EXECUTIVE SUMMARY

Even though Strategy is what differentiates a company from another but the strategy is not
the overall driver of the company’s success since every strategy a company makes gets
copied by rivals and sometimes the rivals copy it and implement that strategy in a more
effective and efficient way than the originator. This is why the ultimate ingredient that
differentiates the uniqueness of a company is its strategic thinking which is also called the
strategic intent.

The strategic intent and desire of Nike Corporation to lead the sports industry has caused
every other competitor in the sports industry to trail Nike. Nike is always ahead of the
competition. It believes in customer loyalty and value to the customers particularly athletes.
In order to delight its customers, Nike continuously comes up with innovative ideas and
customization in its products.

This report contains a strategic analysis of Nike Corporation. The report makes a complete
external and internal analysis of Nike thereby highlighting all the pluses and minuses of Nike
and their impact on capitalizing the opportunities and mitigating the risks that lie ahead. The
report, than moves on to the strategies that Nike could very well undertake to keep up the
edge on the competition. The financial analysis of the company is also present which
represents the soundness of the company’s financials. A complete analysis of the products
Nike is offering is made along with the strategic position of the company in the form of
space matrix. Finally the report enunciates a couple of new break through innovative
strategies Nike can come up with to give a crushing defeat to its competition.
NIKE AT A GLANCE

Industry: Footwear/ Apparel/Accessories

Founded: 1964
Country: United States
CEO: Mark Parker
Website: www.nike.com
Employees: 44,000
Sales: $25.28 B
Headquarters: Beaverton, Oregon

HISTORICAL BACKGROUND

The company was founded in 1964 by two men, namely Phil knight who was a middle
distance athlete, and he was also a business student of Stanford University, his partner in
this venture was Bill Bower man who was a track coach in the University of Oregon. Both of
them were talented and they realized the demand of athletic shoes in USA. When the
company was formed its initial name was “Blue Ribbon Sports”. The first store was open
Santa Monica, California in 1966.

The company introduced its Nike brand of shoes in 1972, just in time for the US Track &
Field trials, which were held in Eugene, Oregon that year. The Nike name which took its
name from the Greek Goddess of victory, had its famous “swoosh” logo designed by Carolyn
Davidson, a graphic design student at Portland State University. The company officially
renamed itself as Nike in 1978. By 1980 the company had gone public followed by an
impressive 50% market share of the US athletic shoe market.

Some wrong decisions in 1980s, particularly miscalculating the aerobics boom of that time
period caused Nike to face some downfall in the athletic footwear industry. But, changes in
the company by Phil Knight, particularly the introduction of a Michael Jordan endorsed
basket ball shoe in 1985, propelled Nike bank to the top of the industry by 1988.

The company began to diversify at that time with the purchase of Cole Haan shoes, a casual
and dress shoe manufacturing company. From this point, Nike would go on and acquire
other brands such as Bauer (1995), Hurley (2002), Converse (2003), Starter (2004) and
eventually Umbro ltd (2008).

PRODUCTS

Nike designs, sells and markets are in three different areas:

 FOOTWEAR
 APPAREL
 EQUIPMENT
In footwear, Nike designs and sells products that are primarily for athletic usage, although a
significant percentage of Nike customers wear them for leisure or as fashion accessory. Nike
places a great deal of emphasis on the design of the footwear as well as high quality
construction. Footwear constitutes around 70% of Nikes total revenues and sales in US.

Nike’s sports related apparel is designed to complement the company’s athletic footwear
products, and it is often sold through the same location and/or under distribution channel.
Typical apparel products include shirts with licensed college or professional team logos,
athletic bags and accessories, running shorts and baseball caps, all emblazoned with the
ubiquitous Nike “swoosh”. Apparel accounts for 25% of Nikes sales.

Sports equipments typically sold under the Nike brand names which include items such as
bags, socks, sport balls, eyewear, golf clubs, bats and gloves.

