NIKE

Tarfah Al Sheikh M00462506

M00473190
Asia Yasin M00440611
Deeqa Ali M00461638
Mercy Etuk M00473603

Tsz ue szeto
 Table of contents

Introduction
Nike Background
External Analysis
Pest Analysis
Industry Environment Analysis
Competitor Analysis
Porters Five Forces Analysis
Internal Analysis
Financial analysis
Opportunities & Threats
Ansofs thingy
Porter’s Generic Strategy
Mintzberg Organisational Structure
Competencies, Capabilities and Resources
Corporate Strategy
Introduction
 Nike Background

• Nike is sportswear company founder in 1978 by Bill Bowerman and Phil

Knight.
• The company specializes in the design, developing and marketing of sports
apparel, athletic footwear, accessory products, and equipment.
• The company is a publicly traded company, trading on the New York stock
exchange with the symbol NKE.
• Nike currently is the market leader in the manufacture of sport and gear
apparels and equipment, and also possess 52% pf the market share across
the world markets (Ramaswamy, 2014).
• The company’s mission has always been to bring innovation and
inspiration to an athlete for every sports division
 PESTEL A

Political Political:
Currently, Nike’s factories are located in over 34 international countries such as: Brazil, Australia, China, Mexico, Pakistan, India, Israel
(Manufacturingmap.nikeinc.com, 2016). The majority of it products also uses raw materials such as: natural and synthetic fabrics and threads, plastic, metal
hardware, natural and synthetic rubber, plastic compounds, foam cushioning materials, nylon, leather, canvas and polyurethane films which are also available in the
countries where manufacturing is made (Nike.Inc, 2016). As a result of the location of manufacturing sites as well as raw materials, the success of production and
manufacturing operations as well as availability of products to customers is dependent on favourable trade regulations as well as political stability in these countries.
Nike is at a risk of failure ad would experience serious difficulty if there is political unrest, disruptions or delays in cross-border shipments in these
Environmental countries(Keynote.co.uk, 2016).
Secondly, Nike faces risk of counterfeit products being sold in its name as a result of current existing leather labelling laws in the UK(Keynote.co.uk, 2016). This
has been a continuous problem for the company as customers expectation as well as the brands reputation is put at risk and the existence of these products is also
misleading to customers. However, the introduction of new leather labelling laws in the in the UK, will mean that the existence, production and distribution of
counterfeit products will decrease which will then allow Nike to repair its brands reputation and enable it to increase sales and profits (Keynote.co.uk, 2016).
Environmental:
With UK consumers increasingly aware of their impact and negative consequences of global warming, industries and their companies are facing increasing pressure
Social to improve their manufacturing and production processes(Keynote.co.uk, 2016). Currently, Nike’s highest emissions stem from raw materials used in manufacturing
its products and finished goods (Nike.inc, 2015). New emission laws states that companies need to reduce their level of CO2 emission to 80% by 2050 (SMMT,
2016). Nike recognises the issue of climate change and aims to cut energy use and Carbon dioxide emissions (CO2) by employing new techniques such as;
reducing process heat loss and improving energy management to ensure that its energy use and CO2 emission rate is reduced (Nike.Inc, 2015).
Nike also faces the risk of condemnation from animal rights groups for use of leather as a raw material(Keynote.co.uk, 2016). This is because of the chemicals
used in the tanning process lead to water pollution and damaged eco systems and Nikes leather sources come from the countries in which it manufacturing takes
place such as: India and suppliers are not bound by UK regulations. If the company is unable to achieve or switch environmentally friendly production processes or
Technological raw materials, it could lead to closure as well as boycotts from customers who are beginning to be more aware and demanding environmentally friendly products
(Keynote.co.uk, 2016).
Social:
The recent shift in public desire to maintain a healthy lifestyle has greatly favoured Nike’s brand and its products as its current demographic is 18-40 years old
(Leontiev, 2016). This has led to increased sales of workout apparel and footwear (Leontiev, 2016). However, there is also a shift towards more environmentally
friendly and Fairtrade products. The company has to continually monitor its working conditions in its factories as well as emissions to avoid legal issues as well as
Economic boycotts from its current customers and the public (Leontiev, 2016).
Economic:
Several economic factors can affect the operations of Nike. Factors such as; exchange rate, interest rates and inflation can determine the success or failure of the
business (Hitt, Ireland and Hoskisson, 2013). Majority of Nike’s products are sold outside of the UK (Nike.Inc, 2016). As a result, transactions are conducted in
various currencies and fluctuations in the exchange rate means that profit margins, product distribution, availability of raw materials and sale values can be greatly
influenced negatively or positively (Nike.Inc, 2016). For example, an increase in exchange rate would result in negative sales and profit values. As this would mean
that the company would struggle to receive its supply of raw materials because of high prices and the number of exports of its products for distribution outside the
Legal UK would also decrease.
-raw material costs:
There has been a sharp increase in global leather prices over the past five years, as the demand for leather is rising within the fashion industry.
Drought caused in the US by flooding in India have slowed down the production of leather as well as more strict regulations of leather trade in some
countries (Keynote.co.uk, 2016). This all adds on to the demand of leather. Around half of global leather use is on footwear so footwear companies have
been affect the most with the recent increase in price; the price of leather is expected to increase over the next few years. Also the price of splits which
are used to make leather sports shoes have been high in the recent years adding more weight to the market(Keynote.co.uk, 2016).
 Porters Five Forces Analysis
Threat of Substitute: Low to medium
Intensity of rivalry: Medium to High
There is only few providers that targets athletics footwear and is designed for a
The industry shows no sign of slowing down, there is continuous innovations on specific purpose so it doesn't apply to the public in general.
lightweight and breathable microfibers(Catalyst, 2014)
. If people want to buy quality shoes to run in they wouldn’t buy sandals because it is
There is no lack of differentiation as consumer demands are always changing. less expensive, they would have to buy sports footwear as a result. This means that
Nike must keep up or they will lose market share as a result. the threat of substitute is low. (123writing, 2013)

