CASE STUDY ANALYSIS

BUSINESS STRATEGY AND ENTERPRISE MODELING

“Create a Hero”

By
Avia Enggar Tyasti ( 29115380)
Sri Junita Indah (29115317)
Tommy Harzaputra (29115331)
Vanessa Helena Obrina (29115393)

Master of Business Administration Program

School of Business and Management

Institut Teknologi Bandung

Table of Contents
CHAPTER 1: CASE SYNOPSIS .................................................................................. 3
CHAPTER 2: ISSUE/PROBLEM IDENTIFICATION ................................................ 4
2.1 Identified Problem ................................................................................................ 4
CHAPTER 3: RELATED THEORIES/FRAMEWORKS ............................................ 5
3.1 Process Management Strategic – External Analysis ............................................ 5
3.2 Process Management Strategic – Internal Analysis ............................................. 6
CHAPTER 4: CASE ANALYSIS AND SOLUTION................................................... 6
4.1 Case Analysis ....................................................................................................... 7
4.2 Proposed Solution ................................................................................................ 8
CHAPTER 5: CONCLUSION AND RECOMMENDATION ..................................... 8
5.1 Conclusion ............................................................................................................ 8
5.2 Recommendation .................................................................................................. 8
CHAPTER 6: LESSON LEARNED ............................................................................. 8
REFERENCE ................................................................................................................. 9

Table of Figures
Fig 1. Page 6.
Fig 2. Page 7.

List of Table
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CHAPTER 1: CASE SYNOPSIS
Summary to
Nike's Core Gompetency: The Risky Business of Fairy Tales
From mini case 8 of Frank Rothaermel’s Strategic Management: Concepts
Introduction

Who does not know the Nike brand? Initial establishment in very famous company was
surprisingly named The Beaverton is located in Oregon. It was founded by University
of Oregon track and field coach Bill Bowerman and middle-distance runner Phil Knight
in 1964 originally as Blue Ribbon Sports. In 1971, the company was renamed Nike (the
“goddess of victory” in Greek mythology) and the now iconic “swoosh” was designed
by a Portland State University student. Coach Bowerman was a true innovator because
he constantly sought ways to give his athletes a competitive edge.

Coach Bowerman experimented with many factors affecting running performance,

from different track surfaces to rehydration drinks. Coach Bowerman’s biggest focus,
however, was on providing a better running shoe for his athletes. He did not accidentally
get an idea of its flagship shoe soles by observing the waffle maker when her breakfast.
Bowerman as if enlightened and created waffle-type sole that is very famous now, not
only provided better traction but was also lighter than traditional running shoes.

After completing his undergraduate degree at the University of Oregon and serving in
the U.S. Army, Phil Knight entered the MBA program at Stanford. One
entrepreneurship class required him to come up with a business idea. So, he wrote a
term paper on how to disrupt the leading athletic shoe maker adidas. The research
question he came up with was “Can Japanese sports shoes do to German sports shoes
what Japanese cameras have done to German cameras?” At that time, adidas athletic
shoes were the gold standard. After his first shipment arrived in the U.S., Phil Knight
sent some of the running shoes to his former coach Bill Bowerman, hoping to make a
sale. To his surprise, Bill Bowerman replied that he was interested in becoming a
business partner and contributing his innovative ideas on how to improve running
shoes, including the waffle design. With an investment of $500 each and a handshake,
the venture commenced.
In 1984, Nike signed Michael Jordan, whom many consider the greatest basketball
player of all time-with an unprecedented multimillion-dollar endorsement deal. Nike
made the unorthodox move to spend basically its entire budget for a specific sport on a
single star athlete. Nike sought to sponsor future superstars that embodied an unlikely
success story.

Michael Jordan’s story is that he had been cut from his high school basketball team
only to become the greatest basketball player ever. In the 1990s and 2000s, Nike
continued to sponsor track and field sports stars such as Marion Jones, as well as Kobe
Bryant in basketball. With the help of major celebrity endorsements, Nike was also able
to move on to different sports and their superstars, including golf with Tiger Woods,
cycling with Lance Armstrong, soccer with Wayne Rooney, and football with Michael
Vick. Over time, Nike developed a deep expertise in creating heroes.

Although this core competency made Nike highly successful, it has not been without
considerable risks. Time and time again, Nike’s heroes have become unmasked as
cheaters, frauds, and criminals, some of whom have committed serious felonies, such
as (alleged) homicide. As Nike veers from one public relations disaster to the next,
disappointment with the brand and its promise may eventually set in causing customers
to go elsewhere. Too many of these public relations disasters combined with too severe
short comings of some of Nike’s most celebrated heroes could damage the company’s
reputation and lead to a loss of competitive advantage.

CHAPTER 2: ISSUE/PROBLEM IDENTIFICATION

2.1 Identified Problem
The nike’s core competency is ”create a hero”. Inspiring people with their product, this
is the way how to branding image in the market. So people get the spirit from the
athletes. But this way will be make some risk for Nike. In 1984, Nike signed Michael
Jordan-whom many consider the greatest basketball player of all timewith an
unprecedented multimillion-dollar endorsement deal. Although this core competency
made Nike highly successful, it has not been without considerable risks.

