with good characteristics for sportsmen. Weaknesses:

CASE STUDY ANALYSIS ON NIKE CORPORATION

- Most of the income comes from the footwear market and the company is highly dependent on this segment. Other branded products are not so strong; - Spoiled publicity because of accusations of poor working conditions and workforce exploiting in the developing and newly industrialized countries. Opportunities: - Usage of waste from regular production to manufacture other goods; - Diversification into adjacent markets like jewellery or sunglasses production; - Further geographical expansion; Threats: - Currency value fluctuations can seriously influence real companys profits; - Growing competition becomes more aggressive and alternative brands steal Nikes market share; - Nikes products are very expensive and its consumers often prefer cheaper brands. Growing price sensitivity can negatively influence companys profits in future. Strategy and Planning Nikes core competencies are innovation, research and development, marketing and effective exploitation of globalization processes. Companys target audience are males and females between 18 and 35 years old who prefer active lifestyle and goods of high quality. Nikes main competitors in the footwear industry are Reebok and Adidas. These companies also use international approach to management and business; they are very profitable and have similar problems with publicity. At the same time Nike remains the

CASE STUDY ANALYSIS ON NIKE CORPORATION market leader due to its cost efficient marketing, effective advertising and research and development. Nikes competitors are less successful in these key factors. Nike uses strategic planning and various planning techniques in its activity. The main peculiarity of companys strategy is to start their marketing and promotion with selling innovative items to professional athletes and teams and by this means deliver the news and fashion of new products to particular customers. Nikes strategy also focuses

on diversity in the workplace. This strategy corresponds to companys vision and mission statement. Among the planning techniques that Nike uses are: contingency planning, benchmarking, scenario planning and others. 3. Organizing for Action Nikes organizational structure is divisional but it has functional departments. Converse and Jordan brands are examples of divisions created around specific products while Nike design is a functional department. Each department has subdepartments, responsible for handling particular tasks. On the top of companys hierarchy are CEO Mark Parker and a board of directors chaired by Phil Knight. In Nike, employees report to divisional managers and divisional managers report to the CEO. Operations department is used to provide proper communication between divisions. Nike is an innovative company and such organizational structure helps it to handle research and development measures. Also, because of the global competition Nike has to react to changes quickly and make rapid decisions. Carrying most of the features of matrix structure, Nikes organizational structure facilitates timely and quality decision making. 4. Leadership

CASE STUDY ANALYSIS ON NIKE CORPORATION Leadership involves a social influence process whereby intentional influence is

exerted by one person or group over other people or groups to structure the activities and relationships in a group or organisation (Yukl, 2002,p3). Leadership and management are different categories and not always can a single person carry two of the roles simultaneously. A leader can be anyone on the team who has a particular talent, who is creatively thinking out of the box and has a great idea, who has experience in a certain aspect of the business or project that can prove useful to the manager and the team (Benincasa, 2012). Leadership style is a certain manner of implementing plans, influencing and motivating people. From 4 to 6 leadership styles are usually differentiated by the scientists. Most widespread classification includes: democratic, authoritarian, laissezfaire and transactional leadership styles. On the top levels of Nike Corporation laissezfaire leadership style is applied as separate departments get relatively much freedom in their decision-making process while top management motivates and transfers the vision of the company to ensure keeping to mission and goals. At lowers levels of the organization various leadership styles are used depending on the cultural peculiarities of the population that lives on a particular territory. Nikes communication environment is very effective. All Nike managers are required to communicate in a similar style across the company. The company has a powerful digital intranet to provide effective communication between Nike headquarters in Beaverton and the international offices. To get relevant feedback from the customers Nike actively uses social media means. To communicate its values to the target audience

CASE STUDY ANALYSIS ON NIKE CORPORATION

Nike uses designated spokespersons that often base their speeches on inspirational stories and motivate the listeners. 5. Managerial Controls Management is relatively decentralized in Nike. It means that much freedom in decision-making is delegated to lower levels of management. The benefits of such approach are: lower-level managers provide relevant information concerning local conditions, they are better motivated and strong leadership is ensured throughout the company. Nikes managerial controls are tightly connected with the usage of Informational technologies. Feedforward, concurrent and feedback controls are made using the specially designed software. Nike has a powerful digital intranet to ensure proper communication between headquarters and international offices. At fist Nike had a developed ERP (Enterprise Resource Planning) System, Supply Chain and CRM (Customer Relationship Management) Software implemented into a single SAP Platform. Later i2s software was implemented that helped to get control over strategic planning, demand management, supply planning and production. In 1998 Nike purchased SAP Apparel and Footwear Solutions (AFS) that provided better financial management, helped to decrease inventory level, improved decision making and provided a holistic view on the whole business. Today Nikes AFS and Retail modules together with other SAP applications including Supply Chain management (SCM) and Business Information Warehouse (B/W) are implemented globally. For example, SAP AFS Solution provides the right tools to manage the entire supply chain from the initial purchasing of raw material to the final delivery of the

CASE STUDY ANALYSIS ON NIKE CORPORATION finished product (Suren, 2007). Provided with such software, Nikes managers can maintain coordination with local suppliers and customers and control whether the financial goals are met. The Funds Management / Budget Control solution in the Business Warehouse software that Nike uses helps to check revenues and expenditures, hold budgetary control and to control the financial equilibrium of business. Also Nike actively uses social media (social networks, blogs, and media portals) to promote their marketing efforts and get feedback from their customers. 6. Innovating and Change Nike implements a lot of innovative approaches to handling business.