Nike is a very well established company, it owns about 31% of athletic footwear Buyers face few switching costs as Nikes main competitors sell at a similar price as
market share and has strong brand image. their product qualities are just as good as Nikes.

It’s part of a oligopoly market (Prezi, 2014)) having few major competitors that Nikes sportswear apparel has more substitutes such as clothing wore on a daily
own a large share of the athletic footwear and apparel market including adidas, basis by consumers, they can choose any sports clothes from high street brands
puma and new balance (hoovers2012) such as H&M for example. Although the quality may not be as good it does make the

Emerging competitors for example would be Under armour, Lululemon and

substitutes cheaper .
Asics.

Supplier Power: High

Suppliers Goods are Critical to Buyers Marketplace Success (Hitt,

Ireland and Hoskisson, 2013):
Nike relies heavily on its suppliers for raw materials such as: natural and
synthetic fabrics, threads, plastic, metal hardware, natural and synthetic
rubber, plastic compounds, foam cushioning materials, nylon, leather,
canvas and polyurethane films (Nike.Inc, 2016). These suppliers are
located in foreign countries who are at risk of issues such as political
unrest, exchange rate fluctuations and the regulatory laws(Anon, 2016). If kkkkk
a disruption (such as: delays in shipment or delivery, work or port strikes)
occurs in the supply of fabrics or raw materials from current sources or an
increase in demand, the company would experience delays in
production and will be unable to meet consumer and retail distribution
needs(Anon, 2016).
High Switching Costs (Hitt, Ireland and Hoskisson, 2013):
Also each supplier operates separately and independently from each
other, replacing or finding a new supplier in the event of a political unrest
would result in poor financial performance and added costs, as well as
delays because of the time(Anon, 2016). It would take to train new
 Competitor analysis
Nike Puma Adidas

