A Report On Nike Company Sport Essay Example
A Report On Nike Company Sport Essay Example

A Report On Nike Company Sport Essay Example

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  • Pages: 12 (3137 words)
  • Published: October 5, 2017
  • Type: Analysis
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Executive Summary

The text discusses Nike, a company specializing in designing and marketing athletic shoes and related products. It was founded by Philip Knight in 1962 as Blue Ribbon Sports before being rebranded as Nike in 1978. A strategic audit was conducted, gathering financial information, press releases, industry data, company history, and current activities to identify strengths, weaknesses, opportunities, and threats faced by Nike. The footwear industry was analyzed using Porter's Five Forces model. Recommendations were made to enhance performance including improving the quality and brand image of the ACG line for extreme sports, expanding promotional efforts within the entertainment sector, increasing marketing efforts for casual footwear lines, maintaining leadership in athletic shoe design and development, enhancing website aesthetics to attract online shoppers,and expanding international marketing endeavors.

Nike's Mission Statement

According to Nikebiz.com,Nike is committed to sec


uring a better quality of life for future generations while also preserving the environment.Acaria.com suggests that Nike aims to maximize profits for shareholders by offering products and services that enhance people's lives, creating value for customers, shareholders, and business partners. Nike, Inc. specializes in designing, developing, and globally distributing high-quality footwear, clothing, equipment, and accessories. The company sells its products through approximately 20,000 retail accounts in the US and more than 110 countries worldwide. Most of Nike's products are manufactured by independent contractors. While footwear production mainly occurs outside the United States, clothing production takes place both domestically and internationally. In fiscal year ending on May 31st in 1999, Nike generated revenues of $8.8 billion compared to the previous year's $9.6 billion. Nike offers a range of footwear offerings focused on athletic use with superior construction and innovative design features. Additionally, they

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offer non-athletic products such as clothing and accessories that complement their footwear line-up through the same marketing channels as their footwear items. Moreover, alongside their regular product line-up, Nike introduces collections with similar designs or for specific purposesNike sells a diverse portfolio of products, including performance equipment like sports balls, watches, eyewear, skates bats, and other sports-related gear. Additionally, they have a subsidiary called Cole Haan Holdings Incorporated that manufactures dress and casual shoes plus accessories for men, women, and children under the brand name Cole Haan.

Nike has various subsidiaries that focus on different markets and products. One of these subsidiaries is Sports Specialties, which sells headwear under a specific trade name and supplies plastic products to other manufacturers. Another subsidiary is Bauer Nike Hockey Inc., specializing in selling hockey-related items such as ice skates, protective gear, hockey sticks, and accessories for street, roller, and field hockey.

In the global market for athletic and leisure shoes, clothing, and equipment; Nike competes with Reebok and Adidas. The Chairman of the Board, President Chief Executive Officer of Nike is Philip H. Knight who co-founded the company. He graduated from the University of Oregon in 1959 before obtaining his MBA from Stanford University in 1962. In 1964 he started Blue Ribbon Sports which later became Nike.
Mr. Knight initially sold merchandise out of a station wagon while working as an Assistant Professor and Certified Public AccountantMr. Knight has been a member of Nike's Board of Directors since 1968. He served as President from 1968-1990 and then again from June 2000 to present day. His contributions to education include donations totaling over $30 million dollars. Forbes' American Benefactor's list recognizes him

as one of the top earners, with an annual salary of $2.5 million plus incentives totaling approximately $3.5 million in 1999.

Nike's Vice Chairman, Richard K. Donahue, has held his position since 1977. Before that, he was the President and Chief Operating Officer from 1990-1994. In addition to his involvement with Nike, Mr. Donahue has been a partner at a law firm since 1951 and previously worked as an assistant to President John F. Kennedy from 1961-1963.

Mr. Donahue has also held prestigious positions such as former President of both the Massachusetts Bar Association and the New England Bar Association.He is actively involved in various organizations including the John F. Kennedy Library Foundation, Joyce Foundation (as a legal guardian), and Courier Corp (as a manager).

