Dustin Nadeau, Donatas Sumyla,

David Deprey and Jaime

Rodriguez
Bus 411, May 2006
Nike
2003
Nike
2003
,8e-Study Overview
W nternal:
History, Nike overview, Key
Facts, Our Brands and Stock
nformation
Nike Actual & Proposed Vision
and Mission
Economic Performance
Evolution of Financial Ratios
Strengths and weaknesses
W Analysis: FE
W External:
ndustry overview and
comparison of financial ratios
Manufacturing
Opportunities and threats
W Analysis: EFE
Competitors
W Market Share
W Analysis: CPM
W Analysis
SWOT Matrix
SPACE
BCG
E matrix
Grand Strategy Matrix
QSPM
W Possible strategies: Matrix
Analysis
W Decisions
Why our decision?
Strategic implementation
Actions
W Evaluation Procedure
W Current Update
i8tory
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 small-
scale 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: t 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.
i8tory
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 nc. for $ 305 million.
Origin of the N,2e ,nd the
Swoo8h
W 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 Nike's website)
voIution of the Swoo8h Logo
Nike Overview
W Nike's principal business activity is the design, development and worldwide
marketing of high quality footwear, apparel, equipment, and accessory
product
W Distributed in over 160 countries around the world: (Asia, Australia, Canada,
Europe, Latin America, and the United States)
W Nike is the largest seller of athletic footwear and athletic apparel in the
world.
W Fiscal year ended May 2003: Revenues of $10,697 million (increase of
8.1% against 2002)
W Employees: 26,000 worldwide.
650,000 in Nike contracted factories around the globe.
W 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.
ey f,.t8 (2003)
W eadquarters: Beaverton, OR
W Index Membership: S&P 500
S&P 1500 Super Comp
W Sector: Consumer Goods
W Industry: Textile - Apparel Footwear & Accessories
W Other Brands: Cole Haan, Converse, Hurley,
Bauer Hockey, Starter Apparel
W Market Cap: 21.738 billion
W Ticker Symbol: NKE
W Ranked 173 in the Annual ranking of America's largest
corporations (Fortune 500 magazine)
Our Brands
W 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.
W 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.
W Hurley nternational, based in California,
designs and distributes a line of action
sports apparel for surfing, skateboarding
and snowboarding, and youth lifestyle
apparel and footwear.
W Converse, based in Massachusetts,
designs and distributes athletic and casual
footwear, apparel, and accessories.
Nike Sto.k (N) Infor2,tion
W Sto.k Sy2-oI: NKE.
W Went public in December 1980 and is
traded on the New York Stock Exchange.
W Price:
Dec 31
st
, 2003: $68.46
May 1
st
, 2006: $82.21
W Shares Outstanding (July 2003): 263.7 mill
Sto.k Pri.e Perfor2,n.e
i8tori.,I Sto.k Pri.e
Perfor2,n.e
'i8ion St,te2ent
"To bring inspiration and innovation to
every athlete* in the world
(* "If you have a body, you
are an athlete
Bill Bowerman, co-founder)
Propo8ed 'i8ion St,te2ent
Continue to bring inspiration to present
and future athletes, while maintaining the
company's standard of quality for its
products.
i88ion St,te2ent
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."
Propo8ed i88ion St,te2ent
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)
Intern,I 8trength8 ,nd we,kne88e8
STRENGTHS:
W Strong brand recognition
W nternet sales
W Growing international presence
W Superior research and development
department
W Strong financial returns
W Strong sense of culture in the
working environment
W Great celebrity spokespersons
W Automatic replenishment system
W Successful experience being
competitive
W Nike doesn't own any factories
W Successful marketing campaigns
WEAKNESSES:
W Lack of stores catering to the
active females
W Poor employment practices at
their international manufacturing
sites giving a bad reputation
W Heavy dependency on footwear
sales
W ssues with Footlocker
IF ,trix
Indu8try Overview
W Athletic footwear manufactures captured nearly one-third of the total
footwear market in the early 1970s.
W Over a span of more than 25 years, American consumers spent $300 billion
on 7.5 billion pairs of athletic shoes.
W Reebok international Ltd. and Adidas became $ 3.5 Billion companies, while
Nike nc. became the first ever $ 9.5 Billion company.
W By 1996 the number of establishments had dropped to about 52, with 12
factories closing since 1995.
W China's imports increase by 6 percent to 1.26 billion pairs in 2003 .
W Brazil's share increased 2.3 percent to 83.5 million pairs in 2003.
W Vietnam's share jumped 91.9 percent to 23.5 million pairs in 2003.
W The US markets continue to be dominated by imports from countries with
low-cost labor.
