NIKE: Rising up? Check!

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Statement of Purpose:

Being a football player, I require the best of resources to deliver a high-level performance.
I very well know how much impact the outfit, most importantly the shoes, can have on
performance. One may argue that it depends on the person and not what he/she is wearing but it
does play a certain role. It can have a huge impact mentally as well.
I began my journey in football in 2008 and during that, I tried out various companies before
I finally tried Nike. Ever since trying Nike, I can’t imagine myself playing in any other shoes. If
you think that’s exaggeration, I haven’t and I can’t even switch between two different collections
of Nike football shoes!
As time passed, Nike didn’t fail to impress me even in other categories like casual or
running shoes, backpacks and clothes. Ask me to close my eyes and choose a brand, first thing
pops up is Nike. I can proudly say that Nike and I are the best partners! So, what has the brand
done to reach at this level? How am I attached to a brand so much that I fail to explore other
brands? Is it just because of the quality of the product or other factors like the looks of the products,
positioning of the brand, endorsements with top athletes, or everything? How did Nike manage to
grow consistently in such a competitive industry? What the journey looks like? What changed the
game completely for Nike? If it had any hard times, what were they and how did Nike get back on
track? Where does Nike stand now?
All of the above questions revolve around my head, and this article will surely enable me
to answer them and learn quite a lot about how a start-up can become such a giant and win
customers around the globe (including a big one here).

Research Questions:

81.8% of the
survey size
considers Nike’s
quality better
than others

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 1/3rd of the
sample size
purchase Nike
products once in
a year

Adidas is the
most competitive
brand based on
the research

3/4th of the
survey size use
Adidas (Nike’s
rival)

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 Most people
shop sports shoes
and least shop
casual clothes
from Nike

Major limitations of the survey:

• Survey size is very small
• Majority is the young age group

Introducing NIKE

“Blue Ribbon Sports”, not many are aware about it. It was the sportswear company founded
by Phil Knight and his former coach Bill Bowerman in 1964 headquartered in Beaverton, Oregon
(Encyclopedia Britannica, n.d.). They then launched Nike in 1971 and now it is the market leader
in the global sports footwear industry. Branding is like raising a child wherein you need a clear
vision to aim and yet tackle new situations every day. Knight and Bowerman have done a great
job in doing so. Though the picture seems quite positive, not everything in the garden is rosy. Nike
had its pitfalls but what is inspiring is how Nike gets back on track!

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5
Source: (Media.corporate-ir.net, n.d.)

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The Beginning

According to (Referenceforbusiness.com, n.d.) Phil Knight before getting his MBA from Stanford,
was a runner and was enrolled in Bowerman's track program. After completing the business school,
Knight traveled to Japan and met a firm called Onitsuka Tiger Co. making athletic shoes. German
products dominated the American
market at that point. Being convinced
that the Japanese shoes could
compete significantly with German
companies, he decided to import
shoes on a small scale in the US. On
the course of setting up the
agreement with Onitsuka Tiger, Blue
Ribbon Sports was invented.

Knight's one-man venture turned into

a partnership with his former track
coach Bill Bowerman in 1964. Being
Source: (Sites.google.com, n.d.)
a renowned field and track coach at
the University of Oregon, he worked to improve the performance of athletes. Both the partners
were determined and had found the gap in the market successfully.
In the first year (1964) BRS sold 1300 shoes earning revenue of $8000. In 1965 BRS acquired
full-time employees and sales team. Bowerman worked with runners to modify the designs of BRS
shoes and his efforts paid off when Cortex became the best seller in 1968.

The Breakup

By the end of the decade, BRS earned $3,00,000. BRS were dependent on a single manufacturer
due to the contract of limited distributorship. Onitsuka did well through only player (BRS) and
realized they need to expand with more players. BRS realized the issue and appointed Shoji
Kitami, international sales director. He met 18 shoe distributors in America and Knight was
concerned of a contractual dispute. According to Kenny Moore, in the book "Onitsuka of the
world", it boiled down to either Onitsuka holding 51% share of the company or BRS making own
shoes. While Cortex was successful they were dependent on Onitsuka as they couldn't get
manufactured by other companies. Onitsuka couldn’t keep up with demand. Knight and Bowerman
realized they had to breakup with Onitsuka and were frustrated due to the lack of capital. However,
in 1971, Japanese trading company Nissho Iwai Corporation financed BRS enabling it to

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manufacture its own line of products overseas through other shoe manufacturer (The Olympians,
n.d.).

The Rebirth

During this period, the brand name "Nike" (Greek Goddess of Victory) and "Swoosh" trademark
(fluid, indicates speed and movement) was introduced with the help of Carolyn Davidson, graphic
design student at Portland University (Creative Market, 2016).