The official website for Nike, Inc., formerly known as Blue Ribbon Sports, provides information about its history at hypertext transfer protocol: //www.acaria.com/jsp/nikehist.html.In 1957,
Phil Knight and Bill Bowerman first met each other.
In 1960, Bowerman continued experimenting with new designs for athletic shoesIn 1962, Knight graduates from Stanford University with a Master of Business Administration degree and starts a company called "Blue Ribbon Sports" (BRS). In 1964, Knight and Bowerman each invest $500 to start BRS. The company sells 1,300 pairs of Tiger running shoes, generating $8,000 in revenue. In the same year, Jeff Johnson becomes BRS' first full-time employee after switching from selling Adidas football shoes. BRS records $20,000 in revenues in 1965. A retail store is established in Santa Monica, CA in 1966, followed by the opening of a sales office in Wellesley, Mass. To manage distribution on the East Coast, Knight dedicates himself fully to BRS as Chairman of the Board and

Chief Executive Officer.

While working as an Assistant Professor of Business Administration at Portland State University in 1969, Knight takes on additional responsibilities at BRS. In 1971 Carolyn Davidson designs the iconic Swoosh logo for a fee of $35 and Johnson suggests changing the company's trade name to NIKE. That same year marks the launch of Nike brand at the U.S Olympic Trials and Canada becomes their first international market.

By establishing Athletics West and manufacturing factories in Taiwan and Korea in 1972,BRS expands its reach into Asia with Nike shoe sales for the first time.Incidentally,in that same year,the first soccer/football shoe under Nike brand hits retail shelves.In order to better reflect their brand identity,BRS changes its name to NIKE Inc.in 1978.The introduction of children's shoes further boosts revenue,resulting in earnings of $71 millionIn 1979, Nike debuted Tailwind - the first running shoe to feature a patented AIR-SOLE padding system. They also introduced their apparel line and quickly became the leading running shoe brand in the U.S., capturing roughly 50% of the market share. That same year, Nike established its World Headquarters in Beaverton, Oregon. In 1980, they went public with two million shares of common stock and opened The NIKE Sport R&D Lab in Exeter, New Hampshire.

By 1981, Nike had become Canada's top shoe seller and formed Nike International Ltd. By 1984, international sales reached $158 million. It was during this year that they launched their AIR JORDAN court shoes and expanded into golf in 1985.

The Air Pegasus achieved a major milestone in 1987 by selling its five millionth pair as part of its fourth generation. The iconic "Just Do It" campaign was launched in 1988

and saw revenues exceeding $1 billion for the first time. Commercials featuring Bo Jackson were popularized in 1989 with the slogan "Bo Knows". In the following year, both the Nike World Campus and the first NikeTown store opened in Portland, Oregon.

Furthermore, in 1991, Nike unveiled their F.I.T.dress and by 1992 had surpassed $1 billion in international sales. A new initiative called P.L.A.Y., which included programs like Reuse-a-Shoe program, was launched by Nike in 1994. Expansion into athletics ball and eyewear markets followed suit in 1995.Nike sponsored the WNBA and selected athletes in the American Basketball League, resulting in over $9 billion in revenue for the fiscal year ending in 1997. Analyzing company ratios is important to assess financial performance and value added for stockholders. Maintaining stockholder satisfaction is crucial for success. Return on Equity (ROE), which measures shareholders' performance and indicates company success, can be calculated by dividing Net Income by Total Equity. During this period, Nike Inc.'s ROE was $0.18 net income per dollar of equity, falling below the industry standard of $0.23 generated per dollar of equity. In order to meet average criteria, Nike Inc. needs to improve its equity management strategies. Their Tax return on Assets (ROA) is $0.10, aligning with industry standards and meaning they generate 10 cents of net income for every dollar of assets. To enhance this ratio, Nike would need to find more efficient ways to use its assets for profit generation. The Net Income Margin reveals how much profit a company earns for every dollar of sales; Nike Inc.'s net income margin stands at 6.45%, indicating that they earn approximately 7 cents in profit for every dollar

of sales generated.To improve this ratio, Nike Inc.should reduce expense ratios relative to sales ratios.
The Current Ratio is significant to creditors, especially short-term ones, who prefer higher current ratios as it measures short-term liquidity. However, a high current ratio may suggest issues with liquidity and inefficiency in cash and short-term asset utilization. Nike Inc.'s current ratio of 1.7 is lower than the industry average of 2.2, so it is important for them to increase their current ratio for better efficiency with short-term assets.

The Quick Ratio indicates how effectively a company converts inventory into cash. Nike Inc.'s quick ratio of .91 aligns with the industry standard of .9. Despite their success in converting inventory assets, there is still room for improvement to meet the industry standard of 2.9. Maintaining a high quick ratio is crucial as inventory is less liquid.

