Introduction

Zest-O Corporation was established as privately owned Family Corporation in May

1981 to engage in the manufacture and distribution of food products in the Philippines. Established
as SEMEXCO MARKETING CORPORATION, the company adopted the name of its flagship
brand in 1995 taking pride in the phenomenal success of Zest-O, the No. 1 Juice Drink in the
Philippines.

It started operation with a clear vision to be the leading food and beverage Filipino company
competing with the multination companies. It has always kept with the ideals of providing quality
products at a reasonable price to its clients.

The company pioneered the first ready-to-drink juice drink in flexible foil pouch (Doy Pack
System) with its flair for innovation, Zest-O juice drinks won the consumers’ patronage and wide
acceptance. Over the past 20 years, Zest-O has earned itself a place in the Filipino culture.

Zest-O Corporation has posted enormous growth over the years. With total assets of only Php 10.0
Mi. when it started, it continued to grow reaching annual gross sales of Php 280.0 Mi. in 1987 after
6 ½ years of operation. As the company continued to venture into different products, sales
continued to post double digit grown reaching total annual gross sales of Php 2.9 B for the year
2000 with a total asset of 850M.

Aside from Zest-O Juice Drink, the company also markets Sunglo Juice Drink in the innovative
“sexy pouch” and Big 250 fruit drinks. Its latest acquisition of Plus! Juice Drinks solidify the
market leadership of Zest-O Corporation to 80% of the total market ready to drink juices.

Guided by the company’s philosophy of producing quality products at an affordable price and
making it available to the most number of consumers, the company has successfully diversified
into other products. With its vision in mind, Zest-O Corporation has ventured in different product
categories over the years. It has successfully entered each product segment both in terms of sales
volume and patronage. Bringing its innovative fervor every time, the company has always breath
new life into each segment it enters.

It has entered in the instant noodles segment with the Quick Chow, Quickie and Magic brands.
Capturing a significant share of the market, it has captured the third spot in the ranking with its
unique product lines. It introduced unique products such as instant rice noodles.

It has also ventured in the carbonated drinks market. Producing standard classics comparable to
the leading brands at the same time introducing new age drinks using indigenous raw materials.
The company has also positioned itself in the highly competitive soft drinks market using
aluminum cans and PET (non-returnable plastic) under the brand name of Zest-O Cola, Rootbeer,
Squiz, Twist and Calamansi Soda w/ honey.

Other products being marketed by Zest-O Corporation includes, fruit juice powder concentrate,
tea drinks, canned nectar drinks, and tropical purees.

Zest-O Corporation handles directly nationwide distribution of its products with its 13 branches
nationwide, strategically located all over the country. It also maintains a strong Sales force divided
into Booking, Ex-truck and Wet Market salesmen. Its client base is in the thousands, directly
servicing 80-90% of the total number of outlets nationwide. At present, the company operates four
manufacturing plants located in Bulacan, Metro Manila and Cagayan De Oro City.

The next 20 years is a big challenge for Zest-O Corporation to keep up with the changing market
environment and to compete in the global economy. The company is preparing not only for the
local market but also making itself competitive internationally.

Mission & Vision Statement

Mission Statement

Our mission is to be the leading manufacturer and distributor of juices, dairy and related food
products that best satisfy the growing needs of the customers.
This, for us is the means by which we can effectively participate in the social and economic
development of the communities we serve, promote professional growth and well-being of our
employees, maintain mutually profitable relationship with our trade partners and achieve growth
level equal to or better than the norms of the food industry.

Vision Statement

To be the leading food and beverage Filipino company competing with the multinational
companies..
 Goals

 to always provide a best quality products to meets the specific needs of consumer
 to maintain customer loyalty
 Short-term objectives (for the next fiscal year)
 To expand the target market by 5%
 To increase the market share by 5%
 To increase consumer awareness on Zest-O product by 10%
 Medium-term objectives (For the next 2 to 3 years)
 to increase the market share by 10% in year 2009
 to increase 10% customer loyalty by 2010
 Long-term objectives (for the next 3 to 5 years)
 to increase target market by 15% in 2011
 to increase 20% customer loyalty 2012
to maintain a strong brand name

Objectives

 To expand globally by selling their stocks to foreign countries that is potentially booming to take
advantage of their rising economy
 To maintain its current rank in the local beverage industry

EXTERNAL ANALYSIS
 General Environment

Economic Development

The company marks its 20th year in the industry with two new softdrinks innovations- the 2-liter,
non-returnable bottle were introduced early this year. Another big news is the introduction of a
whole new product category, the Zest-O Calamansi Soda. This healthy and refreshing product is
the first of its kind and is currently carving its own niche in the softdrink business. In its 20th
year in the industry with two new softdrinks innovations- the 2-liter, non-returnable bottle were
introduced early this year. Another big news is the introduction of a whole new product category,
the Zest-O Calamansi Soda. This healthy and refreshing product is the first of its kind and is
currently carving its own niche in the softdrink business. Other products being marketed by Zest-
O Corporation includes, canned nectar drinks and cup noodles.
 Socio Cultural

Competition in food and beverage industry is rapidly growing over the years and Zest-O being the
most dominating product in line make food and beverage should effectively position its product to
be able to retain and defend then lead among other competitors. First way is to continue keeping
the excellent and delicious taste of the product or to develop it more by suggesting and introducing
more flavors in their product line based on their customers preferences although their pricing might
increase a little with a nutrition given by the product, consumer will still prefer to buy these goods
because they can be guaranteed that Zest-O product will attain its satisfaction. And the second way
is by providing a large budget for their promotional strategy in order to introduce the old and new
product swiftly and effectively. It can be through magazine.