Nike, Inc. has two main competitors within the sportswear market
General information General information General information which are Adidas and Puma. Adidas is highly known brand for its
Annual shares: £21.48bn • Annual shares: £2.60bn • Annual shares: £12.97bn various shoe brands such as Reebok, TaylorMade and Rockport. The
company operates in 160 different countries and is regarded as the
• 12-month Net income growth:21.89% • 12-month Net income growth:42.14% • 12-month Net income growth:29.41% third largest sport apparel and equipment provider (Hoovers, 2016).
• GDP: 46.31% • GDP: 45.46% • GDP: 48.28% Puma is constantly altering it image, creating footwear and other
accessories which are sold in other department stores as well as their
• Values:the company strives to provide • Values: they partake in endeavour to • Values: The company uses its brand equity own individual stores (Hoovers, 2016).
encouragement and advance the further improve future generations, in to establish the image as a ‘genuine’
potential of athletes around the world order to create a more enriched world sporting brand. They aim to develop new
(About.nike.com, 2016) (HuntShire, 2016). products that can motivate consumers
• New developments and long-term • New developments and long-term (adidas Group, 2016).
goals: goals: • New developments and long-term goals:
Continuing to develop new designs to To expand their existing brands, for Three features have been considered to be the
coincide with its existing shoe brand lines example, the second generation of main focus of the company, which are speed,
for example, Kobe shoe line, with the evopower 1.3was recently released to the cities and open source (Adidas-group.com,
involvement of Kobe Bryant, the company public (Footy Headlines, 2016). With this 2016). In order to keep up with the endless
is bring out ‘Kobe 11’ trainers (Nike News, they can expand and grow more. pace that the sporting line industry, they must
2016). Furthermore, they are focused on • Capabilities: increase the speed of their growth and
new innovations that can adapt to the • Partnerships with Ferrari and BMW performance (Adidas-group.com, 2016).
growing world of technology. • Qualified R&D group
• Capabilities: • Strong brand name Outlining their five year proposal centred on
• strong relationships • Sponsorships with players and teams emerging in innovative concepts, as a way to
• programming and elite coaching from different sporting industry improve upon their current growth (Adidas- £21.48
• 17 languages available at the Training • Resources: group.com, 2016).
clubs • Employing 8300 workers • Capabilities:
• Resources: • Operating in over 90 countries • Strong financial position
£12.97
• return on capital increased • Collaboration with other sports companies
• Top athletes involved in premium •
performance • Resources
• 408 apparel factories • Strong distribution network
4.4
2.4 £2.60 1.8
• 2030 design patents • 2400 stores 21.98% 42.14% 29.41%

Nike Addidas Puma

Annual shares (billion) Annual sales (billion)
Income growth
 Nike Porters Generic Strategy (Stand Out from the Crowd | Examples of Differentiation, 2014) and

(Nike.Inc, 2016).
Nike’s differentiation strategy is its focus on innovation and development of its products. This can be seen in its continuous improvement of its
personalised shoes for individuals. In 1987,the company introduced its first ever running shoes with air technology that athletes could actually see
(Nike.Inc, 2016). From the Air technology in its shoes, Nike has been able to develop other cushioning such as: Nike Zoom, Nike Shox, Max air and
lunarlon for over 40 products under its name. The company in a bid to establish and differentiate itself from other brands introduced the Nike ID option
for customers as well as a range of gadgets (Nike +) and even partnering with apple to develop the iPod sports kit to help track fitness (Nike.Inc, 2016).
This has enabled the company to provide products that stand out from other brands and customers are willing to pay more for products they believe
are authentic.
The company also invest large amounts (approximately £1.3billion in 2015) in research and development and also rely upon employees who are
specialists in the fields of biomechanics, exercise physiology, engineering, industrial design as well as research committees and advisory boards made
Nikes Differentiation
up of athletes, Strategy:
coaches, trainers, Examples
equipment managers,oforthopaedist's,
Nike’s Innovation and
podiatrists to Development
help with developing products to meet customer demands as well
the brands aim of manufacturing shoes that reduce injury, enhance and maximize athletic performance (Nike.Inc, 2016).