Source: (Creative Market, 2016)

Firing shots, win or die for Nike

BRS produced and sold the sneakers in its own name "Nike" by the end of 1971. Though Nike
challenged the integrity with the agreement of Onitsuka, Onitsuka had breached the agreement
first by soliciting other distributors. Knight and Bowerman filed the suit for the same. Onitsuka
countersued and claimed their trademarks were violated and they solicited other partners only after
BRS began Nike. This thus became a "win or die" situation for Nike because if Onitsuka won,
BRS would lose the exclusive right to sell the Bowerman’s shoes.

Winner

Federal judge ruled in favor of BRS and Onitsuka agreed to pay BRS an out-of-court settlement
to end the legal conflict. Since then, the goddess of Victory, Nike, began to spread her wings and
fly.

Nike’s Journey

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1970s

BRS opened its first US plant in Exeter, New Hampshire in 1974 and their sales neared $5 million.
This was due to aggressive promotion of "Nike" through prominent athletes like Ilie Nastaseb and
Jimmy Connors and 1976 Olympic Trials. BRS revenue skyrocketed to $28 million in 1977.
Opening up of Asia, South America and Europe between 1977-1978 expanded international sales.
In 1979 Nike sold half the running shoes bought in US and moved to new headquarters building
in Beaverton and added a market line of sports clothing and Air shoe cushioning device.

1980s

In the start of 1980s, Nike's aggressive marketing and ground-breaking design and savvy enabled
it to surpass Adidas, the former leader in US. Nike went public offering 2 million shares of stock
in December, 1980. Jogging craze helped Nike and later led to stagnated demand but due to other
athletic shoes (majorly basketball and tennis), work and leisure, children's shoes and apparels it
still gained a substantial share of sales. After expanding to international market, it faced tough
competition from Adidas and Puma who particularly had a stronghold in the soccer market.
However, in 1982, Nike's sponsored Aston Villa became the winning team in English and
European Cup championships. By 1982 Nike had more than 200 kinds of shoes (including Air
Force I) and clothing items.

Down to up

In 1984, it faced 11.5% drop in shoe sales and 30% drop in profits majorly due to aggressive
discounts and the increased costs. It moved away from traditional marketing strategy (supporting
sporting events and athlete endorsements) to wider approach through first national television and
magazine advertising campaign by investing $10 million. Yet earnings continued to fall, incurring
quarterly loss of $2.1 million at the end of February, 1985. Knight resumed the post of president
which he relinquished in 1983. Nike reduced costs by not marketing all the shoes and reduced the
line of shoes by 30%, and closed facility in Exeter.

“Air Jordan” the GAMECHANGER

The consumer interest shifted from jogging to aerobics which led to restructuring of company in
1985, closing 2 factories and rearranging divisions of apparels and athletic shoes. Company
recovered with the move of signing basketball player Michael Jordan to endorse the new version
of Air shoes called "Air Jordan". This move revived Nike and boosted revenues. Early 1986 Nike

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also announced expansion into less expensive shoes, casual apparel for women and tennis gear
marketed under the name "Wimbledon" and sales topped to $1 billion for the first time.

Branching out from Athletic shoes, Nike purchased Cole Haan in 1988 for $80 million. Profits
rebounded to $100 million with sales of $1.2 billion.

Just do it!

Nike then launched a television campaign around a theme "Just Do It" worth $10 million. With
sales booming, Nike continued aggressive marketing through ads featuring Jordan, Spiker Lee, Bo
Jackson along with the campaign.

1990s

Market dominance

In 1990s the revenue hit $2 billion. Same year Nike opened NikeTown in Portland selling full
range of Nike products. In 1991, Nike had a record sale of 41 million pairs of Nike Air shoes
gaining second place behind Adidas in market share.

Celebrating 20th anniversary in 1992, revenues rose $3.4 billion helping in expansion of 30
discount outlets and 2 NikeTowns. Bringing back the old slogan "There is no finish line", Phil
Knight announced massive plans with a goal "the best sports and fitness company in the world".
Though critics contended regarding Nike's influence and negotiations in an athlete's life, marketing
executives saw Nike not as a product line but as a lifestyle which is "Nike Attitude".

Tiger Woods agreed to a 20-year endorsement contract of $ 40 million in 1995 who later went on
to become a golf legend shattering records and winning 18 majors validating it as a blockbuster
contract.

The Slippage

With revenues of $9.19 billion in 1997, Nike's share of shoe market neared 50% of the US.
However, due to Asian financial crisis in the summer of 1997, sneaker sales plunged. Tastes of
teenagers changed from athletic shoes to dress shoes. Fourth quarter (1997-98) loss was of $67.7
million leading to laying off 1200 employees and slashing budget by $100 million for sports stars
endorsement.