Technological Development

Political Factors

Nike’s sports shoe business is subject to the effects of the political landscape. This component of
the PESTEL/PESTLE Analysis model deals with governmental influence on the remote or macro-
environment of businesses. The following political external factors determine some of Nike’s
strategies:

1.Stable political climate in most major markets (opportunity)

2. Expanding free trade policies (opportunity)
3. Improving government support for infrastructure (opportunity)

Stable political conditions in most major markets present opportunities for Nike to grow its
business in these areas. Also, expanding free trade policies facilitate better market penetration
overseas. Moreover, improving government support for infrastructure, especially in developing
countries, gives Nike more opportunities to expand its operations in these markets.

Legal Factors

In Nike’s case, the following legal external factors are important in the sports shoes, apparel and
equipment business:

1. Improving employment law in developing countries (threat & opportunity)

2. Expanding consumer law in developing countries (opportunity)
3. Expanding health and safety regulations (opportunity)
 Improving employment law in developing countries is a threat because it leads to an increase in
labor costs in areas where many of Nike’s production facilities are located. However, this external
factor also provides an opportunity for the company to apply higher standards for labor and
employment. In addition, Nike has the opportunity to improve its brand image by highlighting
customer satisfaction in marketing its sports shoes, apparel and equipment. Similarly, the company
has opportunities to improve its health and safety measures to address expanding health and safety
regulations.

 Market Demand and Opportunities

Types of Product

Nike produces a wide range of sports equipment. Their first products were track running shoes.
They currently also make shoes, jerseys, shorts, cleats,baselayers, etc. for a wide range of sports,
including track and field, baseball, ice hockey, tennis, association football (soccer), lacrosse,
basketball, and cricket. Nike Air Max is a line of shoes first released by Nike, Inc. in 1987.
Additional product lines were introduced later, such as Air Huarache, which debuted in 1992. The
most recent additions to their line are the Nike 6.0, Nike NYX, and Nike SB shoes, designed for
skateboarding. Nike has recently introduced cricket shoes called Air Zoom Yorker, designed to be
30% lighter than their competitors'.In 2008, Nike introduced the Air Jordan XX3, a high-
performance basketball shoe designed with the environment in mind.

Nike sells an assortment of products, including shoes and apparel for sports activities like
association football,basketball, running, combat sports, tennis, American football, athletics, golf,
and cross training for men, women, and children. Nike also sells shoes for outdoor activities such
as tennis, golf, skateboarding, association football, baseball, American football, cycling,
volleyball, wrestling, cheerleading, aquatic activities, auto racing, and other athletic and
recreational uses. Nike recently teamed up with Apple Inc. to produce the Nike+ product that
monitors a runner's performance via a radio device in the shoe that links to the iPod nano. While
the product generates useful statistics, it has been criticized by researchers who were able to
identify users' RFID devices from 60 feet (18 m) away using small, concealable intelligence motes
in a wireless sensor network.

In 2004, Nike launched the SPARQ Training Program/Division. Some of Nike's newest shoes
contain Flywire and Lunarlite Foam to reduce weight. The Air Zoom Vomero running shoe,
introduced in 2006 and currently in its 11th generation, featured a combination of groundbreaking
innovations including a full-length air cushioned sole, an external heel counter, a crashpad in the
heel for shock absorption, and Fit Frame technology for a stable fit.

Intensity Competition
Nike is the leading sports footwear brands in the world and is known as one of the top 3 amongst
the trio leading the sports footwear market across the world – Adidas, Reebok and Nike. All three
of them are known and loved for their marketing strategies and the way they connect to their
customers.

Adidas and Reebok are the top two Nike competitors but there are many others in the sports
footwear market as well. Many of the top sports footwear companies have concentrated on other
products besides shoes such as apparels, deodarants and perfumes, sports accessories etc.

Nike has a worldwide revenue of 33 billion dollars. It is leading the footwear market and has a
brand valuation at 27 billion dollars. In the total sale of Nike, the footwear sale is maximum. It has
a huge distribution network across the globe from which it sells a combination of products. It has
brilliant strategic tie ups with football, cricket and other sports teams.