Vision:

Build a sustainable business and create value for Nike and our stakeholders by decoupling
profitable growth from constrained resources

Mission:

"Bring inspiration and innovation to every athlete* in the world

If you have a body you are an athlete,"

Mission Statement Analysis:

Customer Yes Athletes

Products No -
Market Yes World
Technology No -
Profit, growth and survival No -
Philosophy No -
Self-concept Yes Bring inspiration and
innovation
Public image No -
Concern for employees No -

Proposed Mission Statement:

To bring inspiration and innovation to every athlete in the world,

 by incorporating the use of advanced technology in designing and manufacturing our

products
  by creating business opportunities that set NIKE apart from its competitors
 by boosting ethical culture and providing values to our employees, shareholders and
society

SWOT ANALYSIS

STRENGTHS

1. Nike is globally recognized for being the number one sportswear brand in the
World.
2. Nike has no factories; rather it uses contract factories to get the work done
which makes it quite a lean organization.
3. Nike is quite strong regarding its research and development; quite evident
regarding its evolving and innovative product range.
4. It has a strong sense of marketing campaign by sponsoring top athletes.
5. The versatile product range makes it more competitive.
6. NIKE, Inc. includes five distinct brands, each with a powerful connection to its
customers.
7. NIKE’s products are sold in approximately 170 countries around the world.
8. NIKEid provides loyal consumers the power to design their own pair (Mass
Customization) which eventually boosted sales.

WEAKNESSES

1. Even though the organization has a diversified range for sportswear, the income
of the business, however, is still heavily dependent on footwear.
Revenues generated from footwear $ 13,426
Revenues generated from apparel $ 6,333
Revenues generated from equipments $ 1,202

2. Nike is criticized for making their products on third world countries, breaking
many labor laws and paying the workers below minimum wage to make more
many as a company
3. Inventory pile up in China and Western Europe is reducing Nike’s profits.
4. Nike products are seemed to be blurring into other product ranges. Within the
Nike Free range, there is Freerun 3.0, Freerun 5.0, Freerun+ 2ID, FlyKnit, FlyKnit
Lunar1 +ID and it can be confusing when picking a running shoe.
5. Nike is considered as “the expensive brand”
OPPORTUNITIES

1. The brand is strictly defended by its owners who believe that Nike is not a
fashion brand, however, a large number of consumers wear Nike product
because they derive a fashion trend rather than to participate in a sport.
2. There is a room for NIKE’s Revenue maximization by focusing on products other
than footwear.
3. Nike could look at investing into more types of wearable technology.
4. The business could also be developed internationally, building upon its strong
global brand recognition. There are many markets that have the disposable
income to spend on high value sports goods.
5. Growing segment of women athletes.
6. Nike has the tendency to invest more in their employee development programs
because the employees are the key resources for the organization.
7. Nike can go towards related and unrelated product diversification because of its
intense R&D and globally recognized brand name.

THREATS:

1. The market for sports shoes and sportswear is quite competitive; the
competitors are constantly developing alternative brands and techniques to take
away Nike’s market share.
2. Increased awareness of human rights
3. Increased raw material prices
4. Consumer price sensitivity is a potential external threat to Nike
5. For the multinational corporations like Nike the biggest threat is currency
fluctuations.
 INTERNAL FACTOR EVALUATION
(IFE MATRIX)
STRENGTHS WEIGHTAGE RATING WEIGHTED
AVERAGE
1. Globally recognized and number 1 0.10 4 0.4
sportswear brand
2. no factories 0.05 4 0.2
3. strong research and development 0.10 4 0.4
4. strong sense of marketing 0.10 4 0.4
5. versatile product range 0.05 4 0.2
6. Five distinct brands, each with a 0.05 4 0.2
powerful connection to its customers.
7. Operating in 170 countries 0.10 4 0.4
8. Mass Customization 0.05 4 0.2
WEAKNESSES
1. Heavy dependence on footwear market 0.10 1 0.1
2. criticized for making products in third 0.10 1 0.1
world countries
3. Inventory pile up in China and Western 0.05 2 0.1
Europe
4. products seemed to be blurring into 0.05 2 0.1
other product ranges
5. “the expensive brand” 0.10 1 0.1
Total 1 2.9

ANALYSIS:

The weighted average score of 2.9 reflects that Nike incorporation has strong internal
position but there is a room for further improvements.
 EXTERNAL FACTOR EVALUATION
(EFE MATRIX)
OPPORTUNITIES WEIGHTAGE RATING WEIGHTED
AVERAGE
1. Nike is often considered as fashion brand 0.10 4 0.4

2. Revenue maximization by focusing on 0.10 4 0.6

apparel and equipments
3. Investing in more wearable technology 0.10 4 0.6
4. Expanding business in other markets with 0.10 4 0.4
high disposable incomes
5. Product diversification 0.05 4 0.2
6. Investment in employee development 0.05 4 0.2
7. Growing segment of women athletes 0.10 4 0.4
THREATS
1. Increased competition 0.10 1 0.1
2. Increased awareness of human rights 0.05 2 0.1
3. Increased raw material prices 0.05 1 0.05
4. Consumer price sensitivity 0.10 1 0.1
5. Currency fluctuations 0.10 1 0.1
TOTAL 1 3.25

ANALYSIS:

The weighted average score of 3.25 reflects that NIKE Inc. enjoys a strong position with
respect to its external environment.
 SWOT MATRIX
STRENGHTS-S
1. Globally recognized and
number 1 sportswear brand
2. No factories
3. Strong R&D
4. Strong sense of marketing
5. Versatile product range
6. 5 distinct brands
7. Operating in 170 countries
8. Mass customization
OPPORTUNITIES-O SO STRATEGIES
1. Nike is often considered as fashion 1. Bring more modifications in
brand Nike’s products to capture
2. Revenue maximization by focusing more market share, since
on apparel and equipments many customers believe
3. Investing in more wearable that Nike is not just a sports
technology brand but a fashion brand
4. Expanding business in other as well. (S1, S4, S7, S3, O1)
markets with high disposable 2. Nike can collaborate with
incomes more technology
5. Growing segment of women companies like Samsung,
athletes Google, Apple etc to
6. Investments in employee develop more wearable
development technology like medicated
7. Product diversification apparels with massagers
and sensors (S1, S3, S4, O3)
3. Target women by using
women celebrities in
commercials. (S1, S4, O5)
4. Nike can diversify in other
products like energy drinks
for athletes.
THREATS-T ST STRATEGIES
1. Increased competition 1. Nike can create finance
2. Increased awareness of human divisions specifically to
rights manage their currency risk,
3. Increased raw material prices most likely using a
4. Consumer price sensitivity combination of forward
5. Currency fluctuations contracts, futures contracts
and call/put options.(S1,T5)
2. Nike should consider the
consumer price sensitivity
in offering their products.
(S1,T4)
WEAKNESSES-W
1. Heavy dependence on
footwear market
2. criticized for making
products in third world
countries
3. inventory pileup in China
and Western Europe
4. Confusing product names
5. “the expensive brand”
WO STRATEGIES
1. Nike could try training its
employees regarding
products and their
characteristics and
streamline the naming of
some of their products
within certain ranges. This
will allow the company to
maximize the customers
understanding of the
products on offer and the
features they represent.
(W4,O6)
2. Nike should acquire high
profile Chinese local players
such as Li-Ning, Anta Sports
products and Peak Sports
Products in order to deal
with inventory pileup
problem. (W3,O1,O4)
WT STRATEGIES
1. Since greater part of Nike’s
revenue is generated from
footwear market, it should
focus more on apparel
because Adidas is giving
tough competition to Nike
in apparel market. (W1, T1)
2. Increased awareness of
human rights results in the
collapse of manufacturing
units, which impacts the
productivity and revenues
negatively; in order to
prevent such issues Nike
should follow the local labor
laws and provide good
working conditions. (W2,
T2)
 COMPETITIVE PROFILE MATRIX (CPM)

FINDINGS:

Critical success Nike Adidas Puma

factors
Market share 33.2% 25% 8%
Global expansion 170 countries 200 countries 120 countries
Marketing $ 2,711 millions $ 2062.85 $ 836.81
Revenues $ 24128 $ 20416.14 $ 9248.44
R&D (amount not found) $ 175.8 $ 116.60
Financial strength $ 2,223 (net income) $ 721.65 (net income) $ 109.90 (net income)
Brand name To be taken on revenues
Innovation
Customer loyalty To be taken on revenues