Shoes to Meet Several Sports Apparel;

Compression and Nike
Demographic Categories pro:
Needs: Nike ID: These are layers
Running, Lifestyle, Personalization designed to keep you
warm in the winter but
Football, Basketball, options for customers flexible to workout in
Gym & Training, on shoes. without burning up.
Skateboarding,
Tennis, Golf. Nike Air Technology:
Nike Air technology
consists of pressurized air
Nike + products Available: inside a tough, yet flexible
Nike + Training app bag. The Air Sole units are
Nike+ Sports watch GPS located in the midsole
beneath the heel, forefoot
Nike + Fuel Band or in both areas. This offer
Nike + Running app lightweight, comfortable
shoes that reduce the
Nike + IPod impact of a workout.
(Adapted from Nike.Inc, 2016
 Mintzberg’s Organizational Structure (Kokemuller and Media,
2016)
Nike is a divisional organisation (Kokemuller and Media, 2016). This is because Nike’s Nike
business is divided into multiple product lines and units. Nike divides the business into three
main divisions: Global head quarters, regional (EMEA) headquarters and subsidiaries
(Brenner, 2016). Nike operates as a divisional organisation because it is able to reduce Subsidiaries
Regional (EMEA)
complexity in operations and decision making process. Control of the divisions is central and Global Headquarters
Headquarters
Nike’satOrganizational
situated Structure
the central head quarters (Brenner, Explained
2016). (Brenner, 2016)
Cole

UK and Ireland
Bauer
The diagrams are a representation of Nike’s organizational structure.
Global Headquarters Australia
The first diagram shows the three divisions in which the organization is Germany Hurley
Slovenia
based. The second diagram shows a more detailed image of the
Switzerland
company. Converse

Regional (EMEA) Headquarters
Subsidiaries
The company houses its other brands under subsidiaries. These Central Europe
Middle East
subsidiaries are in charge of all marketing and distribution activities of Africa
the company and its products(Brenner, 2016).
Italy and France
The regional headquarters is in charge of developing and
implementing strategies as well as gathering and identifying new or
Northern Europe
available resources and trends in stated regions in order to increase
efficiency in the development and design process(Brenner, 2016).
Liberia
However , the global headquarters is in charge of final decision making Portugal
Spain
process, research, design and development of products as well as
three of Nike’s four major markets and also manages regional
operations in the U.S and Asia Pacific (Brenner, 2016).
 Nike corporate strategy
• Nike has embedded innovation at the core of its growth and this is reflected in the corporate strategy. It pursues a continuous
process of trying to create innovative products for its customers across the world. The company has targeted that it will grow the
Nike brand across the six different locations that it is operating in, it also plans on expanding its presence across the emerging
markets. While growing the brand, it also aims at opening around 300 new stores through a period of 5 years across its different
markets so that it is able serve its customers directly. Another growth driver will the NikeiD that will be aimed towards teenagers and
expand its product appeal and drive revenues. (Nike, 2015)

Innovation culture is fostered into everything Nike does,

Cost Leadership Focused Innovation it has imbibed this into everything Nike stands for.

CSR Community Impact

• Nike is present across different countries across the globe. It sells its products through retailers, wholesalers and its own retail
outlets, directly to customers. It is a multi-country operator how its expansion plans are not merger driven in its markets. It has
acquired a number of brands that complement its overall portfolio how its growth is not driven by mergers or acquisition (Vogel,
2012). The company has embedded sustainability as a core growth driver into its business strategy.