Supplies & Distribution

Nike shoes are conceded by other multi brand stores and exclusive Nike stores worldwide. Nike
has about 20,000 retail accounts in the US and sells its products in about 200 countries worldwide.
In the international market, independent distributors, licenses and subsidies sell Nike products.
The company has manufacturing facilities worldwide and in Asia, customer service and other
operational units (Nike Marketing Mix).
Nike long term plans to open more stores and franchise to reach target customers and to expand
the maximum buyers.
In Nike Town store, shops sell sheep showmanship interested enough to do whatever. Nike town
stores can take the entire city blocks and customers can feel like future oriented. These include
basic shoe stores made during each boasting chandeliers Nike product imaginable. Nike town
product offers a complete experience. This store has all the products, but will not stay there again
create a memorable experience for the customer to bring back again (Nike 4PS).
In the international market, Nike has independent distributors, licenses and subsidiaries which sell
its products. To reduce the cost of Nike’s products, it has outsourcing strategy with China, from
developing countries in Asia, such as Vietnam. And to do more business online because Nike
tradition is as spending on online advertising as compared to advertising media, e- commerce and
online marketing contributions are planned to expanded appropriate channels (Nike Marketing
Plan).
Nike has some specific distribution outlets and use them for distribution of its products, following
are the major ones:
• Nike town shop: In big cities of countries, Nike’s outlets are there to serve customers with
products.
• Flagship stores: Nike has contracted with retail stores that has label of flagship of Nike which
serve with high volume of Nike’s products to consumers
• Nike id: It is a Nike’s online store that is website which serves the customers of all over the world
with customization services.
• Big retail discount stores: The big stores of country also serve with some high demand Nike
products for the target customers.
All these have availability of Nike’s products; consumers who want Nike’s products can get
required products from these distribution methods of Nike.

Cost of Doing Business

Nike shoes are conceded by other multi brand stores and exclusive Nike stores worldwide. Nike
has about 20,000 retail accounts in the US and sells its products in about 200 countries worldwide.
In the international market, independent distributors, licenses and subsidies sell Nike products.
The company has manufacturing facilities worldwide and in Asia, customer service and other
operational units (Nike Marketing Mix).
Nike long term plans to open more stores and franchise to reach target customers and to expand
the maximum buyers.
In Nike Town store, shops sell sheep showmanship interested enough to do whatever. Nike town
stores can take the entire city blocks and customers can feel like future oriented. These include
basic shoe stores made during each boasting chandeliers Nike product imaginable. Nike town
product offers a complete experience. This store has all the products, but will not stay there again
create a memorable experience for the customer to bring back again (Nike 4PS).
In the international market, Nike has independent distributors, licenses and subsidiaries which sell
its products. To reduce the cost of Nike’s products, it has outsourcing strategy with China, from
developing countries in Asia, such as Vietnam. And to do more business online because Nike
tradition is as spending on online advertising as compared to advertising media, e- commerce and
online marketing contributions are planned to expanded appropriate channels (Nike Marketing
Plan).
Nike has some specific distribution outlets and use them for distribution of its products, following
are the major ones:
• Nike town shop: In big cities of countries, Nike’s outlets are there to serve customers with
products.
• Flagship stores: Nike has contracted with retail stores that has label of flagship of Nike which
serve with high volume of Nike’s products to consumers
• Nikeid: It is a Nike’s online store that is website which serves the customers of all over the world
with customization services.
 • Big retail discount stores: The big stores of country also serve with some high demand Nike
products for the target customers.
All these have availability of Nike’s products; consumers who want Nike’s products can get
required products from these distribution methods of Nike.

 Industry and Competition Analysis

Market Information

 Growing awareness on healthy living, exercising and active lifestyles led to and increase in the
demand for comfortable shoes wear.
 In 2011, the global athletic footwear market was worth USD 74.7 billion, and it is expected to
reach USD 84.4 billion in 2018, and forecasted to grow with CAGR 1.8%.
 Athletic shoes market is the 36% of the footwear market totally, having the largest share.
 With 42% market share, Asia Pasific is the leading region in athletic shoes market.
 Also, Asia Pasific region is said to be producing 87% of all sports shoes around the world!
 Nike, is the global leader, with 54% market share as reported in the beginning of 2013 has three
main competitiors; Adidas, Puma, Asics (you may think ‘where is Reebok?’ ; Adidas owns Reebok
since 2006.)
 As you know, Nike is not a company that produces only shoes, but their net sales’ 54% is from
Nike Footwear, sells approximately 120 million pair of shoes annually.
 Nike reported their sales revenues as USD 20.8 billion in 2012.
 In Turkey, in 2000, the shoes market is said to be more than USD 200 million.
 Two main competitors; Adidas and Asics.

Operation Product/Aspects

Nike Inc. is a leading global manufacturer and seller of sports shoes, apparel and equipment. This
market position is partly a result of effective and efficient operations management (OM). To ensure
success, Nike’s managers must continually examine and improve strategies and approaches used
in the 10 strategic decision areas of operations management. These areas pertain to the main
decisions in managing streamlined operations and productivity that effectively address business
goals and objectives. Nike’s operations management considers talent management, product
development, and total quality management as some of the most important variables in these 10
strategic decision areas.
Nike’s Operations Management, 10 Decision Areas

1. Design of Goods and Services. This strategic decision area deals with the design of Nike’s athletic
footwear and other products. The operations management objective is to ensure that product design
aligns with organizational capabilities and business goals. In this case, Nike Inc. focuses on designs
based on advanced technology and current market preferences.