CPM – Competitive Profile NIKE ADIDAS PUMA

Matrix
Critical Success Factors Weight Rating Weighted Rating Weighted Rating Weighted
Score Score Score
Market Share 0.15 4 0.6 3 0.45 2 0.3
Global expansion 0.1 3 0.3 4 0.4 2 0.2
Revenues 0.1 4 0.4 3 0.3 2 0.2
Innovation 0.15 4 0.6 3 0.45 2 0.3
Marketing/ Advertising 0.15 4 0.6 3 0.45 2 0.3
Brand Name 0.1 4 0.4 3 0.3 2 0.2
Financial strength 0.05 4 0.2 3 0.15 2 0.1
Customer Loyalty 0.05 4 0.2 3 0.15 2 0.1
Research & Development 0.15 4 0.6 3 0.45 2 0.3
Total 1 3.9 3.1 2

ANALYSIS:

The above mentioned competitive profile matrix reflects that Nike is the most competitive
of the all with the weighted score of 3.9, whereas Adidas Group is the toughest competitor
for Nike Inc.
 BCG MATRIX

Growth rate Relative market

share
Footwear 1.8% 1
Apparel 4% 0.7
Equipment 4% 1

RELATIVE MARKET SHARE IN THE INDUSTRY

HIGH 1.0 MEDIUM 0.50 LOW 0.0

HIGH +20

INDUSTRY  FOOTWAER
GROWTH RATE  APPAREL
 EQUIPMENT

MEDIUM 0

LOW (-20)
 SPACE MATRIX NIKE INC

INTERNAL FACOTRS EXTERNAL FACTORS

Financial Position (FP) Stability Position (SP)

Return of Investment 7 Economic Recession -6

(Higher than the competitors) (Biggest threat to consumer income
Financial Leverage 4 and buying pattern)
(Rising debt) Soaring Input and freight cost (cotton, -5
Liquidity Position 7 leather and labor prices are raising).
(Very strong liquidity ) Regulatory Risk (Risk of government -6
Working Capital 7 regimes)
(In billions higher than other Competitive Pressures (Bitter -7
competitors) competition by Adidas and others)
Inventory Turnover 7 Price Wars among rivals -7

Profitability Growth 7 Translational Risk (Currency Risk) -5

(11.86% Increase)
AVERAGE -6
AVERAGE 6.5

Industry Position (IP)

Competitive Position (CP)

Market Share -1 Growth Potential 7

(Biggest market share) (Nike has huge potential to grow)
Customer Loyalty -1 Profit Potential (The Company can 7
(Highest customer base) boost its sales)
Brand Image -1 Financial Stability 6
(Strongest brand image)
High Quality Products -1 Ease of entry to market 2
(Quality superior than any other (Entrance is very easy)
competitor)
Competitive Pricing -6 Capacity for Innovation 7
(Very expensive product) (Lots of for blue ocean strategies)
Marketing Activities -1 AVERAGE 5.8
(Extraordinary marketing activities)
AVERAGE -1.83

Y-Axis 6.5+(-6) (FP+SP) 0.5

X-Axis 5.8+(-1.83) (IP+CP) 3.97
 GRAPHICAL REPRESENTATION OF SPACE MATRIX
ANALYSIS:

After illustrating the space matrix it is obvious that Nike Inc should follow aggressive
strategies which includes forward and horizontal integration, market development, market
penetration, product development and diversification (related or unrelated).