Nike Inc. has a dividend yield of 1.16%, which is calculated by dividing annual dividends received per share by the stock's current market price. The dividend payout ratio, used by professional traders to assess company performance, is determined by dividing dividends per share by earnings per share. Nike Inc.'s payout ratio stands at 22.22%, considered reasonably good.

With a recent stock price of $41.38 and annual dividends of $0.48 per share, Nike Inc.'s figures indicate they are relatively efficient in their dividend payouts each year.
Despite not consistently surpassing industry standards, Nike Inc. has been shown to operate a healthy company by consistently adding value and satisfying shareholders through past financial analysis. The company deserves recognition for its continuous pursuit of new markets and future prospects, such as expanding into new markets, increasing sales, and reducing product costs. Investing

in Nike Inc. stock is recommended as this report demonstrates it to be a wise venture with promising opportunities for any investor. Moreover, the company is expected to continue paying dividends, ensuring positive returns for shareholders.

Over the past two decades, there has been a shift from a standardized economy to a flexible one. This shift has resulted in changes in organizational structures such as outsourcing due to the demand for niche products replacing mass consumption of standardized goods. The athletic footwear industry, including Nike, operates in a highly competitive and volatile market where rapid production growth, intense competition, market volatility due to different shoe styles, and innovation are crucial factors for success.

Nike prioritizes both product and design flexibility while safeguarding proprietary information by maintaining outsourcing relationships in countries with low labor costs. Alongside organizational flexibility, Nike's triumph can be attributed to their strategy of product differentiation which encompasses a wide range of clothing items, equipment options, and accessories designed specifically for various sports activities.A SWOT analysis is crucial for evaluating Nike's internal strengths and weaknesses, as well as external opportunities and threats. This analysis forms the basis for strategic market recommendations that build upon Nike's reputation for innovative products like the popular Nike Air and Nike Shox lines. The primary focus of the Nike Shox line is to enhance athletes' performance in jumping, running, and gaining a competitive edge. Extensive research and development efforts have been dedicated to creating these technologically advanced shoes over a span of 16 years. By incorporating springs into the soles of athletes' shoes, Nike has fulfilled a long-standing dream. In terms of design, Nike follows current fashion trends with simple

yet stylish designs. They are also adept at mass-merchandising and have gained a strong reputation for unique advertisements and impactful promotions. Furthermore, thanks to their worldwide distribution facilities, Nike can sell their products in over 100 countries, greatly contributing to their global reach. Additionally, through a partnership with Hewlett-Packard (HP), Nike supports their global Nike Supply Chain (NSC) project by utilizing HP's hardware, software, and consulting services for their supply chain operations.The main goal of this partnership is to establish a consumer-driven supply chain and decision-making model, which will give Nike a sustainable competitive advantage and strengthen its position as a global brand leader. The project aims to enhance Nike's adaptability, mitigate risks in inventory and capital investment, improve customer service, optimize processes and information flow, ensure product quality, and establish an efficient global supply chain.

In addition to its strong financial status and loyal customer base, Nike possesses valuable human and organizational assets. The company's employees are highly competitive individuals who do not accept defeat due to their athletic backgrounds. Furthermore, Nike benefits from intangible assets such as its brand image and organizational culture. These factors provide the company with a sustainable competitive advantage that is recognized worldwide through past advertisements, promotional endorsements, and events embodying a culture of competition in sports with a "Just Do It" attitude.

Moreover, Nike's research and development team consistently creates innovative products to maintain a full pipeline. They also partner with manufacturers in countries with less strict work environment regulations and lower costs because of their labor-intensive production process. Over the past decade, Nike's growth has given them a competitive advantage in the market thanks to their leadership, wide product

range, and strong brand recognition.However, Nike has faced weaknesses such as transitioning from a small rebellious company to a large corporate entity, as CEO Phil Knight acknowledges. The negative publicity surrounding allegations of "sweatshops" during manufacturing has particularly impacted consumer perception among those aged 18 to 24 and contributed to the decline of Nike's brand image. Additionally, the excessive use of the Nike logo on some shoes and rising costs of sports endorsements with diminishing returns are concerns due to the blurring line between sports and entertainment industries. Furthermore, Nike lacks expertise and resources in the Internet era, limiting their marketing strategy and online sales capabilities.