BUSINESS, MANAGEMENT
Nike Inc. Operations Management: 10 Decisions, Productivity
UPDATED ONUPDATED ON FEBRUARY 7, 2017 BY EDWARD FERGUSON
Nike Inc 10 strategic decisions of operations management and productivity areas, sports shoes,
case study analysis
A pair of Nike Zoom Elite 2 shoes. Nike Inc. operations management includes standards and
policies to support optimal productivity in all strategic decision areas of the global business.
(Photo: Public Domain)
Nike Inc. is a leading global manufacturer and seller of sports shoes, apparel and equipment. This
market position is partly a result of effective and efficient operations management (OM). To ensure
success, Nike’s managers must continually examine and improve strategies and approaches used
in the 10 strategic decision areas of operations management. These areas pertain to the main
decisions in managing streamlined operations and productivity that effectively address business
goals and objectives. Nike’s operations management considers talent management, product
development, and total quality management as some of the most important variables in these 10
strategic decision areas.

The 10 strategic decisions of operations management (OM) at Nike Inc. cover a wide variety of
issues, considering the company’s global market for sports shoes, apparel and equipment. Nike
effectively addresses these decision areas through standards consistently applied in operations
management throughout the global organization.

Nike’s Operations Management, 10 Decision Areas

1. Design of Goods and Services. This strategic decision area deals with the design of Nike’s
athletic footwear and other products. The operations management objective is to ensure that
product design aligns with organizational capabilities and business goals. In this case, Nike Inc.
focuses on designs based on advanced technology and current market preferences.

2. Quality Management. Nike emphasizes quality in its processes and products. The objective in
this strategic decision area is to satisfy consumers’ expectations about product quality. The
company’s operations management addresses this concern through high quality standards and the
application of total quality management (TQM) in the production of sports shoes, equipment and
apparel.
3. Process and Capacity Design. This strategic decision area requires that Nike’s operations
management must prioritize streamlining and efficiency of production. The objective is to ensure
adequate, effective, and efficient production. At Nike, operations managers apply continuous
improvement strategies to support the company’s production goals and needs based on market
dynamics.

4. Location Strategy. Physical location is the typical concern in this strategic decision area of
operations management. The objective is to optimize costs and efficiency through proximity to
employees, suppliers and the target market. In the case of Nike Inc., the operations managers apply
a corporate strategy that chooses production facility locations based on costs and nearness to the
most significant markets. For example, Nike Inc. has sports shoe suppliers in Southeast Asia
because of the cost advantage based on cheaper labor in the region.

5. Layout Design and Strategy. Nike’s operations management deals with the layout design of
its facilities. The objective in this strategic decision area is to optimize workflow based on human
resources, capacity requirements, technology, and inventory requirements. Nike’s operations
managers apply corporate layout design and strategy to company-owned facilities only. For
example, the firm uses office layouts where employees can move easily. The factories that produce
the athletic shoes, apparel and equipment are not under Nike’s control in terms of layout design
and strategy.

6. Job Design and Human Resources. Human resource adequacy and maintenance are the
objective in this strategic decision area of operations management. Nike Inc. satisfies this concern
through internal leadership development, along with coaching and mentoring. The company also
has regular evaluations of job assignments to ensure person-job fit.

7. Supply Chain Management. Nike has excellent supply chain management, which facilitates
efficient production to support the global sports shoes, apparel and equipment business. The
objective in this strategic decision area of operations management is to align the supply chain with
the company’s overall strategic aims. Nike Inc. satisfies this objective through supply chain
automation and optimization of transport distances among suppliers, production facilities,
distributors and retailers.

8. Inventory Management. The objective in this strategic decision area is to maintain operations
management that minimizes inventory costs while maximizing its effectiveness and efficiency.
Nike’s operations managers apply the perpetual method of inventory management, which involves
continuous monitoring and movement of inventory from the supply chain to the distributors and
retailers.
 9. Scheduling. Nike’s scheduling approach is primarily concerned with corporate operations and
the coordination of the supply chain with distribution and retail operations. In this strategic
decision area of operations management, the aim is to maximize resource utilization. Nike Inc.
managers satisfy this aim through automation. Corporate office schedules are standardized, while
supply chain schedules are adjusted according to the conditions of the market. Nike applies
changes to the supply chain based on market demand for its athletic footwear, equipment and
apparel.

10. Maintenance. Nike’s maintenance strategy considers adequacy of all resources. Adequacy of
human resources, facilities and capacity is the objective in this strategic decision area. Nike’s
operations management implements continuous recruitment programs to support HR needs, as
well as reward programs and career development strategies for maximum retention of employees.
For facilities, the company has dedicated teams to regularly evaluate facility and equipment
integrity and requirements. The companies that manufacture Nike shoes, apparel and equipment
are responsible for their own maintenance.

Productivity at Nike Inc.

Nike Inc. operations management supports maximum productivity of corporate offices, the supply
chain, distribution network, and company-owned retail facilities. There are a variety of measures
applied to determine actual productivity levels. In this case, Nike uses the following criteria to
measure productivity in some business areas:

1. Revenue per square foot (Productivity of Nike’s retail stores)

2. Pair of shoes per hour (Productivity of Nike suppliers)
3. Items per day (Productivity of inventory personnel)
4. Documents per day (Productivity of Nike’s corporate offices)

 Competitor Analysis

Major Competitor
 Competitors Profile

1. Adidas

Adidas formerly known as Dassler Brother Shoes is the designer, manufacturer and marketer of
shoes, clothing and accessories. In 2005, Adidas acquired Reebok for $3.8 billion. After takeover
both the companies Reebok and Adidas have strong position to compete with Nike in North
America. Adidas group consist three subsidiaries i.e. Reebok, Runtastic and TaylorMade.
According to this, Adidas is the strong competitor of Nike and the second largest shoemaker in the
world. Adidas brand valuation is $14.3 billion and revenue amounted for 21.218 billion (Euro).

