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NIKE, Inc. Introduction: Nike, Inc. is a major publicly traded sportswear and equipment supplier based in the United States. The company is headquartered near Beaverton, Oregon, which is part of the Portland metropolitan area. It is the world's leading supplier of athletic shoes and apparel and a major manufacturer of sports equipment with revenue in excess of $18.6 billion USD in its fiscal year 2008 (ending May 31, 2008). As of 2008, it employed more than 30,000 people worldwide. Nike and Precision Castparts are the only Fortune 500 companies headquartered in the state of Oregon, according to The Oregonian. The company was founded on January 25, 1964 as Blue Ribbon Sports by Bill Bowerman and Philip Knight, and officially became Nike, Inc. in 1978. The company takes its name from Nike, the Greek goddess of victory; it is also based on Egyptian usage of "strength", "victory", nakht. Nike markets its products under its own brand as well as Nike Golf, Nike Pro, Nike+, Air Jordan, Nike Skateboarding and subsidiaries including Cole Haan, Hurley International, Umbro and Converse. Nike also owned Bauer Hockey (later renamed Nike Bauer) between 1995 and 2008. In addition to manufacturing sportswear and equipment, the company operates retail stores under the Nike town name. Nike sponsors many high profile athletes and sports teams around the world, with the highly recognized trademarks of "Just do it" and the Swoosh logo. Nike is the world’s largest athletic company.
Nike, Inc.
Type Public: (NYSE: NKE) Industry: Deg and Manufacturing: Sportswear, Sports equipment. Founded: 24 January, 1964. Founder(s): William J. "Bill" Bowerman, Philip H. Knight Headquarters: Washington County, Oregon, United States (Near Beaverton, Oregon) Area served: Worldwide Key people: Philip H. Knight (Chairman), Mark Parker (CEO) & (President) Products: Athletic shoes, Apparel, Sports equipment, Accessories Revenue : ▲ US$ 18.627 billion (2008) Operating income: ▲ US$ 2.199 billion (2007) Net income: ▲ US$ 1.883 billion (2008) Total assets: ▲ US$ 12.443 billion (2008) Total equity: ▲ US$ 7.825 billion (2008)
Employees: 30,200 (2008) Website: www.nike.com
History: The company initially operated as a distributor for Japanese shoe maker Onitsuka Tiger, making most sales at track meets out of Knight's automobile. The following is a history of Nike, Inc. from the beginning when it was known as Blue Ribbon Sports. 1955 1960 1962 1964 1965 1966 1968 1969
1971
Phil Knight and Bill Bowerman meet at University of Oregon in Eugene. Bowerman continues tinkering with new designs for athletic shoes. Knight receives a Master of Business istration from Stanford University and makes up a company named "Blue Ribbon Sports" (BRS). Knight’s first shipment of Tiger Shoe samples arrive in January. Jeff Johnson becomes BRS' first full-time employee (he switched over from selling Adidas football shoes). Jeff Johnson opens the first BRS retail outlet in Santa Monica, Calif. Knight & Bowerman convert their handshake agreement from 1964 into a formal written partnership on April 26. The first BRS West retail store is opened in Eugene, Oregon. Knight devotes himself full-time to BRS (he was an Assistant Professor of Business istration at Portland State University). Knight becomes Chairman of the Board and Chief Executive Officer of BRS and later Nike, Inc. Swoosh Design trademark is created by Carolyn Davidson for a fee of $35. Johnson dreams up the company's new brand name, NIKE, the Greek Goddess of victory. A soccer/football shoe is the first NIKE model to hit the retail market.
1972
A Nike T-shirt to promote the shoe becomes the first apparel item. BRS launches the Nike brand at the U.S. Olympic Trials.
1977
Canada becomes BRS’ first foreign market. BRS starts Athletics West. Manufacturing factories are set up in Taiwan and Korea.
1978
Nike shoes are sold in Asia for the first time. BRS changes its corporate name to NIKE, Inc. The first children's shoes are introduced.
1979
Revenues = $71 million. Nike introduces the Tailwind, the first running shoe with the patented AIR-SOLE cushioning system. The NIKE Apparel line begins.