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This further led to protests and boycotts over allegations of the treatment of workers in Asian
factories. Abuse of workers, low wages, poor working conditions and child labour were the
charges. Nike took immediate actions which affected the workforce like increasing minimum age,
allowing inspections of factories and tightening air quality standards. The hostility against
multinational companies burst into spotlight when protesters (against WTO) made an attempt to
storm a NikeTown outlet.

To recapture the growth, Nike took initiatives like establishing a unit called ACG (all conditions
gear) in 1998 to take advantage of trend toward extreme sports kike mountain biking,
skateboarding and snowboarding.

After 2 years, in order to market sports-technology accessories like audio player, wrist compass,
portable heart monitor, it even created a new division called Techlab. Early 1999, Nike started
selling through company's website. Same year it sponsored women's US national soccer team who
won the Women's World Cup which earned good publicity.

The Comeback of 21st Century

The turnaround for Nike wasn't through marketing but it was from concentrating on supply-chain
management, logistics and information systems. Donald Blair was brought from PepsiCo as CFO
for better control. It overhauled its apparel operations, soccer shoe market, garnered surging sales
of its golf equipments. Comeback was also due to not only focusing on performance shoes but also
on other categories by owning a portfolio of brands through various acquisitions. Nike also took
steps against labour exploitation cofounding Fair Labour Association to contract factory
inspections.

In 2004, Knight stepped aside and William D Perez became the president and CEO who was a
marathon runner, golfer and was hired from S.C. Johnson and Son with an experience of 34 years.

Nike acquired Starter and Umbro in 2004 but in order to focus in the core business lines, Nike
started divesting by selling Starter in 2007, Umbro and Cole Haan in 2012. Hurley was acquired
in 2002 and it is going to be sold this year (2019) according to (Bizjournals.com, 2019).

In 2007, according to Clean Air-Cool Planet (England-based environmental organization), Nike

ranked 3rd among 56 companies in a survey of climate-friendly companies. Manufacturing shoes
from waste, using plastic, recycling old shoes are some deeds for the environment by Nike (U.S.,
2007).

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Being known for its sponsorships, Nike continued signing biggest superstars in football like
Cristiano Ronaldo, Neymar and Mbappe (Web.archive.org, 2019). In tennis, Nike is a sponsor of
Roger Federer, Rafael Nadal, Maria Sharapova and other big names. It is also an official kit
sponsor of Indian National Team since 2005. In 2015, Nike signed an 8-year deal with NBA
(Sports et al., 2015). Nike also continued sponsoring big stars in basketball like Lebron James,
Kobe Bryant among others.

As per a CNN report, Nike spent $11.5 billion which is a third of sales on endorsement contracts
and marketing in 2018. 85 men's and women's basketball teams were sponsored by Nike and
Jordan brand in the NCAA tournament.

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Recent blunders

Marathoner Eliud Kipchoge though won the 42nd Berlin marathon,

2015, he finished shy of 63 seconds of the world record. During the
race the insoles of his shoes were sliding out which created problems
for him (Npr.org, 2015). Nike admitted it to be a sock liner problem.

Source: (Npr.org, 2015)

On 21st February, 2019, Nike's stock

plummeted 1.7% and it lost $1.1 billion as
basketball star Zion Williamson's Nike shoe
broke and he sprained his knee (The
Independent, 2019).

Source: (Usatoday.com, 2019)

Nike introduced "Betsy Ross sneaker" in order to celebrate

Independence Day in the US with an early version of
American flag named after the flag make Betsy Ross. But
the sneakers were pulled back by Nike as NFL quarterback
Colin Kaepernick objected the design arguing it to be
associated with slavery and used by extremist nationalist
groups (Forbes.com, 2019).
Source: (Sports.yahoo.com, 2019)

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Up it goes

Source: (Macrotrends.net, 2019)

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Closer to the Future

In June 2015, Phil Knight retired handing the baton to Mark Parker. But in order to focus on being
digital, he will be replaced by John Donahoe who was formerly a CEO of eBay and chairman of
the board at Paypal (Lauren Thomas, 2019).

According to (Forbes.com, 2019), Nike's triple-double strategy: 2x innovation, 2x direct, 2x speed

has been paying off. It can be evidenced by strong owned and partnered digital channel, driven by
innovative platforms and solid growth across footwear and apparel. Strong sales growth with
expected revenue growth to $42 billion by FY2020 is likely considering the increasing focus on
upcoming global sports events, digital platform and increasing partnerships.

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References:

1. Encyclopedia Britannica. (n.d.). Nike, Inc. | History & Facts. [online] Available at:
https://www.britannica.com/topic/Nike-Inc [Accessed 27 Oct. 2019].

2. Referenceforbusiness.com. (n.d.). NIKE, Inc. - Company Profile, Information, Business

Description, History, Background Information on NIKE, Inc.. [online] Available at:
https://www.referenceforbusiness.com/history2/99/NIKE-Inc.html [Accessed 27 Oct.
2019].

