Nike

2003
Dustin Nadeau, Donatas Sumyla,
David Deprey and Jaime
Rodriguez
Bus 411, May 2006

Case-Study Overview

Internal:
History, Nike overview, Key
Facts, Our Brands and Stock
Information
Nike Actual & Proposed Vision
and Mission
Economic Performance
Evolution of Financial Ratios
Strengths and weaknesses
Analysis: IFE

External:
Industry overview and
comparison of financial ratios
Manufacturing
Opportunities and threats
Analysis: EFE
Competitors
Market Share
Analysis: CPM

Analysis

SWOT Matrix
SPACE
BCG
IE matrix
Grand Strategy Matrix
QSPM

Possible strategies: Matrix

Analysis
Decisions
Why our decision?
Strategic implementation
Actions

Evaluation Procedure
Current Update

History
1962: Phillip Knight, a Stanford University business graduate
and former member of the track team, arranges to import
athletic shoes from Japan and sell them in the U.S.. Knight
created Blue Ribbon Sports as a cover name for his smallscale shoe-selling operations
1964: William Bowerman becomes a partner by matching
Knight's investment of $500.
1965: Hires a full time employee, and annual sales reach
$2,000.
1966: Blue Ribbon Sports, also known as BRS, rents its first
retail space; employees can now stop selling shoes from their
cars.
1969: It now has several stores and 20 employees; sales are
close to $300,000.
1971: Nike, capitalizing on the Greek goddess of victory. The
first Nike product sold with the new symbol is a soccer shoe.
1970 1975: Steve Prefontaine was turned to the University of
Oregon by Bill Bowerman and wore Nike products.

History
1976: The popularity of jogging increases revenue to $14 million.
1978: The company changes its name to Nike.
1980: Nike goes public, offering 2 million shares of stock.
1990: Nike files suit against competitors for copying the patented
designs of its shoes, and also engaged in a dispute with the
U.S. Customs Service over import duties on its Air Jordan
basketball shoes.
1997: Feb., Stocks reaches a high of $76 per share.
1998: Sept., Stocks tumbles to $31 per share.
2000: The National Football League declines to renew its
exclusive apparel licensing arrangement with Nike.
2001: Nike opens its first Nike Goddess store, a unit targeting
women, in Newport Beach, CA.
2003: Nike purchases Converse Inc. for $ 305 million.

Origin of the Name and the

Swoosh
Nike is the Ancient Greek goddess of
victory
It is one of the most recognized symbols in the
world The Swoosh. Simple. Fluid. Fast.
(Quote from Nikes website)

Evolution of the Swoosh Logo

Nike Overview

Nikes principal business activity is the design, development and worldwide

marketing of high quality footwear, apparel, equipment, and accessory
product
Distributed in over 160 countries around the world: (Asia, Australia, Canada,
Europe, Latin America, and the United States)
Nike is the largest seller of athletic footwear and athletic apparel in the
world.
Fiscal year ended May 2003: Revenues of $10,697 million (increase of
8.1% against 2002)
Employees: 26,000 worldwide.
650,000 in Nike contracted factories around the globe.
Facilities: in Oregon, Tennessee, North Carolina and The Netherlands.
Also operates leased facilities for:
* 14 Niketowns,
* Over 200 Nike Factory Stores,
* 12 NikeWomen stores
* Over 100 sales and administrative offices.

Key facts (2003)

Headquarters: Beaverton, OR
Index Membership: S&P 500
S&P 1500 Super Comp

Sector: Consumer Goods

Industry: Textile - Apparel Footwear & Accessories
Other Brands: Cole Haan, Converse, Hurley,
Bauer Hockey, Starter Apparel
Market Cap: 21.738 billion
Ticker Symbol:
NKE
Ranked 173 in the Annual ranking of America's largest
corporations (Fortune 500 magazine)

Our Brands

 Cole Haan, based in Maine, sells dress

and casual footwear and accessories for
men and women under the brand names
of Cole Haan, g Series, and Bragano.

 Nike Bauer Hockey, based in New

Hampshire, manufactures and distributes
hockey ice skates, apparel and equipment,
as well as equipment for in-line skating,
and street and roller hockey.