1980
Nike is the No. 1 running shoe with nearly 50 percent of the U.S. market revenues. World Headquarters are opened at 3900 S.W. Murray Blvd. in Beaverton, Oregon. Nike goes public with 2 million shares of common stock. The NIKE Sport R&D Lab opens in Exeter, New Hampshire.
1981 1984 1985 1986 1987 1988
NIKE shoes become the number-one seller in Canada Nike International Ltd. Is formed International sales take off, reaching $158 million. AIR JORDAN court shoes are introduced along with apparel. Nike charges into the sport of golf. The Air Pegasus, a NIKE classic in its 4th generation, sells its 5,000,000th pair. The “Just Do It” campaign is introduced.
1990
Revenues break $1 billion for the first time. "Bo Knows" commercials featuring Bo Jackson are tied to the Just Do It theme. Doors open to the NIKE World Campus.
1991 1992 1994
The first Niketown opens in Portland, Oregon. NIKE F.I.T. apparel is introduced. International revenues top $1 billion. NIKE launches P.L.A.Y., Participate in the Lives of America's Youth.
1989
1995 1996 1997
1998 1999 2000 2002 2003
P.L.A.Y. includes Reuse-a-Shoe, a program that diverts more than 1 million shoes from landfills to new court surfaces. Nike enters the sport ball and eyewear markets. In November, Niketown New York opens its 85,000 sq. ft. of innovative retail design & sports heritage. Nike sponsors WNBA and selected athletes in the American Basketball League. Nike designers approach the design of the first Nike running watch. Bauer Nike Hockey is formed. In December, Sydney organizers approach Nike to sponsor the Australian Team. Nike Air Presto, otherwise known as a “t-shirt for your feet,” is launched. Speed skaters wearing Nike Swift Skin suits set eight world records & earn gold medals in Salt Lake City. Nike completes the acquisition of Converse Inc. & its incredibly rich & storied heritage in September.
Background: Nike became a Goliath with sales running $9.2 billion a year by persuading consumers to pay hundreds of dollars for spruced-up tennis shoes. It took about a decade to climb from its beginnings, when Phil Knight, its founder and chairman, was peddling running shoes out of his car trunk, to leadership of the athletic shoe business. Along the way, Nike revolutionized the way corporations deal with athletes and professional teams, angered human rights activists with its low-wage manufacturing overseas, and stirred criticism of its outsized impact on popular culture. When Nike launched its apparel six years ago, critics scoffed – and then watched it grab that market, too. Since then, Nike’s stock has soared 18-fold, while its profits have grown rapidly. In several recent blockbuster quarters, earnings surged
more than 70% from a year earlier.
But that growth suddenly
evaporated, and sneaker and apparel sales stayed slack during much of 2002.
Sports equipment was projected to become Nike’s “third
engine,” powering the flagging sneaker and apparel sales.
Acquisitions: •
As of November 2008, Nike, Inc. owns four key subsidiaries: Cole Haan, Hurley International, Converse Inc. and Umbro.
•
Nike's first acquisition was the upscale footwear company Cole Haan in 1988.
•
In February 2002, Nike bought surf apparel company Hurley International from founder Bob Hurley.
•
In July 2003, Nike paid US$305 million to acquire Converse Inc., makers of the iconic Chuck Taylor All Stars.
•
On March 3, 2008, Nike acquired sports apparel supplier Umbro, known as the manufacturers of the England national football team's kits, in a deal said to be worth £285 million ($600 million).
• Other subsidiaries previously owned and subsequently sold by Nike include Bauer Hockey and Starter.