Historically, Nike shoes became successful due to innovative design, created specially for athletes. Since then the company continues to invent new things and surprise the world community with non-standard approaches to business. First of all, the company was one of the first to sell the trade mark only, having no physical production facilities and concentrating on marketing and promotion only. This allowed Nike to minimize risks and maximize profits. Among other innovative ideas of the company are: 225 Forest (storefront in California where wakeboarders, BMX-ers, and skaters can customize Chuck Taylor All Stars and Hurley board shorts with their favourite artwork); Women's Nike Training Club (Possibility for women to create a personal virtual trainer using an iPhone app); Total90 Laser III Boot (Soccer players submit a unique user code that comes with the boot into Nike's Soccer+ Web site to receive an online coaching session from Italy's Juventus FC). Also Nike became famous for its open-source approach allowing them to collaborate with virtually everyone. For example, special Nikes R&D laboratory provides the green technologies that can be

CASE STUDY ANALYSIS ON NIKE CORPORATION accessed by various social entrepreneurs and manufacturers. With Nikes decentralized management and encouraged innovation, innovative ideas come from various

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international offices. These and other innovations allowed Fast Company journal to call Nike #13 of most innovative companies in the world (Sacks, 2012). At the same time, technological innovations are no more so necessary in the case of Nike Corporation. Nikes organizational structure and peculiarities of management allow the company to remain sensitive to changing consumer and social trends. Nike is always ready for change and changes the world itself simultaneously. A good example from Nikes history is the time when the company, feeling the shifting consumer trends, decided to get involved into worlds most popular sports - soccer. While soccer was not particularly popular in the USA, for Nike it became a wonderful opportunity to go global and become a leader in this market. Nike is a social responsible company. In its CSR report they say: Nike sees corporate responsibility as a catalyst for growth and innovation, an integral part of how we can use the power of our brand, the energy and passion of our people, and the scale of our business to create meaningful change. The company focuses its efforts on core impact areas tied to its long-term growth and innovation strategies: improving conditions in contract factories, designing for a better world, achieving climate neutrality and unleashing potential through sport. At the same time Nike is often accused of violating the human rights of its workforce in the developing countries and providing unsatisfactory working conditions. This ethical issue negatively influences companys publicity and forces Nike to constantly look for the solutions to this problem. 7. Summary

CASE STUDY ANALYSIS ON NIKE CORPORATION Nike is a good example of an innovative contemporary company that I would

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really like to join. Nike provides clear career paths and wonderful opportunity to expose your potential. Companys management is extremely effective and because of decentralized approach combined with encouraging all sorts of innovation, innovative ideas come from everywhere, allowing low-level managers to become a part of the history. Nike is a very successful company, a true market leader. Companys approach to marketing, advertising and getting feedback from the customers provides an effective model on which others can learn. Also, Nike is a very flexible company that feels and reacts to all shifting trends in its market. Though the company has certain ethical issues to resolve, it is still a socially responsible company with strong image.

CASE STUDY ANALYSIS ON NIKE CORPORATION References Nike official website, http://nikeinc.com/ Peggy Kataveli, CMA, Nike boss outlines new ambitious financial goals, Business 2.0 Press, May 5, 2010 Carmen Gasparotti, The internal and external environment analysis of romanian naval industry with swot model

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Dunrea de Jos, University of Galai, Management & Marketing (2009) Vol. 4, No. 3, pp. 97-110. Market Research World, SWOT Analysis Nike, Inc., http://www.marketing-research.com/marketing/swot-analysis-nike-inc Nancy E. Landrum and David M. Boje, Kairos: Strategies just in time in the Asian athletic footwear industry Pre-publication Draft of Chapter 6, To appear in Book titled: Asian Post-crisis Management Edited by Usha Haley, expected publication date 2001. Dwight Chestnut, Nike's Flat Organizational Structure, e-how, http://www.ehow.com/facts_6887850_nike_s-flat-organizational-structure.html S.Suren , SAP AFS Intro SAP blog, http://www.sapafs.net/2007/08/sap-afs-intro.html, 16 Aug, 2007 Funds management [FM] & Budget Control Systems [BCS], Business Information Warehouse, University of Kentucky, BW Web Reporting Funds Management / Budget Control, October 1 2005. Danielle Sacks, Most Innovative Companies 2010, Fast Company, July 12, 2012