Acquisition’s Timeline
 Competencies, Capabilities & Resources
Competencies
• It has a very distinctive brand awareness with its Swoosh
sign and famous tag line of “Just Do It’
• It endorses a large number of global athletes
• It has flagship stores where it provides customers the
opportunity to engage with the brand
• It offers customizable shoes
• It offers new products and has a string innovation
pipeline
• It focuses on new and better products
• It has a wide range of products that can meet the needs
of a large number of customers
• Majority of its shoes are outsourced from Asia where it
benefits from cheap labor
• Doubled its business in the last 10 years
• Nearly tripled its EPS in the last 10 years
• Revenues grew by 10% to $30.6 billion
• Gross margin improved by 120 BPS (Forbes, 2016).
Capabilities
• Deeply personal and responsive, our digital
ecosystem drives strong relationships, growing
the NIKE+ community exponentially every year
Resources
• And we’ve rolled out elevated NIKE+ Run Clubs
• Return on Invested Capital increased to 28.1%
in 20 cities around the world to offer runners
• Women’s Event, where 27 of the world’s top
more comprehensive programming and elite
athletes unveiled new premium performance
coaching
products
• NIKE+ Training Club to 17 languages while
• It has 146 footwear factories in 14 different
adding sharing capabilities
countries
• NIKE e-commerce revenue grew 55% in fiscal
• It has 408 apparel factories in 30 countries
2015 to over $1 billion
• It has 2030 design patents
• It has 951 across the world and sell through its
• There are 62600 employees globally (Stynes,
website to 25 different countries (Nikebiz,
2015).
2016).

Assets ($M) Rev ($M)

$350.00 $24,000.00 $32,000.00
$300.00
$22,000.00 $30,000.00
$250.00
$200.00 $28,000.00
$150.00 $20,000.00
$26,000.00
$100.00
$18,000.00
$50.00 $24,000.00
$0.00 $16,000.00 $22,000.00
2006 2007 2008 2009 2010 2011
$14,000.00 $20,000.00
Nike Inc 2011 2012 2013 2014 2015
2011 2012 2013 2014 2015
S&P 500 Index - Total Returns
Assets ($M) Rev ($M)
Down Jones
S&P 500 Apparel, Accessories and luxury goods

The above graph shows the total comparison of 5 year The company has increased its assets to meet This chart shows the revenues are increasing
total return among NIKE which shows how it is the customer demands and cater to its growing consistently for the past years as the business is
performing against the stock market where NIKE business demands growing.
performing that the stock market index.

The financial statement provides the
revenue, cost of operating, administrative
expenses and interest income and many
other cost factors that contribute to the
company’s overall profits and losses, over
a specific period of time (stock analysis on
net, 2016). Nike INC, revenue increased
over the past five years, from £13,155.79
million in May 2010 to £19,994.69 million
in May 2015 (Hoovers, 2015). However,
the company experienced two separate
decreases in their revenue, net income
and net profit margin during the five year
period. The first occurrence was in 2011,
with the revenue dropping from £13,
155.79 million in 2010 to £12,663.23
million. On the other hand, the net profit
margin increased 0.19%, which shows
that overall; Nike Inc. was able to gain
more profit, after all their expenses were
paid off.
Financial Analysis
The second period that the company
underperformed was 2013 to 2014
(Hoovers, 2015). The revenue dropped
from £16,688.88 million to 16,584.88
million. However, this drop was not as
significant as the previous downturn,
were they lost substantially higher
amount of revenue and net income. In
terms of net profit margin, it decreased by
0.13%. This is the first occurrence that
Nike, Inc. has lost profit of their remaining
revenue, within the five year duration
(Hoovers, 2015).
Overall, the revenue of Nike, Inc. trend
varied throughout the five years. It started
off at a high rate of growth, between 2010
until 2012. However, after this significant
peak in revenue, the growth became
more to be steadier, with relative
increases, apart from some irregularities
of extreme burst in profit increase. In
regards to the net income and net profit
margin tend, the company experienced
consistent rises throughout the five years,
with only limited abnormalities.
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http://www.marketing91.com/adidas-swot-analysis/