Products: Nike produces a wide range of sports equipment. Their first products were track running shoes. They currently also make shoes, jerseys, shorts, base layers etc. for a wide range of sports including track & field, baseball, ice hockey, tennis, Association football, lacrosse, basketball and cricket. Nike Air Max is a line of shoes first released by Nike, Inc. in 1987. The most recent additions to their line
are the Nike 6.0, Nike NYX, and Nike SB shoes, designed for skateboarding. Nike has recently introduced cricket shoes, called Air Zoom Yorker, designed to be 30% lighter than their competitors'. In 2008, Nike introduced the Air Jordan XX3, a high performance basketball shoe designed with the environment in mind. Nike sells an assortment of products, including shoes and apparel for sports activities like association football, basketball, running, combat sports, tennis, American football, athletics, golf and cross training for men, women, and children. Nike also sells shoes for outdoor activities such as tennis, golf, skateboarding, association football, baseball, American football, cycling, volleyball, wrestling, cheerleading, aquatic activities, auto racing and other athletic and recreational uses. Nike is well known and popular in youth culture, chav culture and hip hop culture as they supply urban fashion clothing. Nike recently teamed up with Apple Inc. to produce the Nike+ product which monitors a runner's performance via a radio device in the shoe which links to the iPod nano. While the product generates useful statistics, it has been criticized by researchers who were able to identify s' RFID devices from 60 feet (18 m) away using small, concealable intelligence motes in a wireless sensor network. In 2004, they launched the SPARQ Training Program/Division. Some of Nike's newest shoes contain Flywire and Lunarlite Foam. These are materials used to reduce the weight of many types of shoes. In the video game Gran Turismo 4 there is a car by Nike called the NikeOne 2022, designed by Phil Frank.
A Nike brand athletic shoe
A pair of Nike Air Jordan I shoes
Top Products: 1. Nike
Trainer Manny Pacquiao SC 2010 Men’s Training Shoe-
2. Nike SFB Men’s Boot-
3. Nike Air Max+ 2009 Women’s Running Shoe-
4. Nike Air Max+ 2009 Men’s Running Shoe-
5. Nike LunarGlide+ Women’s Running Shoe-
6. Nike Air Force 1 07 LE Men’s Shoe-
7. Nike Zoom Kobe V Men’s Basketball Shoe-
8. Nike LunarGlide+ Men’s Running Shoe-
Other Products: 1. OREGON SERIES DIGITAL SUPER WA0024:
A durable outdoor
watch for runners and endurance athletes. Inspired from the design and construction of our Altimeter com watches. This is our larger version. • 100-hour chronograph, interval timer and data recall • 100m water resistance •
3 time alarms and 1 hydration alarm
• Battery hatch on back plate / Easy replacement
2. NIKE LUNA WOMEN’S DUFFEL BAG: Make your move with the
Nike Luna Women's Duffel Bag, an ideal travel companion boasting a sleek, retro look that will help keep you organized from the street to the studio. Full-zip main compartment. Exterior sleeve pocket at side Nike corporate logo screen-print at side.
• Dimensions: 9" H x 18" W x 9" •
Fabric: 100% Nylon Imported
3. NIKE WAFFEL STITCH (MLB RED SOX) WOMEN’S HOODIE:
Ultra lightweight, the Nike Waffle-Stitch (MLB Red Sox) Women's Hoodie is a modern take on a classic, offering an edgy way to cheer on your team. Hood with drawcord Open neck Kangaroo pocket Team logo left arm Rib cuffs Fabric: 60% cotton/40% polyester Machine wash Imported.
NIKE TIEMPO TEAM TRAINING FOOTBALL: 32 design, machine stitched polyurethane casing, 6 wing latex bladder.
4. NIKE BAUER VAPOR XXXX HOCKEY GLOVE: The glove that feels
like an extension of your hand gives you unparalleled flexibility thanks to a Segmented Back Roll, protecting you from every hit and every blast. Get a greater feel for the game with the Vapor XXXX Gloves.
Levels of Strategic Management at Nike: The products and services mentioned above reflect three types of major strategies employed by the organization at various levels. Namely they are:
1.
Corporate Level Strategy: Corporate level strategy occupies the highest level of strategic
decision-making and covers actions dealing with the objective of the firm, acquisition and allocation of resources and coordination of strategies of various SBUs for optimal performance. Nike has succeeded in competing in the footwear industry for as long as they have is because they remain flexible in a volatile market by using subcontracting relationships overseas in low labor-cost countries. Another reason why Nike has continued to be a strong competitor is based on their product differentiation. Although they started out by only producing and selling athletic shoes, their product line now consists of a wide range of clothing, equipment and accessories. They also design products for a variety of sports, ranging from running to golf to aquatic activities.