W From 1997 to 2001, the value of industry shipments declined from $ 219.6
million to $106.5 million.
W 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
xtern,I Opportunitie8 ,nd
Thre,t8
OPPORTUNTES:
W Customer use of company's
products change from athletic
purpose to a fashion item
W Development of international trade
(GAAT and NAFTA)
W Generation Y children (born
between 1979 and 1994) will reach
60 million
WGeneral demand for
clothing/footwear for leisure activities
continues to increase
W Growing e-commerce's positive
effect since one of company's
competitive advantages is nternet
sales
WWomen demand for athletic footwear
and clothing is increasing significantly
THREATS:
W Competitors which copy company's
business model (high value branded
product manufactured at a low cost)
WReebok's strong presence with 204
factory direct stores
WAdidas-Salomon AG, top European
competitor
W The impact of foreign currency
fluctuation and interest rates, and
political instability
W Labor and political unrest in the
suppliers countries
W Cost orientated customers vs
company's higher-end market.
F ,trix
Athletic Shoe Market Share
(2000)
o2petitive ProfiIe ,trix (P)
SWOT An,Iy8i8
SPA ,trix
* Y axis: - Financial Strength: +4
- Environmental Stability: - 1 Y coordinate: +3 STRAT: ARSSI'
* X axis: - Competitive Advantage: - 2 X coordinate: +3
- ndustry Strength: + 5
Business Structure
Operating Segments:
Footwear
Apparel
Equipment
Operating Regions:
US
Europe, Middle
East and Africa
(EMEA)
Asia Pacific
Americas
,trix
Cash-Cow
Stars
Dogs
Question marks
I ,trix
The r,nd Str,tegy ,trix
W Potenti,I Str,tegie8:
W - Market Development
W - Market Penetration
W - Product Development
W - Backward ntegration
W - Forward ntegration
W - Concentric
Diversification
,trix An,Iy8i8
"SP
e.i8ion8
W !rimary: Focus on finding the most promising customers (kids
and women) and introduce more products or improve current
ones to satisfy potential increase in demand
W 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
mplement product diversification with company's newest technologies
so resulting increased earnings could be reinvested into R&D plans
Why this strategy?
W U.S. Women: Prefer fashion, not footwear, they
prefer clothing, we must create a shopping style
based in athletic shopping.
W U.S. Kids: E-commerce, influenced by
innovation and design, not only comfort or sports
W We need to consolidate US sales compared to
international sales and international competitors
W Difficult to expand towards other sports or
population segments
I2pIe2ent,tion
A.tion8:
W 4203:
Open 25 8pe.ifi. 8tore8 8pe.i,Iized onIy for wo2en
In.re,8e R& expen8e8 -y 7% in wo2en produ.t8
In.re,8e ,rketing expen8e8 -y 10%, de8igning , 8pe.ifi.
.,2p,ign for wo2en u8ing fe2,Ie endor8e2ent8
re,te , new Iogo for wo2en 2,rket whi.h wouId -e ,88o.i,ted
with f,8hion trend8 ,nd introdu.e new produ.t8
W /8:
In.re,8e R& expen8e8 -y 7% in kid8 produ.t8
In.re,8e ,rketing expen8e8 -y 10%, de8igning , 8pe.ifi.
.,2p,ign for kid8
Introdu.e 2ore 8o..er ,nd -,8ket-,II produ.t8 t,rgeting potenti,I
youth 2,rket
W Re8e,r.h in intern,tion,I 2,rket to find out wh,t ,re the new
trend8 reI,ted with wo2en ,nd kid8 produ.t8 (Long-ter2)
Showing o8t: PS-IT An,Iy8i8
v,Iu,tion8
W Nike annual financial reports
W Sales and profits reports (on-line and off-line) based
on Women stores and Kids products
W Frequent management meetings between VP Global
Brand Management (US), VP Global Footwear, VP
Global Apparel, and VP Subsidiaries and New
Business Development
W Evaluation reports
&pd,te: 2004-2006
W 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.
W 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
W 2006: Nike Pro Apparel expands into NBA.
Nike uses Rihanna to help infiltrate the women's market.
Nike expands women's product line and website.
ntroduced "Nike Consider to be more environmental conscious.
ntroduced new footwear and apparel line "Pre dedicated to Steve Prefontaine
Referen.e8
W http://finance.yahoo.com
W Nike Annual Reports (2003 & 2005)
W Annual ranking of America's largest corporations, Magazine: Fortune 500
(2005): cnn.money.com
W www.nikebiz.com (nvestor Relations)
W www.bigcharts.com
W www.businessweek.com
W Strategic Management Concepts and Cases; Fred R. David, 10
th
Ed.
Thank you!
W Questions?
W Comments?