2. Reebok

Reebok is another competitor of Nike Inc. Reebok is a footwear and apparel company that designs,
manufactures and distributes CrossFit, fitness, running footwear and clothing. Reebok is a
subsidiary of German company Adidas Group. Reebok manufactures variety of assortment but
according to Reebok, customer top rated product is Reebok CrosFit Nano 8. The company
 considers itself distinctive and authentic with is consumers. Reebok revenue is amounted for $2
billion in 2017.

3. Fila

Fila is another sportswear manufacturing company and also a top competitor of Nike. Fila is a
worldwide leading brand among sportswear and footwear brands like Nike, Puma and Adidas. It
is Italian-South Korean Company founded in the year 1911 in Italy. After passing through many
ownerships finally purchased by Fila Korea in 2007. It is headquartered in Seoul, South Korea.

4. ASICS

ASICS Corporation is a Japanese company that designs, manufactures and sells footwear and
sports equipment. In recent years ASICS running shoes brand is ranked among top footwear brands
in the market. ASICS is the top competitor of Nike.

Summary & Conclusion

External Factor Evaluation (EFE) Matrix

Key External Factors Weights Rating WeightedScore

0.0 to1 0.0 to1
Opportunities

Women demand for athletic footwear and clothing 0.12 4 0.48

Development of international trade ( GAAT and NAFTA ) 0.12 4 0.48
Generation Y children will reach 60 million 0.1 4 0.4
Demand for leisure activities continues to increase 0.1 3 0.3
Growing e-commerce's positive effect 0.1 3 0.3
Customer use of products as a fashion item 0.06 3 0.18
Threats
Competitors which copy company's business model 0.12 2 0.24
 The impact of foreign currency fluctuation and interest rates, 0.12 1 0.12
and political instability
Labor and political unrest in the suppliers countries 0.08 1 0.08
Cost orientated customers vs company's higher-end market 0.08 2 0.16
TOTAL 1 2.74

External Opportunities

 Nike is expanding efforts in the Female Sector of the market. Three times as many young
women are participating in US sports as were just 10 years ago. Women represent a huge
market. Reebok sells nearly 50% of it shoes to women after its great success with aerobics
shoes in the late 1980's. Nike has begun to take notice of the female market and started to
market to it. They feel the female sector is strong opportunity in both athletics and casual
wear. Now, women demand for Nike’s footwear and clothing is increasing significantly.

 International opportunities are a major focus for the next few years. There has been much
fine-tuning in this area by creating regional headquarters to focus on the individual foreign
markets. A warehouse was created in Japan to house both shoes and apparel. Endorsements
have been granted to athletes from various countries to help strengthen the brand identity.
All of these factors helped contribute to the company's earnings in Europe to increase 35%
from the prior year. This focus on gaining world acceptance of Nike's products will help
position itself as the industry leader throughout all parts of the world. Because it has taken
the effort to position its foreign operations, it will be ready to meet the needs of the
international community when the industry makes its reversal. Therefore, Nike will be
focusing on the international markets, such as South Africa, India, Mexico, Peru, Chili,
Bolivia, andEastern Europe.

 General demand for clothing or footwear for leisure activities continues to increase
 Growing e-commerce’s positive effect since one of the company’s competitive advantages
is Internet sales
 Customer use of company’s products change from athletic purpose to a fashion item

External Threats

 There are some competitors that copy Nike’s business model which is 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 also political instability
 Labor and political unrest in the suppliers countries
 Cost orientated customers vs company’s higher-end market

INTERNAL ANALYSIS

Revenue Sales for Past 3years

Revenue
NIKE annual/quarterly revenue history and growth rate from 2016 to 2019. Revenue can be
defined as the amount of money a company receives from its customers in exchange for the sales
of goods or services. Revenue is the top line item on an income statement from which all costs and
expenses are subtracted to arrive at net income.

 NIKE revenue for the quarter ending May 31, 2019 was $10.184B, a 4.04% increase year-
over-year.
 NIKE revenue for the twelve months ending May 31, 2019 was $39.117B, a 7.47%
increase year-over-year.
 NIKE annual revenue for 2019 was $39.117B, a 7.47% increase from 2018.
 NIKE annual revenue for 2018 was $36.397B, a 5.96% increase from 2017.
 NIKE annual revenue for 2017 was $34.35B, a 6.1% increase from 2016.

Gross Profit
NIKE annual/quarterly gross profit history and growth rate from 2006 to 2019. Gross profit can
be defined as the profit a company makes after deducting the variable costs directly associated
with making and selling its products or providing its services.
 NIKE gross profit for the quarter ending August 31, 2019 was $4.871B, a 10.78% increase
year-over-year.