Successful differentiation allows a Nike to: • Command a price for its product, and/or • Increase unit sales, and/or • Gain buyer loyalty to its brand. 2.
Business Level Strategy: As their business level strategy it has focused on Differentiation
strategy ever since it started. Nike has always made successful attempts to distinguish their products or services from other in the industry. Nike mines consumer insights and uses research and development to design performance athletic products. Nike has contract with manufacturers to make and ship products to their owned and partner retailers around the world. Nike creates demand for product through marketing and advertising, their presence in sports and their relationships with athletes (sports marketing). For Nike to be successful, the world of sport must be successful. To build their business, they have to fuel and respond to consumer interest around the world and continually appeal to changing demographics and new markets in a deeply competitive industry. Nike also stimulates growth through smart, effective investments in people, research and development resources and a well-managed supply chain. They increase shareholder returns by effectively managing their operating costs in proportion to their growth rates.
3.
Functional Level Strategy:
Functional
Level
Strategy
includes
Sales
and
marketing
department of the organization. It is directed at improving the effectiveness of operations within the company. NIKE is employing this strategy within its manufacturing, marketing, product development, and customer service processes. Thus, in order to improve its customer services, Nike strives to represent the highest service standard within its industry, and tries to build loyal customer relationships around the world.
Key Steps towards Strategic Planning:
The preparation of a strategic plan is a multi step process covering Vision, Mission, Objectives, Values, Goals, Strategies and Programmes. VISION MISSION OB J E C TIVE S GOA L S S TR ATE GIE S VA L UE S P R OGR A MME S
1.Vision: “Innovate for better world” Unleashing potential through sport. In the last two years, Nike has invested $100 million worldwide in community-based sports initiatives. By 2011, NIKE is expected to invest another $315 million. These investments will be used to give excluded youth around the world the chance to play because as access to sport can enhance their lives. Nike will provide products, resurface playing fields, community-based programs, and help young people create their own communities. This is all will be the NIKE “Let Me Play commitment.”
2.Mission: “To bring inspiration and innovation to every athlete in the world. If you have a body, you are an athlete.”
Nike works toward succeeding this mission, by bringing sport to everyone, athlete and non-athletes, as “the world's #1 shoemaker” doing “more dominating than assisting, to capture more than 20% of the US athletic shoe market.” Nike’s mission is recognized in the way products are marketed, and in the social responsibility Nike feels to the world. With their mission statement, Nike addresses the individuals of the world with regards to sports. Nike’s social involvements and corporate responsibility are seen “as a catalyst for growth and innovation.” Nike uses the “power of our brand, the energy and ion of our people, and the scale of our business to create meaningful change.”
3.Objectives: Provide an environment which develops people to maximize their
contribution to NIKE. Identify focused consumer segment opportunities. Provide quality and innovative services and products internally and
externally. Establish
and nurture relevant emotional ties with consumer
segments. Maximize profits.
4.Goals: Goals state general targets to be accomplished. Goals are the target. The goals of Nike are as follows: To increase sales of international market.
To increase sales in the U.S. apparel business.
To view sustainability (of the environment) as a source of innovation & growth for the company, not just as a responsibility. To use sports as a tool for youth inclusion.
5.Strategies: The rules & guidelines by which mission, vision, objectives, goals etc. may be achieved are called as strategies. Strategies can cover the business growth & relates to primary matters in key functional areas.
6.Values: Nike main three core values of the company are honesty, competitiveness, and teamwork. Despite its size, Nike operates with a minimum of hierarchy. As a result, there is a lot of collaboration and consensus decision-making. Commonly held values are imperative in such a matrix organization.
7.Programmes: The final elements are the programmes which set out the implementing plans for its key strategies. These should cover resources, objectives, time scales, deadlines, budgets & performance target.
Keys towards business strategies:
SWOT analysis sizes up a firm’s resource strengths and weaknesses and its external opportunities and threats to provide a good overview of whether a firm’s business position is fundamentally healthy or unhealthy. This will provide a clear view of Nike’s resource capabilities and deficiencies, its market opportunities, and the external threats to the company’s future well being and provide a starting point for the recommendations to Nike’s strategic market strategy.