3. Media.corporate-ir.net. (n.d.). [online] Available at: http://media.corporate-

ir.net/media_files/IROL/10/100529/nike-gs09/docs/nike-growth-story.pdf [Accessed 30
Oct. 2019].

4. Creative Market (2016). The $35 Nike Logo and the Woman Who Designed It. [online]
Available at: https://creativemarket.com/blog/the-35-nike-logo-and-the-woman-who-
designed-it [Accessed 27 Oct. 2019].

5. Russell, C. (2019). Adidas or Nike? Which Retail Giant is Winning The Sneakers War?.
[online] Forbes.com. Available at:
https://www.forbes.com/sites/callyrussell/2019/08/22/adidas-or-nike-which-retail-giant-
is-winning-the-sneakers-war/#4c1bdfeb12b7 [Accessed 29 Oct. 2019].

6. The Olympians. (n.d.). Blue Ribbon Sports – The Olympians. [online] Available at:
https://theolympians.co/tag/blue-ribbon-sports/ [Accessed 29 Oct. 2019].

7. Bizjournals.com. (2019). Nike to sell Hurley brand to Bluestar Alliance. [online] Available
at: https://www.bizjournals.com/portland/news/2019/10/29/nike-to-sell-hurley-brand-to-
bluestar-alliance.html [Accessed 30 Oct. 2019].

8. U.S. (2007). Canon tops list of climate-friendly companies. [online] Available at:
https://www.reuters.com/article/environment-climate-companies-dc/canon-tops-list-of-
climate-friendly-companies-idUSN1840883720070619?feedType=RSS [Accessed 30
Oct. 2019].

9. Web.archive.org. (2019). Jogadores de Futebol Patrocinados pela Nike | Nikemedia

Brasil. [online] Available at:
https://web.archive.org/web/20130419025657/http://nikemedia.com.br/futebol/atletas/
[Accessed 30 Oct. 2019].

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10. Sports, O., GP, M., Olympics, S., Games, A., Games, C., Games, &., Racing, H. and
Games, X. (2015). Sources: NBA, Nike have near-$1B apparel deal. [online] ESPN.
Available at: https://www.espn.in/nba/story/_/id/13053413/nba-signs-8-year-apparel-
deal-nike [Accessed 30 Oct. 2019].

11. Npr.org. (2015). NPR Choice page. [online] Available at:

https://www.npr.org/sections/thetwo-way/2015/09/28/444207846/just-missed-it-
marathoner-comes-up-short-on-world-record-after-nikes-fall-apart [Accessed 30 Oct.
2019].

12. The Independent. (2019). Nike stock market value plunges by $1bn after basketball star's
shoe breaks. [online] Available at:
https://www.independent.co.uk/news/world/americas/nike-share-price-zion-williamson-
shoe-duke-blue-devils-north-california-stock-a8791476.html [Accessed 30 Oct. 2019].

13. Usatoday.com. (2019). [online] Available at:

https://www.usatoday.com/story/sports/ncaab/acc/2019/02/20/zion-williamson-shoe-
blows-apart-apparent-injury/2934508002/ [Accessed 30 Oct. 2019].

14. Forbes.com. (2019). Why Nike's Pulling The Flag Shoe Is A Blunder. [online] Available
at: https://www.forbes.com/sites/charlesrtaylor/2019/07/02/why-nikes-pulling-the-flag-
shoe-is-a-blunder/#6b431e611eda [Accessed 30 Oct. 2019].

15. Sports.yahoo.com. (2019). Yahoo is now part of Verizon Media. [online] Available at:
https://sports.yahoo.com/nike-recalls-shoe-after-colin-kaepernick-raises-racial-concerns-
044445358.html [Accessed 30 Oct. 2019].

16. Macrotrends.net. (2019). NIKE Revenue 2006-2019 | NKE. [online] Available at:
https://www.macrotrends.net/stocks/charts/NKE/nike/revenue [Accessed 30 Oct. 2019].

17. Lauren Thomas, M. (2019). Nike CEO Mark Parker to step down—ex-eBay CEO John
Donahoe to replace him. [online] CNBC. Available at:
https://www.cnbc.com/2019/10/22/nike-ceo-mark-parker-to-step-down-john-donahoe-to-
replace-him-in-2020.html [Accessed 30 Oct. 2019].

18. Forbes.com. (2019). After A Strong Performance In Q3 2019, Would Focus On Digital
Platform Drive Nike's Growth?. [online] Available at:
https://www.forbes.com/sites/greatspeculations/2019/03/25/after-a-strong-performance-

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in-q3-2019-would-focus-on-digital-platform-drive-nikes-growth/#6158cc4535e5
[Accessed 30 Oct. 2019].

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