 NIKE gross profit for the twelve months ending August 31, 2019 was $17.948B, a 9.5%
increase year-over-year.
 NIKE annual gross profit for 2019 was $17.474B, a 9.51% increase from 2018.
 NIKE annual gross profit for 2018 was $15.956B, a 4.21% increase from 2017.
 NIKE annual gross profit for 2017 was $15.312B, a 2.28% increase from 2016.
Operating Income
NIKE annual/quarterly operating income history and growth rate from 2006 to 2019. Operating
income can be defined as income after operating expenses have been deducted and before interest
payments and taxes have been deducted.
 NIKE operating income for the quarter ending August 31, 2019 was $1.543B, a 15.67%
increase year-over-year.
 NIKE operating income for the twelve months ending August 31, 2019 was $4.981B, a
6.59% increase year-over-year.
 NIKE annual operating income for 2019 was $4.772B, a 7.36% increase from 2018.
 NIKE annual operating income for 2018 was $4.445B, a 6.4% decline from 2017.
 NIKE annual operating income for 2017 was $4.749B, a 5.49% increase from 2016.

Company’s Growth

It started with a handshake. Two visionaries, Bill Bowerman and his University of
Oregon runner Phil Knight, thought they could do a better job of designing and
selling shoes to runners. They were right. Today Nike is the world’s leading
innovator in athletic footwear, apparel, equipment and accessories.
Along the way, Nike helped the world’s best athletes win races, games and
championships. And the athletes helped Nike design and market the products and
brand that changed the face of sports. Together we continue to push through the
boundaries of what is possible. We are constantly at work creating growth opportunities
that set Nike apart from the competition and provide value for our shareholders.
Nike is many things – a product designer, a consumer goods manufacturer, a brand
communicator, a leader in corporate responsibility, a portfolio of authentic and
relevant brands. Behind every corner of the Nike business is a singular focus –
innovation. It is our nature to innovate. It is the fuel that powers our performance.
When we look at long-term growth, there are eight things that define who we are,
what we do, and how we operate to reach our potential.
Let’s take a look at these eight things.
Nike’s mission statement is, “To bring inspiration and innovation to every athlete in
the world.” And as co-founder Bill Bowerman once said, “If you have a body, you
are an athlete.”
This is how Nike sees the world – it defines the endless possibilities for human potential,
sets the tone and direction for the numerous long-term growth opportunities we see,
and continues to inspire new generations of athletes and consumers.
Sports is a universal language. It transcends cultures, borders and barriers. It’s
an enduring passion for consumers and a source of human aspiration and
empowerment. Sports teaches us about life – individual effort, teamwork, respect,
how to win, how to lose, how to compete intensely and play fairly. Sports inspire,
amaze and reward us in good times and in bad.
Sports is a great business to be in, and an even better business to lead.
From a sleepy little town in Oregon, Nike has grown into the world’s largest athletic
footwear and apparel company. We started with a shoe and a t-shirt. Today we’re a
diversified and complex global organization:
We sell our products in 170 countries.
We have more than 30,000 worldwide employees.
We have a dozen brands that serve more than 30 major sports and
consumer lifestyles.
We work with 600+ factory partners.
We serve millions of consumers with thousands of products.
From the beginning, our business model was built on partnerships – athletes, teams,
retailers, manufacturers, and supply chain providers. We work with the best of the
best all over the world. And we do it all with a singular purpose – to serve the needs
of our global consumers.
Since 2005, more than 50 percent of our revenue has come from outside the U.S.
With leadership positions in established markets like the U.S. and Western Europe
and in emerging markets like China and Brazil, we believe we have tremendous and
unique opportunities to grow.
When most people think of Nike, they think of the Swoosh. It’s one of the most
recognized symbols in the world. The brand it represents is our strongest asset.
We’ve been very strategic in adding dimension to the Nike Brand, making it a
powerful and flexible engine for growth.
Using the same kind of thoughtful and deliberate strategy, we’ve created a portfolio of
brands capable of reaching across multiple sports, lifestyle categories, and price points.
In addition to the Nike and Jordan brands, our wholly-owned subsidiaries include
Cole Haan (luxury shoes, handbags, accessories and coats); Converse (athletic
and lifestyle footwear, apparel and accessories); Hurley (action sports and youth
lifestyle footwear, apparel and accessories); Nike Golf, and Umbro (a leading U.K.
based football/soccer brand). Each strengthens our ability to maximize our reach
and relevance worldwide.
Each brand speaks to a different, clearly defined consumer, which diversifies
opportunities for long-term growth. And even as we benefit from the diversity
of our brand portfolio, we’re also leveraging our resources and core competencies
in product, marketing, and operations to drive consistent growth and profitability.
True innovation isn’t just new and different. It’s new and better. It’s surprising.
Sometimes it’s shocking. Nobody does that better than Nike. Yet we know you
can’t anoint yourself as innovative – the consumer ultimately decides that for
themselves. That’s why we spend so much time with athletes and consumers –
listening, observing, studying and then creating products that enhance athletic
Profitability ratio Description The company

Gross profit margin Gross profit margin indicates the percentage of Nike Inc.’s gross profit margin ratio
revenue available to cover operating and other deteriorated from 2017 to 2018 but then
expenditures. improved from 2018 to 2019 exceeding 2017
level.

Operating profit margin A profitability ratio calculated as operating Nike Inc.’s operating profit margin ratio
income divided by revenue. deteriorated from 2017 to 2018 and from 2018
to 2019.