Strengths:
• Nike is a globally recognized for being the number one sportswear brand in the World. • Nike has no factories; rather it uses contract factories to get the work done which makes it quite a lean organization. It has contracts with above 700 shops globally in about 45 different countries. •
Nike is quite strong regarding its research & development; quite evident regarding its evolving and innovative product range.
•
It belongs to Fortune 500 companies which 2007 total revenue exceeded 18 billion USD.
•
It employs more than 30,000 people worldwide.
•
Owns strong marketing strategy under Nike brand that assumes the involvement of world top-class athletes and sportsmen in Nike’s ‘Just do it’ advertising campaigns.
•
It leads its international business operations through acquisitions and re-branding: Converse Inc, 2003; Starter athletic clothing, 2004; Umbro, 2008.
•
Nike’s brand is used to manufacture and promote a wide variety of products for all types of sport-oriented and leisure activities.
•
It manages the US premier training program SPARQ Training Program.
•
Nike applies lunarlite foam and flywire materials to reduce the weight of manufactured shoes.
Weaknesses:
• The Nike organization does have a wide and diverse range of sports products but the income of the business is still heavily dependent upon the footwear market. •
The retail sector is very sensitive to price.
•
Nike unwilling to disclose information concerning its partnering companies, which caused harsh criticism from Corp Watch and other companies.
•
Nike has violated overtime laws minimum wage rates and in Vietnam, 1996.
•
It provides poor working conditions, and tends to exploit cheap workforce overseas, especially in free trade zones.
•
In 1990s, Nike was reported to apply child labour in Pakistan and Cambodia to produce soccer balls.
• Contracts overseas companies that apply non-transparent and inadequate labour regulations, involving child labour. •
Positioned as a permanent subject of criticism by anti-globalization groups.
• Forced Labour applications in partnering apparel factories in Malaysia, involving forced Labour and poor living conditions.
Opportunities: •
Nike
has
many
opportunities
in
the
product
development
department. •
There is also the opportunity to develop products other than shoes such as sportswear, jewelry, clothing, etc.
•
The business could also be developed more extensively in international markets and thereby build upon its strong global brand recognition.
•
Producing sportswear products from manufacturing waste.
•
Extension of eco-friendly projects like ‘Reuse-A-Shoe Program’ aimed at further recycling.
•
Emphasis on corporate marketing strategy through the promotion of corporate brand and sponsorship agreements.
•
There are many international regions that still need tapping and there is need for sportswear and with Nike’s strong global brand recognition, it can initiate in many markets that have the disposable income to spend on high value sports goods.
Threats: •
Nike is vulnerable to the international nature of trade.
•
The market for sports shoes and clothing is very competitive.
•
The weaknesses section, the retail sector has become very price competitive.
•
Textile industry adversely affects the environment, and therefore the company is permanently striving to maintain its eco-friendly reputation.
• A recession may lead to job shortages in most of Nike’s worldwide branches. • The organization has experienced many adverse publicity s due to its widespread advertising.
Strategic Management Process of Nike: Strategic Management process is a systematic approach to a major
and
increasingly
important
responsibility
of
general
management to position and relate the firm to its environment in such a way which will assure its continued success and make it secure from surprises. The Strategic Management process of Nike consists of 5 phases which can be diagrammatically represented as follow:
ANALYSIS
GOAL SETTING
STRATEGY FORMULATION
STRATEGIC MANAGEMENT
STRATEGY MONITORING
STRATEGY IMPLEMENTATION
Phase I- Analysis: This is the first phase of Strategic Management process in Nike. Analysis is the process of breaking a complex topic into smaller parts to gain a better understanding of it. Different types of analysis which are done in Nike are Financial statement analysis, Fundamental analysis, Technical analysis, Business analysis, Price analysis, Market analysis etc. For e.g. If Nike faces sales problem then the company may go Price analysis, which involves the breakdown of a price to unit figure.