Time and time again, Nike’s heroes have become unmasked as cheaters, frauds, and
criminals, some of whom have committed serious felonies, such as (alleged) homicide.
As Nike veers from one public relations disaster to the next, disappointment with the
brand and its promise may eventually set in causing customers to go elsewhere.
Although nike’s co-founder and chairman Phil Knight declared that scandals
surrounding its superstar endorsement athletes are “part of the game,” its marketing
strategy is not without risks. 40 In some instances, Nike continued to sponsor its athletes
involved in various scandals, while in others it terminated its lucrative endorsement
contracts.

CHAPTER 3: RELATED THEORIES/FRAMEWORKS

There are two environments that can affect a company, internal environment from the
company itself and external environment from the company. The company can control
the internal environment, while the external environment can’t be controlled. External-
Internal Analysis explained in Figure 1.

External
Environment
Analysis

Sustainable
Business Competitive Superior
Strategy Advantege Performance
(SCA)
Internal
Environment
Analysis

Figure 1. Process Management Strategic

3.1 Process Management Strategic – External Analysis

In External environment there are six components that affect the stability::
 Political namely regarding: political environment, tax policies, etc.
 Economic namely regarding: projected interest rate, inflation, etc.
 Socio-cultural namely regarding: lifestyle trend, changes of
demographic, etc.
  Technological namely regarding: level of government research funding,
level of technology, etc.
 Ecological namely regarding: limit permitted waste, sustainable of
natural resources, pollution, etc
 Legal namely regarding: relevant consumer laws, etc.
From this case, we know that Nike facing a problem from external
environment. Because, the endorsement including to lifestyle “Socio-cultural”. We
can’t avoid that, but we can prevent it.

3.2 Process Management Strategic – Internal Analysis

VRCN Framework (Valuable, Rare, Costly to Imitate, and Non-substitutable)
This is important to identify the VRCN, so we know our position and we can keep
update VRCN if suddenly our company’s revenue reduce from usually.

Nike’s
Position

Figure 2. Identify VRCN

 From figure 2 we can discuss that:
- Nike is “Valuable”,
- “Not Rare” because there are competitors,
- “Costly to Imitate” is Yes because another competitor must have a big modal to
compete the Nike.
- Non-Substitutable is No, many choices we can substitute not only Nike.
So, from figure 2, we can classify Nike position in “Competitive Party”. In this
position, Nike also succeed to reach SCA, but they still need to innovate in order to
survive.

CHAPTER 4: CASE ANALYSIS AND SOLUTION

4.1 Case Analysis
4.1.1 Situational Analysis

At the beginning, Nike does have its own uniqueness compared to its competitors. Nike
has a core competency from the others, namely by making an athlete as a hero in the
sport area that can inspire and give influence to the society. This method is quite
effective and very sustainable for Nike is capable of making revenue increases, but in
the end some brand ambassador of nike scandal exposed a fairly detrimental to the
sustainability of nike. For example Tiger woods, there are many negative impacts
experienced since the tiger wood’s scandal. Nike became the public's view is not as it
used to. Nike almost lost their core competency. This is not unexpected by Nike. This
is an external factor that can not be avoided but able to be prevented.

4.1.2 Problem Analysis

The main problem faced by Nike that is, they choose the wrong brand ambassador,
they were initially able to see the potential and make a superstar athlete. But there are
many athletes who have endorsed habits and inappropriate behavior of a role model.
Like Tiger wood, Lance Armstrong, etc. It really was not unexpected, but Nike should
be able to prevent it by providing some important points in the contract, in order to
make the ambassador afraid to do things that are detrimental to their own career and
also Nike.
4.2 Proposed Solution
The problems faced by Nike is an external factor, it is not able to be avoided but Nike
can prevent that by adding key points in endorsement contracts and more cautious
longer choose where the athletes were able to keep the good habit and behavior.

CHAPTER 5: CONCLUSION AND RECOMMENDATION

5.1 Conclusion
Throughout this report, the situation presented in the mini case has been thoroughly
discussed and analyzed. Starting from the identification of several major set of
illustrated circumstance, that becomes the motivation to address some of the identified
issues. Followed by the exploration of business issue, that indicates the core
competency of nike is “create a hero” is not always sustainable, by using the
situational analysis based of the provided theories and literatures. Until finally, the
proposed business solution that Nike can prevent that by adding key points in
endorsement contracts and more cautious longer choose where the athletes were able
to keep the good habit and behavior, to address the arising issue.

5.2 Recommendation
- Updating the content of the contract endorsement shows that do unethical things can
lead to adverse consequences
- Gives a press conference to explain and apologize to the fans and sponsors
- More be careful in providing sponsorship of focusing on the individual being focused
on the team or club.

CHAPTER 6: LESSON LEARNED

- At first Nike is able to achieve the SCA, but need to realize that if we are able to
achieve SCA at this time, it is not a guarantee for us to reach the SCA in the future.
- If there are problems such as declining revenue, we have to check and renew VRCN
VRCN that SCA can be achieved again.
- To achieve sustainability, just keep innovating.
REFERENCE
Frank Rothaermel, 2014. Strategic Management: Concepts. 2 Edition. McGraw-Hill
Education.