 Hurley International, based in California,

designs and distributes a line of action
sports apparel for surfing, skateboarding
and snowboarding, and youth lifestyle
apparel and footwear.

 Converse, based in Massachusetts,

designs and distributes athletic and casual
footwear, apparel, and accessories.

Nike Stock (NKE) Information

Stock Symbol: NKE.
Went public in December 1980 and is
traded on the New York Stock Exchange.
Price:
Dec 31st, 2003: $68.46
May 1st, 2006: $82.21

Shares Outstanding (July 2003): 263.7 mill

Stock Price Performance

Historical Stock Price

Performance

Vision Statement
To bring inspiration and innovation to
every athlete* in the world
(* If you have a body, you
are an athlete
Bill Bowerman, co-founder)

Proposed Vision Statement

Continue to bring inspiration to present
and future athletes, while maintaining the
company's standard of quality for its
products.

Mission Statement
Nike is the "largest seller of athletic footwear and
athletic apparel in the world. Performance and reliability
of shoes, apparel, and equipment, new product
development, price, product identity through marketing
and promotion, and customer support and service are
important aspects of competition in the athletic footwear,
apparel, and equipment industry. We believe we are
competitive in all of these areas."
The company aims to " lead in corporate citizenship
through proactive programs that reflect caring for the
world family of Nike, our teammates, our consumers,
and those who provide services to Nike."

Proposed Mission Statement

To continue to offer quality products with increasing
growth in the industry and expanding globally. Our
mission has always been to provide a competitive edge
by developing the most technological products. Keeping
in mind fair labor practices in all our suppliers factories,
while maintaining a competitive advantage, with the
shareholders interests, and company profits in mind. We
also believe our employees are one of our most
important assets. To increase the responsibility towards
the environment by evaluating the impact of day to day
operation and attempts to change operations that have a
negative impact.

Economic Performance:
Revenues by Regions (20012003)

Evolution of Financial Ratios

(1999-2003)

Internal strengths and weaknesses

STRENGTHS:

Strong brand recognition

Internet sales
Growing international presence
Superior research and development
department
Strong financial returns
Strong sense of culture in the
working environment
Great celebrity spokespersons
Automatic replenishment system
Successful experience being
competitive
Nike doesnt own any factories
Successful marketing campaigns

WEAKNESSES:

Lack of stores catering to the

active females
Poor employment practices at
their international manufacturing
sites giving a bad reputation
Heavy dependency on footwear
sales
Issues with Footlocker

IFE Matrix

Industry Overview

Athletic footwear manufactures captured nearly one-third of the total

footwear market in the early 1970s.
Over a span of more than 25 years, American consumers spent $300 billion
on 7.5 billion pairs of athletic shoes.
Reebok international Ltd. and Adidas became $ 3.5 Billion companies, while
Nike Inc. became the first ever $ 9.5 Billion company.
By 1996 the number of establishments had dropped to about 52, with 12
factories closing since 1995.
China's imports increase by 6 percent to 1.26 billion pairs in 2003 .
Brazil's share increased 2.3 percent to 83.5 million pairs in 2003.
Vietnam's share jumped 91.9 percent to 23.5 million pairs in 2003.
The US markets continue to be dominated by imports from countries with
low-cost labor.
From 1997 to 2001, the value of industry shipments declined from $ 219.6
million to $106.5 million.
U.S. shoe manufacturing plants declined by 775 between 1967 and 2001,
the number of new plants opening dwindled to nearly zero.

Key Ratios: Overall Comparison

(2006)

Key Ratios: Overall Comparison

(2006)

Key Ratios: Overall Comparison

(2006)

Manufacturing: Nationality of
Contract Suppliers

External Opportunities and

Threats
OPPORTUNITIES:

THREATS:

Customer use of companys

products change from athletic
purpose to a fashion item
Development of international trade
(GAAT and NAFTA)
Generation Y children (born
between 1979 and 1994) will reach
60 million
General demand for
clothing/footwear for leisure activities
continues to increase
Growing e-commerces positive
effect since one of companys
competitive advantages is Internet
sales
Women demand for athletic footwear
and clothing is increasing significantly

Competitors which copy company's

business model (high value branded
product manufactured at a low cost)
Reebok's strong presence with 204

factory direct stores

Adidas-Salomon AG, top European
competitor
The impact of foreign currency
fluctuation and interest rates, and
political instability
Labor and political unrest in the
suppliers countries
Cost orientated customers vs
companys higher-end market.