Phase II- Strategy Formulation: This phase is also called as Strategic Planning phase at Nike. This phase is done by the top level management or at the corporate level stage of Nike. In Nike, this phase includes the following steps:
Step 1: Framing Mission and Objectives: This is the first step in Strategy formation of Nike. The Mission statement of the company is “To bring inspiration and innovation to every athlete in the world. If you have a body, you are an athlete.” The objective of the company is to “Provide an environment which develops people to maximize their contribution to NIKE.”
Step 2: Analysis of Internal environment: Analysis
of
internal
environment
includes
Strengths
and
Weakness of the company. To list few of them, Strengths of Nike are as follows:
•
It belongs to Fortune 500 companies which 2007 total revenue exceeded 18 billion USD.
•
Nike applies lunarlite foam and flywire materials to reduce the weight of manufactured shoes.
• Nike is a globally recognized for being the number one sportswear brand in the World. Weaknesses of Nike are as follows: •
The retail sector is very sensitive to price.
•
It provides poor working conditions, and tends to exploit cheap workforce overseas, especially in free trade zones.
• The Nike organization does have a wide and diverse range of sports products but the income of the business is still heavily dependent upon the footwear market.
Step 3: Analysis of External environment: External environment includes Opportunities and Threats for Nike. Opportunities for Nike in the Market are as follows: •
Extension of eco-friendly projects like ‘Reuse-A-Shoe Program’ aimed at further recycling.
•
The business could also be developed more extensively in international markets and thereby build upon its strong global brand recognition.
Threats are as follows: •
The market for sports shoes and clothing is very competitive.
• A recession may lead to job shortages in most of Nike’s worldwide branches.
Step 4: Gap analysis:
The Management of Nike conducts Gap analysis i.e. they compare and analyze its present performance level and the desire future performance level.
Step 5: Framing Alternative Strategies: As we talk about Nike, they are giving a lot of attention and time to make the new ment strategy of the company. There are three main types of strategies i.e. corporate, business and functional.
Step 6: Choice of strategies: As Nike is considered they have a powerful ment strategy. They implement their strategy in a beneficial and proper way. New commercials on television are the examples of the implementation of their strategy. Big board’s which they have on the road sides are another example of the implementation of their strategy. So the company chooses or selects the best strategy depending upon the situation.
Phase III- Strategy Implementation: This phase is carried out by the Middle level management or at the functional level stage at Nike. This phase in Nike includes the following steps:
Step 1: Formulation of plans, programmes and projects: This is the first step in Strategy implementation stage of Nike. This refers to formulating new plans, programmes and projects of Nike.
Step 2: Project Implementation: The Project Implementation step of Nike includes the following stages: Conception phase, Definition phase, Planning and organizing phase, Implementation phase and Clean up phase.
Step 3: Procedure Implementation: For implementing the strategy Nike needs to be aware of the various
government
regulations
FEMA
regulations
and
foreign
collaboration etc.
Step 4: Resource Allocation: This step deals with various resources available with Nike such as: • Physical Resources: Companies Assets • Financial resources: Capital of the company. • Human Resources: Employees of the Company.
Step 5: Structural Implementation: Every
company
must
have
its
organization
structure
to
implement strategies. Nike follows Functional structure to carry framework and implement strategies.
Step 6: Functional Implementation: It deals with functional plans and policies of Nike. The functional managers belong to various departments or areas such as Marketing, Finance, Human resources, Operations & other in case of Nike.
Step 7: Behavioral Implementation: It deals with issues of leadership, corporate culture, personal value, business ethics and corporate responsibilities for Nike.
Phase IV- Strategy Evaluation/Strategy Monitoring: Evaluation of strategy is that phase of Strategic management process of Nike in which managers try to assure that the strategic choice is properly implemented and it is meeting the objectives. This phase in Nike includes the following steps:
Step 1: Setting of standards: The standards are established in of quality, quantity, cost and time for Nike to achieve the objectives of the firm.
Step 2: Measurement of performance: The next step is to measure the actual performance. For this managers of various departments asks for performance reports from the employees and the performance is measured in both quantitative and qualitative .
Step 3: Comparison of actual performance with standards: Actual performance is compared with the desired standards of Nike. Such comparisons are required by the company to find out deviations.