Despite these weaknesses, there are opportunities for Nike to seize upon. They can target Generation Y with their "All Conditions Gear" (ACG) product line that caters to extreme sports enthusiasts. It is crucial for them to expand into mainstream sports such as golf, hockey, tennis, volleyball, football, soccer etc., with new products and accessories. Expanding into both current and new international markets while staying ahead with innovative technologies like Nike Shox is essential for their growth. Another opportunity worth exploring is broadening promotions beyond sports to include entertainment venues due to the blurred line between these industries.In addition to tapping into the corporate wear market worth $3 to $4 billion, Nike also shows promise in women's sports and entertainment. However, there are external threats that could impede their sales growth and marketing efforts. The primary threat comes from an economic recession, which not only poses risks to their sales growth but also their promotional activities. Furthermore, the athletic footwear market is becoming more mature, posing a challenge for Nike. Unfavorable

demographic shifts and difficult promotions also negatively affect the brand image. The weak Euro and Asian recession further threaten international sales and growth. Additionally, their extreme sports product line is seen as lower quality compared to competitors, impacting sales and brand image negatively. Competition in the industry is intense among numerous companies vying for sales. Significant amounts of money are spent on marketing and promotions to target the young consumer demographic most likely to spend on Nike products. Despite a slowdown in industry growth, new markets such as extreme sports and corporate wear sectors experience high growth rates influenced by the seasonal nature of product demand in this competitive industry.In addition, companies in other industries are striving to attract customers by offering substitute products, particularly in the non-traditional sports and casual wear sectors. This is possible because consumers have access to readily available substitutes with competitive pricing, comparable quality, and minor differences. The athletic footwear industry faces barriers to entry due to the extensive research and development requirements. On the other hand, entering the casual footwear market is less expensive. Specialized technological expertise in athletic footwear, such as Nike Air, Nike Shox, and Reebok DMX, is not easily accessible. Establishing brand preferences and loyalty requires costly efforts like promotions and endorsements to build a brand image. New entrants encounter challenges related to low capital investments for manufacturing but struggle with limited access to retail space as a major obstacle. Currently, there are no regulatory policies or trade barriers preventing entry into the industry. Suppliers do not hold control over prices or availability of inputs since there is an abundance of raw materials and manufacturing capacity

available. The quality and performance of products depend more on the manufacturing process rather than specific raw materials used. Buyers have some power due to low switching costs but cannot negotiate prices or obtain group discounts since purchases are made individually instead of collectively unified textHowever, buyers have a wide range of brand choices available and do not pose a threat of integrating backward into sellers' businesses. After examining Nike's organization, business practices, and market position, our recommendations are as follows: Firstly, we suggest that the ACG merchandise line invest more money, resources, and advertising in order to improve its declining quality and brand image. This can be achieved through enhancements in product design, materials, and manufacturing processes. Additionally, the organization should focus on improving spending efficiency. Furthermore, expanding promotions to encompass entertainment and non-sports venues would be beneficial given the blurred lines between entertainment and sports. Currently primarily marketing their sports footwear lines, Nike should also incorporate their casual footwear line to boost sales. As differentiation is Nike's strategic approach, they should continue leading in athletic footwear technology. By doing so, they can introduce new shoe types and other products while expanding their diverse range of offerings. Nike's business success relies on effectively utilizing the Internet for customer communication.Currently , they are developing a new technology that allows customers to design their own shoes online.To facilitate this process effectively , it is crucial for Nike to enhance their website by making it more user-friendly .The current website is experiencing slow download speeds and does not have an effective design to showcase their products adequately. Additionally, we suggest that Nike enhances its global efforts to

maximize product sales worldwide and maintain its position as the leader in athletic footwear technology and performance. This will ensure they retain their competitive advantage and prevent any potential threats from new entrants. For more information, please refer to the following references: 1.http://www.nikebiz.com/environ/com_mission.shtml 2.http://www.acaria.com/jsp/nikehist.html 3.http://yahoo.marketguide.com/mgi/busidesc.asp?rt=busidesc;rn=6446N 4.http://www.acaria.com/jsp/nikehist.html 5.http://yahoo.marketguide.com/mgi/biograph.asp?rt=biograph;rn=6446 6.<...In 1999-2000, the RMA Association was mentioned on page 753.7.You can find more information at https://quote.fool.com/ and https://www.yahoo.com/.In addition, you can visit the websites http://www.nikebiz.com/community/pressgca.shtml and http://faculty.washington.edu/jwh/207lec28.htm. For more information, refer to the book "Crafting and Implementing Strategy" by Arthur Thompson Jr., A.J. Strickland III (Irwin McGraw-Hill:1998), specifically on page 147.

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