CI Team 3 Business Report
EXECUTIVE SUMMARY:
CI Team 3 will focus on Nikes current situation -
identify what problems they face, and find a
solution that is beneficial in all aspects. As a
collective, CI Team 3 has decided to identify the
problems of failure in handling excess inventory
and basketballs decrease in popularity that have
leaded to a decrease in sales of basketball
merchandise. For the first problem, it was decided
that a location-based augmented reality app would
be released. Nike GO is an app where virtual
coupons can be found based on the physical
location of the user. With these coupons, customers
can get free merchandise and a chance to purchase
exclusive items at a local Nike retailer. Amidst this,
Nike will be aiming to handle excess inventory by
giving away free shoes. Nike GO aims to grab
the attention of a more broader audience, where
everyone can participate for a chance to get free
sneakers. For the latter issue, the only way for
basketball to be revived is to host an event that will
draw international attention. CI Team 3 has decided
to create Nike Next, a tournament held in the US,
aimed towards recruiting and exposing younger
players which will restore popularity in basketball
within the global community. These two innovative
ideas will increase investor interest for years to
come. Nike GO earns a profit through signing
contracts with other businesses, where the app can
draw in more people to the given business in
exchange for usage of their facilities. Not only this,
Nike GO also contains in-app purchases and
advertisements to earn more profit as well.
COMPANY DESCRIPTION:
Nike was incorporated on Sept. 8, 1969 and is
located in Beaverton, Oregon, United States. Its
mission statement is To bring inspiration and
innovation to every athlete in the world. The
business opportunity for Nike, along with its
subsidiaries, is to design, develop, market, and sell
athletic footwear, apparel, equipment, accessories,
and services. It has a huge Chinese market with 9%
of 2014 revenue and is expected to grow as the
company enhances its brand image. Nike has been
able to extend their brand value over 19 billion
dollars as of 2014 with a market cap of over 80
billion dollars. Nike has reached out to over 190
countries with almost 60,000 workers spread across
the world.
Effective Date of Business:
Fourth quarter revenues up 6 percent to $8.2
billion; 9 percent growth excluding currency
changes. Fourth quarter diluted earnings per share
flat to prior year at $0.49. Fiscal 2016 revenues up
6 percent to $32.4 billion; 12 percent growth
excluding currency changes. Fiscal 2016 diluted
earnings per share up 17 percent to $2.16.
Worldwide futures orders up 8 percent; 11 percent
growth excluding currency changes. Inventories as
of May 31, 2016 up 12 percent.
INDUSTRY ANALYSIS:
According to a research conducted in 2015, the
average house holding in the US spends
approximately $21 for shoes. The footwear market
is projected to reach $371.8 billion by 2020. The
leading players in the market include Nike (22.9%),
Adidas (9.7%), New Balance (4.4%), Puma (2.1%)
and Under Armour (0.8%). With Nike's heavy
sponsoring with top athletes that lead to gained
coverage, the company holds the largest pie in the
market. However, it is threatened by fast paced
growing presences of competitors in the sports
apparel industry.
Shares in Footwear Market (2015)
Nike 22.9%
Adidas 9.7%
New Balance 4.4%
Puma 2.1%
Under Armour 0.8%
!
The industry's weakness is the heavy dependence
of range of products upon the companys' share of
the market. Furthermore, consumers active search
for better deals leads to price competition in the
retail sector, eventually forcing companies to
squeeze its margin. Based on its strong global
brand recognition, Nike has a number of
opportunities to overcome these weaknesses of the
industry. It can focus on product development and
increase the number of manufacturing sites in
places like Mexico where there's a lower
manufacturing and transportation cost while close
to the United States.
Target Market:
Nike currently targets active and outgoing athletes
of all socioeconomic classes and gender between
18 and 40 years old, with a casual lifestyle and
fashionable taste. (Target Market)
COMPETITION ANALYSIS:
The increasing number of competitors in the
industry and their fast-paced growth is posing a
threat to Nike. As opposed to the past where Nike
was the undoubted number one sportswear
company, it is currently undergoing pressure and is
threatened by its competitors. While Nike is facing
danger, its competitors are gaining opportunities to
potentially replace Nikes spot.