Step 4: Find out the deviations:
After comparison, the managers notice the deviations. For e.g. Nike Dunk sales target was 1000 units and the actual sales were only 900 units than the deviations are to the extent of 100 units.
Step 5: Analyzing Deviations: The managers analyzes the deviations and reports to the higher authorities or the top level management saying that deviations were due to poor promotion, faulty pricing etc.
Step 6: Taking Corrective measures: This is the last step in Strategy Evaluation phase of Nike. At this stage the managers of various departments takes corrective steps to correct the deviations.
Phase V- Goal Setting: This is the last phase of Strategic Management process of Nike. Goal Setting involves establishing specific, measurable and timetargeted objectives of the company. At this stage Nike has finally achieved its corporate objectives and goals of establishing themselves as number one sportswear brand in the world. Thus to conclude the Strategic management process of Nike which is build over 19 steps with 5 phases. This process is a lengthy and an ongoing process. It helps Nike to continue, achieve success and make it secure from surprises.
BCG MATRIX:
Companies that are large enough to be organized into Strategic business units face the challenge of allocating resources among those units. In the early 1970's the Boston Consulting Group developed a model for managing a portfolio of different business units (or major product lines). One popular method for analyzing corporate business portfolios is the BCG growth share matrix. We can analyze Nike’s different products like sport balls, timepieces, eyewear, skates, bats, athletic shoes, & apparel, other equipment designed for sports activities with the help of BCG Matrix.
Question marks:
Question marks are new lines of business with a low market share in an expanding market that the corporation believes can be grown into stars. To make question marks into stars, corporations must make significant cash outlays; this requires profit from their other lines of business. This commitment of resources is, of course, not without risk because question marks can become dogs. Question marks use growth strategies to get to profitability fast. Nike has decided to market a tailored line of sporting apparel to compete more directly with under amours high performance sweat resistant line of fitting clothing’s. Nike needs to closely monitor sales of these products to determine whether it has a star or a dog on its hand.
Stars: Stars are emerging business with a rapidly growing market share. Corporations typically plow profits back into the stars products, in the hope that a star will eventually gain enough market shares to become a cash cow. Stars often use growth strategies. Nike developed a star by hiring Tiger Woods to represent its new line of golf clubs. Nikes golf line has since done very well, finding a direct link between Tiger’s wins & increased sales volume. The Nike+ technology used to monitor a runner’s distance & calories burned has been a pleasant star by Nike expects the market for Nike+ to grow rapidly.
Cash Cows:
Cash cows generate lot of revenue. They may exhibit low growth, but they have high market share e.g. Air Jordan sneakers. Cash cows typically use stability strategies (why put a sure thing at risk?).
Dogs: Dogs give low return in a low growth market, & to add insult to injury, they have low market share – nothing is going right with a dogs. Therefore, corporations often divest or liquidate their dogs at some point when they determine the dogs is a hopeless case; for e.g. the World Wrestling Federation folded the XFL in 2001. Dogs require turnaround & retrenchment strategies. The business portfolio analysis helps corporate level managers figure out how to allocate cash & other resource among the organization’s business lines (as well as which corporate strategies to use). Managers use profits from cash cows to fund question marks & sometimes stars. Any cash from dogs is also given to question marks & stars, as well as any resources from their sale.
GE Growth Matrix:
The GE Matrix is a model to perform business portfolio analysis on the Strategic Business Units of a corporation. The General Electronics of USA with the of consulting firm Mckinsey and Co. developed a more complicated matrix as a technique of portfolio analysis. The GE Business Screen introduces a three by three matrix, which
now
includes
a
medium
category.
It
utilizes
industry
attractiveness as a more inclusive measure than BCG's market growth and substitute’s competitive position for the original's market share. The GE Business Screen introduces a three by three matrix, which
now
includes
a
medium
category.
It
utilizes
industry
attractiveness as a more inclusive measure than BCG's market growth and substitute’s competitive position for the original's market share. A large corporation may have many SBU's, which essentially operate under the same strategic umbrella, but are distinctive and individual.