EFE Matrix

Athletic Shoe Market Share

(2000)

Competitive Profile Matrix (CPM)

SWOT Analysis

SPACE Matrix
* Y axis: - Financial Strength:
- Environmental Stability:
* X axis: - Competitive Advantage:
- Industry Strength:

+4
-1
-2
+5

=> Y coordinate: +3
=> X coordinate: +3

STRATEGY: AGRESSIVE

Business Structure
Operating Segments:
Footwear
Apparel
Equipment

Operating Regions:
US
Europe, Middle
East and Africa
(EMEA)
Asia Pacific
Americas

BCG Matrix

Stars

Cash-Cow

Question marks

Dogs

IE Matrix

The Grand Strategy Matrix

Potential Strategies:
- Market Development
- Market Penetration
- Product Development
- Backward Integration
- Forward Integration
- Concentric
Diversification

Matrix Analysis

QSPM

Decisions
Primary: Focus on finding the most promising customers (kids

and women) and introduce more products or improve current

ones to satisfy potential increase in demand
Alternative:
Keep expanding into current and future foreign markets by being
aggressive and the worldwide leader of the footwear industry
Accelerate funding for numerous marketing campaigns in order to get to
specific markets or customer groups
Focus on improving working conditions and human rights at
international manufacturer centers and at the same time increasing their
productivity
Implement product diversification with companys newest technologies
so resulting increased earnings could be reinvested into R&D plans

Why this strategy?

U.S. Women: Prefer fashion, not footwear, they
prefer clothing, we must create a shopping style
based in athletic shopping.
U.S. Kids: E-commerce, influenced by
innovation and design, not only comfort or sports
We need to consolidate US sales compared to
international sales and international competitors
Difficult to expand towards other sports or
population segments

Implementation
Actions:
Women:
Open 25 specific stores specialized only for women
Increase R&D expenses by 7% in women products
Increase Marketing expenses by 10%, designing a specific
campaign for women using female endorsements
Create a new logo for women market which would be associated
with fashion trends and introduce new products

Kids:
Increase R&D expenses by 7% in kids products
Increase Marketing expenses by 10%, designing a specific
campaign for kids
Introduce more soccer and basketball products targeting potential
youth market

Research in international market to find out what are the new

trends related with women and kids products (Long-term)

Showing Cost: EPS-EBIT Analysis

Evaluations
Nike annual financial reports
Sales and profits reports (on-line and off-line) based
on Women stores and Kids products
Frequent management meetings between VP Global
Brand Management (US), VP Global Footwear, VP
Global Apparel, and VP Subsidiaries and New
Business Development
Evaluation reports

Update: 2004-2006

2004: Nike introduces Swift technology.

Nike Swift increases track times by up to 1.13%.
Football (soccer) wear becomes #1 in Europe.
Nike SHOX footwear introduced in other footwear types and continues to boom.

2005: Profits recover, growing nearly 30% to reach $1.2 billion on

unprecedented revenue of $ 13.7 billion.

Nike has 8 NikeWomen stores in key cities in the U.S..

Nike Pro Apparel introduced into NFL and MLB.
Greatly expands SHOX running footwear
August: Main competitors have joined with the recent announced acquisition of
Reebok by Adidas

2006: Nike Pro Apparel expands into NBA.

Nike uses Rihanna to help infiltrate the womens market.

Nike expands womens product line and website.
Introduced Nike Consider to be more environmental conscious.
Introduced new footwear and apparel line Pre dedicated to Steve Prefontaine

References

http://finance.yahoo.com
Nike Annual Reports (2003 & 2005)
Annual ranking of America's largest corporations, Magazine: Fortune 500
(2005): cnn.money.com
www.nikebiz.com (Investor Relations)
www.bigcharts.com
www.businessweek.com
Strategic Management Concepts and Cases; Fred R. David, 10th Ed.

Thank you!
Questions?
Comments?