FINANCIAL POSITION

Conservative Profile Aggressive Profile

1.00

0.50
COMPETITIVE INDUSTRY
POSITION POSITION
1 2 3 3.97

Defensive Profile
Competitive Profile

STABILITY POSITION
 ANALYSIS OF BUSINESS MODEL
ELEMENTS NIKE INC.
Value proposition  Nike provides the most efficient products to foster the best
possible performance of athletes
 It offers ground breaking apparel, footwear and equipments
with cutting edge technology.
Customer segmentation Athletes and fitness segment
Channel Nike outlets, retailers, online stores and distinctive marketing to appeal
more customers
Customer relationships Vey high
Revenue streams A major portion of their revenues is generated from footwear market
Key resources  Efficient employees
 Strategic marketing innovations
 Distribution network
 Integrated research laboratories
 Brands (Nike, Nike Golf, Converse, Hurley and Jordan)
Key activities  Highly innovative product designing
 Distinctive marketing strategy
 Distinctive research and development
 Periodic employee trainings
 Effective distribution
Key partnerships Suppliers, Contract factories, advertising agencies and endorsed
athletes
Cost structures  Invests heavily in R&D and Marketing
 Lower manufacturing cost due to outsourcing
 Low distribution cost due to distribution capability

BLUE OCEAN STRATEGY

The proposed blue ocean strategy for Nike is

SWEATFREE APPARELS WITH REPLACEABLE DEO PADS:

 FINANCIAL RATIOS
NIKE INC., PROFITABILITY RATIOS

May 31, May 31, May 31, May 31, May 31, May 31,
2013 2012 2011 2010 2009 2008
Return on Sales
Gross profit margin 43.59% 43.40% 45.58% 46.28% 44.87% 45.03%
Operating profit margin 12.86% 12.60% 13.49% 13.01% 9.69% 13.07%
Net profit margin 9.82% 9.21% 10.22% 10.03% 7.75% 10.11%
Return on Investment
Return on equity (ROE) 22.28% 21.41% 21.67% 19.55% 17.11% 24.06%
Return on assets (ROA) 14.13% 14.37% 14.22% 13.23% 11.22% 15.13%
Source: Based on data from Nike Inc. Annual Reports

NIKE INC., LIQUIDITY RATIOS

May 31, May 31, May 31, May 31, May 31, May 31,
2013 2012 2011 2010 2009 2008
Current ratio 3.47 2.98 2.85 3.26 2.97 2.66
Quick ratio 2.31 1.82 1.94 2.32 1.93 1.68
Cash ratio 1.52 0.97 1.15 1.53 1.05 0.84
Source: Based on data from Nike Inc. Annual Reports

NIKE INC., DEBT AND SOLVENCY RATIOS

May 31, May 31, May 31, May 31, May 31, May 31,
2013 2012 2011 2010 2009 2008
Debt to equity 0.12 0.04 0.07 0.06 0.09 0.08
Debt to capital 0.11 0.04 0.06 0.06 0.09 0.07
Interest coverage 144.17 91.39 84.65 70.92 49.93 65.18
Source: Based on data from Nike Inc. Annual Reports

NIKE INC., LONG-TERM (INVESTMENT) ACTIVITY RATIOS

May 31, May 31, May 31, May 31, May 31, May 31,
2013 2012 2011 2010 2009 2008
Net fixed asset turnover 10.32 10.59 9.86 9.84 9.79 9.85
Total asset turnover 1.44 1.56 1.39 1.32 1.45 1.50
Equity turnover 2.27 2.32 2.12 1.95 2.21 2.38
Source: Based on data from Nike Inc. Annual Reports
NIKE INC., SHORT-TERM (OPERATING) ACTIVITY RATIOS

May 31, May 31, May 31, May 31, May 31, May 31,
2013 2012 2011 2010 2009 2008
Turnover Ratios
Inventory turnover 7.37 7.20 7.68 9.32 8.14 7.64
Receivables turnover 8.12 7.36 6.65 7.18 6.65 6.66
Payables turnover 15.38 15.19 14.20 15.15 18.58 14.46
Working capital turnover 2.61 3.15 2.84 2.50 2.97 3.38
Average No. of Days
Average inventory processing 50 51 48 39 45 48
period
Add: Average receivable collection 45 50 55 51 55 55
period
Operating cycle 95 101 103 90 100 103
Less: Average payables payment 24 24 26 24 20 25
period
Cash conversion cycle 71 77 77 66 80 78
Source: Based on data from Nike Inc. Annual Reports