Net profit margin An indicator of profitability, calculated as net Nike Inc.’s net profit margin ratio
income divided by revenue. deteriorated from 2017 to 2018 but then
improved from 2018 to 2019 not reaching 2017
level.

performance and overall consumer experiences.

It’s our connection to athletes and consumers that allows us to create game-changing
technologies and products. Innovations like the Nike Flywire support system, Lunarlite
foam cushioning, Hyperdunk basketball shoe, new generations of Free footwear, and
the new Trainer 1 shoe continue to set the standard for the industry.
Much of this insight into performance happens at the Nike Sport Research Lab.
It’s the premier center for advanced R&D in biomechanics, exercise physiology,
engineering, industrial design and related fields. We also rely on research committees
and advisory boards made up of athletes, coaches, trainers, equipment managers,
orthopedists, podiatrists and other experts who consult with us and review designs,
materials and concepts for product improvement.
Just like in sports, talent can take you only so far. You have to put in the hard work.
That’s how we approach product innovation. Our talent and work ethic are key to
our performance and continued success.

Profitability, other relevant performance Indicator

Strength and Weaknesses

Strengths :

• Competitive Organization. Nike is a very competitive organization. Phil Knight (Founder and
CEO) is often quoted as saying that 'Business is war without bullets.' Nike has a healthy dislike of
is competitors. At the Atlanta Olympics, Reebok went to the expense of sponsoring the games.
Nike did not. However Nike sponsored the top athletes and gained valuable coverage.

• Strong brand recognition. Nike is known around the world for being one of the most iconic
brands. It was recently ranked as the world’s 31st most valuable brand in terms of its brand value
,which is USD 10.8 billion, by the annual Business Week’s global top 100 brand survey. In spite
of many market maneuvers (such as the recent merger between Adidas and Reebok), Nike has
remained the leader in its category. Its famous logo ‘SWOOSH ’can be recognized instantly by
anyone.

• Internet sales. Nike’s E-commerce sales are grouped into a broader category, which Nike calls
direct-to-consumer that also includes its bricks-and-mortar retail stores. Direct-to-consumer
revenue increased 22.9% to $4.3 billion in 2013 from $3.5billion in 2012. Nike’s fiscal year ends
May 31. Nike does not release e-commerce sales figures. Nike is No. 72 in the Internet Retailer
Top 500 Guide with an estimated $422.1 million in2012 online sales. So, Nike’s e-commerce sales
grow 30% in2012.

• Growing international presence. Contracts with about 700shops worldwide, runs offices in 45
countries ; manages factories in China, Indonesia, Taiwan, Thailand, India, Vietnam, Philippines,
Pakistan, and Malaysia.

• Superior research and development department. Nike’s research and development efforts are a
key factor in the past and future success. Technical innovation in the design of footwear, apparel,
and athletic equipment receive continued emphasis as NIKE strives to produce products that help
to reduce injury, enhance athletic performance and maximize comfort. In addition to NIKE’s own
staff of specialists in the areas of biomechanics, chemistry, exercise physiology, engineering,
industrial design and related fields, Nike also utilize research committees and advisory boards
made up of athletes, coaches, trainers, equipment managers, orthopedists,
podiatrists and other experts who consult with us and review designs, materials and concepts for
product improvement. Employee athletes, athletes engaged under sports marketing contracts and
other athletes wear-test and evaluate products during the design and development process.

• Strong financial returns. Belongs to Fortune 500 companies, the total revenue of Nike in 2008
exceeded 18 billion USD.

• Strong sense of culture in the working environment. The employees have been actively engaged
in shaping our sustainability journey. In 2005, people from across the company participated in an
effort to focus on what the future of sustainability at Nike, and their roles within it, should look
like. Nike challenged employees through group exercises and brainstorming sessions to define
how the future could look and how we would get there.

• Great celebrity spokespersons. One of the most successful collaborations between a brand and a
celebrity is that of Nike and Michael Jordan. So successful was the collaboration that Nike and
Jordan launched a new brand variant called the Air Jordan line of sport shoes. Nike pulled off a
very similar coup in the sports industry when it joined forces with the ace golfer Tiger Woods to
enter the golf category with its apparel, equipment and accessories. Nike had no experience in golf
before. Moreover, golf being a very elite game; it was generally considered that a brand like Nike
would not be very successful. This might have probably been true had Nike chosen the traditional
path to building its equity in the golfing arena. But Nike chose to associate with the best golfer in
the world and have him endorse the brand. As is known today, Nike has emerged highly successful
in golf.

• Nike doesn’t own any factories. It does not tie up cash in buildings and manufacturing workers.
This makes a very lean organization. Nike is strong at research and development, as is evidenced
by its evolving and innovative product range. They then manufacture wherever they can produce
high quality product at the lowest possible price. If prices rise, and products can be made more
cheaply elsewhere (to the same or better specification), Nike will move production

• Successful international marketing. Nike feels strongly that their biggest opportunities for growth
lie in the countries on South Africa, India, Mexico, Peru, Chili, Bolivia, and several eastern
European countries. Nike is planning to expand marketing in these areas in the next several years
to build demand and distribution systems. Nike also plans to contract manufacture its shoes in
several of these countries. We feel that international marketing is an immense opportunity for
Nike. Nike should pay particular attention to India, which has the largest middle class in the world.
Reebok commands 70% of the market share in India. There are 2 dimensions of growth which can
be expanded by international marketing, market share and market penetration.