To being with, Nikes biggest rival Adidas is on a
continuing rise in the sports industry. Its popular
shoe collections such as Superstar, Stan Smith, obtain a QR code or a digital ticket. The ticket will
and Kanye Wests new line of Yeezys are display a certain coupon or identification number
showing great increases in popularity. Also, its
subsidiaries are allowing Adidas to gain enough
potential to threaten Nike. However, Adidass
Asian-made products are buying Americans
discomfort. In addition, continuous complaints
about its online customer service will, if continued
in the future, negatively impact its high-held
reputation. Another rising star in the sports market
is Under Armour. Starting with the partnership with
renowned NBA MVP Stephen Curry, various
sponsorships boosted the companys position in the
market. Nonetheless, the popularity and demand for
Stephen Currys products are incomparable to the
Nikes Jordans as well as Nikes popular products.
Another main competitor in the sports market is
New Balance. It is known for having an extremely
environmental-friendly approach in manufacturing
their products. It also solves the problem of
limitation of size variety. However, this leads to a
limited style when compared to other leading
competitors such as Adidas or Nike.
OPERATIONS & MANAGEMENT:
Nikes professional department, NSRL (Nike
Sports Research Lab), is located in Beaverton,
Oregon, adjacent to its headquarters. There are 700
factories with 650,000 contract workers that
manufacture footwear and clothing worldwide. CI
Team 3 has established three solutions, the first
being Nike Next: a basketball competition held
twice a year, once each in summer and winter.
Athletes must be between 15-19 years of age and
one team of 12 players may apply per school. A
total of 16 teams may apply from each state; the
official application deadline will be between the 6th
and 20th of April and between the 6th and 20th of
October for the winter and summer competition
respectively. After the first round, two teams will
be picked from each state to advance to Regionals,
a two-day tournament. The final round will be held
at the Barclays Center in Brooklyn, NY. Players
will receive Nike endorsements and the week-long
event will be covered by ESPN. Nike Nexts key
features include the special appearance of
professional athletes. These players will be invited
from the multitude of Nike Athletes that Nike has
signed contracts with.
For Nike GO, the customers will search around to
that codes for a product. These products range from
clothing, limited shoes to coupons for discount. The
customers can go to a local Nike retailer to redeem
their code and receive the product. Allowing the
consumers to gain shoes by playing a game is an
unique way that would not only entertain
consumers, but also promote Nikes footwear -
known and unknown lines alike. This will aid in
decreasing excess inventory.
In addition to the Nike Go application, Nike will
create a network that uploads products currently
available for customers. This will prevent situations
where consumers cant find the product that they
desire to buy. Nike Kinesis is an open app that
reveals available merchandise for customers,
possibly at a lower price, and expose products to a
bigger audience. As mentioned, the application is
easily accessible and serves as an option for
consumers seeking for cheap shoes. By providing
good service and good deals, customers will return
and Nike Kinesis will attract attention as one of the
top online retail services. It is an app that can be
used continuously.
Key Employees:
Philip H. Knight: Chairman Emeritus, Mark Parker:
Chairman, President and CEO, Nike, INC, Trevor
Edwards: President, Nike Brand, Andy Campion:
Evp, Chief Financial Officer, David Ayre: Evp,
Chief Administrative Officer & General Counsel,
John Slusher: Evp, Global Sports Marketing, Eric
Sprunk: Chief Operating Officer
Plan for Identifying/Recruiting/Securing Key
Participants:
Nike Next: The professional athletes can be invited
from a multitude of Nike Athletes (not necessarily
athletes who are signature models) that Nike has
signed contracts with.
Nike GO: The appeal of getting free merchandise
from a company like Nike is high and there is a low
risk of a punishment for the customer. To redeem a
coupon/code, a person must redeem it at a Nike
retail store, which leads to the customer to discover
more Nike products.
FINANCE:
Compensations & Incentives Plan:
Nike Next: All participants of this event will be
provided with temporary EMT (emergency medical
technician) to prevent potential injuries. If any of
the prize from the event contains defection, Nike
will provide an instant return of the merchandise.
Nike customer service is available 24/7 in case
anything goes wrong.
Nike Kinesis: To prevent the possibility of the Nike
Kinesis server going down and the customer not
knowing the available amount of stocks left, the
backup program will restore the data in the event of
data loss.
Nike GO: Whenever technical problems occur in
the application, the Nike technical workforce is
always on stand 24/7 to fix it. Nike will not
compensate for the loss of a redeem code or an
account id and its password. Frequent update of
application will prevent GPS hacking.
LONG TERM DEVELOPMENT:
The long term goal is to continually channel Nikes
extra, non-selling merchandise to Nike Kinesis. To
increase the sells of non-selling merchandise to a
level anticipated, Nike will need to recruit and
secure key participants through the use of exposure,
advertisement to make a certain item more radical
and worth more than it actually is.