Nike

Company History

In 1962 Phil Knight, developed a plan to make low-cost running shoes in Japan and sell them in the United States as part of his work toward an MBA degree at Stanford. After graduation, he teamed up with Bill Bowerman, his track coach at the University of Oregon, to realize his dreams. In 1964 with $500 each, they started the Blue Ribbon Sports Company. In 1972, Blue Ribbon Sports received a trademark on its Swoosh logo and introduced the Nike Brand name. In the 1970’s and 1980’s used their technological expertise to develop athletic shoes that revolutionized the industry. Nike grew more successful every year with profits increasing steadily during this time. In 1980 Nike goes public, offering 2 million shares of stock. The company continued its growth in sales. In just 12 years company revenues went from $1.96 million to $919 million.

Critical Issues Being faced by CEO of Nike, Inc. ➢ In 1984, 29% Decrease in net income from Previous year ➢ The athletic-footwear industry had become competitive. ➢ Another major issue is Maintaining its competitive edge through innovative methods of Marketing ➢ Domestic Market for athletic shoes was decreasing. ➢ Consumer Preferences: Consumers were changing their preference from the athletic shoes to a more fashionable and traditional style. ➢ Because of foreign operations some risks occurs like revaluation of currency, export duties, political instability. ➢ There are 50 companies worldwide that produce athletic footware, which is becoming increasingly competitive.

SWOT Analysis Strengths 1. Brand Name 2. Financially Strong

3. 4. 5. 6.

Strong Competitive Position Sells variety of models Effective Research and Development Department Effective promotional Activities 7. Successful experience being competitive 8. International Marketing Efforts

Weaknesses 1. Use of Contract manufacturers makes it difficult to control quality of production 2. Use of sports stars who fail to perform, retire or become injured could adversly effect Nike image and consequently sales. 3. Heavy dependency on footwear sales 4. Use of contract manufacturing in foreign countries has the potential to create financial problems due to foreign currency fluctuations and interest rate changes.

Opportunities 1. Nike must focus on Growing e-commerce, it will have positive effect

2. Can grow in new and emerging markets 3. Women demand for athletic footwear and clothing is increasing significantly 4. Customer use of company’s products change from athletic purpose to a fashion item

Threats 1. 2. 3. 4. 5.

Strong Competitors Consumer Preferences Currency Fluctuation Piracy of footwear and apparel designs could decrease sales and adversly impact image. Political unrest in the suppliers countries

SWOT Matrix Strengths 1. Brand Name 2. Financially Strong 3. Strong Competitive Position 4. Sells variety of models 5. Effective Research and Development 6. Effective promotional Activities

Weaknesses 1. Use of Contract manufacturers makes it difficult to control quality of production 2. Use of sports stars who fail to perform, retire or become injured could adversly effect

7. Successful experience

being competitive 8. International Marketing Efforts

Nike image and consequently sales. 3. Heavy dependency on

athletic footwear sales 4. Use of contract manufacturing in foreign countries has the potential to create financial problems due to foreign currency fluctuations and interest rate changes.

Opportunities 1. Nike must focus on

Growing ecommerce, it will have positive effect 2. Can grow in new and emerging markets 3. Women demand for athletic footwear and clothing is increasing significantly 4. Customer use of company’s products change from athletic purpose to a fashion item Threats 1. 2. 3. 4.

Strong Competitors Consumer Preferences Currency Fluctuation Piracy of footwear and

SO Strategies ➢ With the help of brand image and effective R&D Nike can focus on Growing Ecommerce (S1,S5,O1)

WO Strategies ➢ Product Development (W3,W4)

➢ Market Development

(S2,S3,S7,O2)

ST Strategies ➢ Alternative Brands

(S1,S2,S5,T1) ➢ Market

WT Strategies ➢ Innovative

products(W3,T1,T2)

apparel designs could decrease sales and adversly impact image. 5. Political unrest in the suppliers countries

Penetration(S6,S2) ➢ Backward Integration(S2,T5)

SPACE Matrix According to my analysis about this case study of Nike, Inc. Company lies in the Aggressive Quadrant of SPACE Matrix.

Grand Strategy Matrix Potential strategies are: ➢ ➢ ➢ ➢ ➢ ➢ ➢

Market Development Market Penetration Product Development Backward Integration Forward Integration Horizontal Integration Related Diversification

The Quantitative Strategic Planning Matrix Market Alternate Strategies KEY FACTORS

Opportunities  





Market Development

Product Development

WEIGHT

AS

TAS

AS

TAS

5

2

10

3

15

4

60

2

30

Focus on Ecommerece 15 New and emerging markets. Women 15 demand increasing Fashionable 15 footwears

3

45

4

60

3

45

4

60

THREATS

 Strong Competitors  Consumer Preferences

20

3

60

2

40

10

2

20

3

30

 Piracy of footwear 10 and apparel designs could decrease sales and adversly impact image.  Political unrest in 10 the suppliers countries

-

-

-

-

-

-

-

-

15

4

60

4

60

15 10

4 3

60 30

4 2

60 20

10

2

20

3

30

10

1

10

2

20

1.00 STRENGTHS



Brand Image

 Financially Strong  Strong Competitive Position  Sells variety of models  Effective Research and Development  Effective promotional Activities 

10

2

5

15

3

5

3

15

3

15

5

-

-

-

-

Successful experience being competitive WEAKNESSES

 Use of Contract manufacturers makes

it difficult to control quality of production 10  Use of sports stars who fail to perform, retire or become injured could adversly effect Nike image and consequently sales.  Heavy dependency on 5 athletic footwear sales 

Use of contract manufacturing in foreign countries has the potential to create financial problems due to foreign currency fluctuations and interest rate changes.

TOTAL

10

1

10

2

20

2

10

3

15

-

-

1

4 .65

Above the two alternatives Product Development is the best one.

Financial Analysis Current Ratio: 1.45(1982)

1.82(1983)

That’s means company has enough cash to make more investments. Earning per Share: 1.37(1982) 1.53(1983) Other expenses: Percentage of other expenses is increasing rapidly

4.9

Recommendations

➢ According to overall analysis company should introduce more products or improve

➢ ➢

➢ ➢ ➢ ➢ ➢ ➢

current ones to satisfy potential increase in demand. Should develop product lines in both fashionwear and sportswear. Keep expanding into current and future foreign markets by being aggressive and the worldwide leader of the footwear industry. Should continue to focus on technology Research in international market to find out what are the new trends related with women and kids products. Should enhance Nike online Market Should develop better methods to control quality of contract manufacturers. Nike should control over extra other expenses. Need to consolidate US sales compared to international sales and international competitors.

Projected Income Statement (Year ended 1984)

(in thousands) Revenues

1144720

Costs & expenses Cost of sales

766982

Selling and administrative

188008

Interest

26928

Other expenses

1130 (983048)

Income before income tax

161672

Provision for income tax

(74325)

Income before minority interest

87347

Minority interest

(197)

Net income

87150