Weaknesses
• Poor employment practices at their international manufacturing sites giving a bad reputation.
Contracts overseas companies that apply non-transparent and inadequate labor regulations,
involving child labor.

• Heavy dependency on footwear sales. The income of the business is still heavily dependent upon
its share of the footwear market.

• Price sensitive. The retail sector is very price sensitive. Nike does have its own retailer in Nike
Town. However, most of its income is derived from selling into retailers. Retailers tend to offer a
very similar experience to the consumer. So margins tend to get squeezed as retailers try to pass
some of the low price competition pressure onto Nike.

• Lack of diversity. The organization does have a diversified range of sports products. However,
the income of the business is still heavily dependent upon its share of the footwear market.

Internal Factor Evaluation (IFE) Matrix

Key Internal Factors Weights Rating Weighted

Score
0.0 to1 0.0 to1
 Strength

Recognized brand name – Swoosh 0.1 4 0.4

Strong in research and development – innovative product 0.07 3 0.21
development
21Strong marketing campaign - sponsors top athletes. 0.09 4 0.36
Marketing practices enables them to expand the athletic
market
A very professionally competitive company 0.08 3 0.24
Diverse portfolio 0.08 3 0.24
Successful advertising campaigns 0.09 4 0.36
Customer loyalty 0.06 3 0.18
Strong financial position 0.09 4 0.36
Strong international presence 0.1 4 0.04
Weaknesses
Products are highly priced 0.06 2 0.12
Revenues are still mostly dependent upon footwear sales 0.5 2 0.1
History for violations of minimum wages, child labor and 0.06 2 0.12
over times in its manufacturing countries
Little control over quality of products from 3rd party 0.05 10 0.5
contractors
Anti-globalization groups 0.04 2 0.08
Price sensitivity of products 0.06 2 0.12
TOTAL 1 3.1

Besides its external factor, Nike’s success is also influenced by its Internal Factor. We’ll discuss
whether the internal weaknesses outweigh the internal strengths or vice versa.

Internal Strengths

International recognized brand name – SWOOSH.

“ The Nike "Swoosh" is a corporate trademark created in 1971 by Carolyn Davidson ,while she
was a graphic design student at Portland State University . She met Phil Knight while he was
teaching accounting classes and she started doing some freelance work for his company, Blue
Ribbon Sports (BRS). “

It is measured as 10% of the internal factor because most of the sales are made by that one click
logo that everyone knows. Almost every nation knows what that symbol means. And that
measures how success they are, what they’ve built internally before.

Right spending allocations

Nike is by far the highest spending in R&D of their products to come up with innovative and
become a pioneer. They always spend their budget more of any other footwear companies. That
way, the pattern of investment is seen and that’s promising for the future. Secondly, they also use
their budget for campaign and advertising. This is also a right thing to do, since they have put so
much on R&D, people deserve to know what’s new and innovative that Nike has to offer.More
over, they utilize the advertising budget really applicably to the markets they want to tap in. They
scored 4 out of 4 in the rating because they are proved to be a pioneer in the advertising, on how
they advertise their products, they use unusual ways and always try to innovate even the
marketing strategies itself. For example, one of Nike’s most famous advertisement trend is that
they ‘challenge’ people. The slogan of “Just Do It” really captures what they do for advertising
strategy. In the launch of their fuel band, they try to implement it by challenging customers’
minds to use fuel band and prove that they can do a lot of movements by running as far as they
can. Customers especially people who are interested in sports and mostly their customers do, will
implement and do mouth-to-mouth since Information Technology is already on the way and
connected to the fuel band.

Internal Weaknesses

Products are highly priced

 Nike is known as high branded footwear brand. One of the weakness of Nike, yet it describes
that they have qualified good products. The other reason why Nike put a high price on every of
their product is because the spending and costs that they can’t press. The costs and spending
made are almost 31% of their revenue and their marketing promotional strategy.31% of the total
revenue that Nike made is a relatively huge numbers. All costs include administrative, selling
and R&D costs that have been occurred.

Total revenue is mostly made out of footwear sales

The footwear sales contributed almost 70 % of the total sales. That means whenever they lose
control over the footwear sales or production, they cannot cover their loses in another type of
products. Furthermore, they still are dependent on the suppliers, they don’t choose to
manufacture all parts of their products their selves, but they use 3rd party to do that. Therefore,
whenever the 3rd party is having trouble with production or increase in price, Nike will have no
control about that.
Dependent on suppliers

As we can see that Nike

History for violations such as minimum wages, child labor and overtimes in its manufacturing
countries. As we know, Nike put their manufacturing mostly in emerging markets such as China,
Thailand and Vietnam simply due to lower costs and distribution purposes. However, as those
countries are not that preventious and strict about child labor and minimum wages, they use it as
an opportunity fort hem to grow their revenue even more. While in the states, the la wand
regulations about that are really strong and demanding everyday. Therefore, they hire child labors
and go below minimum wages.

Summary and Conclusion

 Strategy Formulation
SWOT Matrix
Space matrix