Growth/share is replaced by competitive position and market attractiveness. The point is that successful SBU's will go and do well in attractive markets because they add value that customers will pay for. So weak companies do badly for the opposite reasons. To help break down decision-making further, then consider a number of sub-criteria: For market attractiveness: Size of market. Market rate of growth. The nature of competition and its diversity. Profit margin. Impact of technology, the law, and energy efficiency. Environmental impact. For competitive position: Market share. Management profile. R & D. Quality of products and services. Branding and promotions success. Place (or distribution). Efficiency. Cost reduction. At this stage the marketing manager adapts the list above to the needs of his strategy. The GE matrix has 5 steps:
One - Identify your products, brands, experiences, solutions, or SBU's. Two - Answer the question, what makes this market so attractive?
Three - Decide on the factors that position the business on the GE matrix. Four - Determine the best ways to measure attractiveness and
business position. Five - Finally rank each SBU as either low, medium or high for
business strength, or low, medium and high in relation to market attractiveness. Now follow the usual words of caution that go with all boxes, models and matrices. Yes the GE matrix is superior to the Boston Matrix since it uses several dimensions, as opposed to BCG's two. However, problems or limitations include: There is no research to prove that there is a relationship between market attractiveness and business position. The interrelationships between SBU’s, products, brands, experiences or solutions are not taken into . This approach does require extensive data gathering. Scoring is personal and subjective. There is no hard and fast rule on how to weight elements. The GE matrix offers a broad strategy and does not indicate how best to implement it.
7’S Mckinsey’s Matrix: Mckinsey developed a new framework to better represent the challenges of Services Marketing and for analysis and improving organizations effectiveness i.e. the 7S model which can be shown with the help of the following diagram:
With the help of the above diagram, 7S Mckinsey Matrix for Nike can be explained as follows:
Strategy: Diversify business portfolio with new acquisitions.
Structure: Matrix-structure. Balances creative with structure and discipline.
Systems:
Encourages work ethics. State of the art computer systems.
Shared Values: Balance of individualistic atmosphere and structure of matrix. Calculated risk taking.
Staff: Mix of new hires and promotions. • Promotions = consistency/company knowledge. • New-hire employees = business minded. Socializing.
Skills: Financially disciplined.
Style: Empowerment of top management. In combination of the 3 hard “S” and 4 soft “S” it provides effective framework for analyzing Nike and its activities. In case of Nike this 7S can be used to explore the extent to which the company is working coherently towards a distinctive and motivating place in minds of consumers.
Organization Structure of Nike: There are 4 types of organization structure and they are as follows:
Functional Structure
Divisional Structure
Types of organizational structure
Strategic Business Unit Structure
Matrix Structure
Of the above four, Nike has a matrix structure; it is a combination between the functional and the divisional structure. Nike consists of 5 departments: HR, Marketing & Sale, ing, Production, and Design & Development that cooperate with each other’s very well. Nike does not manufacture its own products; Nike signed contracts with the factories to produce their products. In Vietnam, Nike signed contract with 12 factories to produce for them and to control the production process, Nike has many production teams and each team is
responsible for 1 factory. Each production team include of a team leader, quality staff, quantity staff, technical staff and scheduling staff. With over 21,000 employees worldwide, the company was organized into departments by both geographic divisions and product categories, which created overlapping management responsibilities and a fluid leadership structure. For example, a footwear manager in Europe answered to both the Vice President of Footwear and the Vice President of Europe. However, there was no formal communication link between the regional vice presidents (those in the United States, Europe, Asia-Pacific, and Latin America) and the product vice presidents (footwear, apparel, equipment). In the case of the World Shoe Project, Hartge operated under the supervision of Jerry Karver, Divisional Vice President of Footwear, and the guidance of Dan Loeb, General Manager of Nike China. Exhibit 1 shows how the World Shoe Project fitted into Nike’s organizational structure.
Exhibit 1:
Positioning of World Shoes within Nike’s Organizational Structure
CEO Phil Knight
President Tom Clarke
Footwear United States Europe Asia Pacific
Apparel
Equipmen t
WORLD SHOE PROJECT
Latin America
Types of Strategies used by Nike:
Finance
Strategy refers to a plan of action designed to achieve a particular goal. There are only 5 types of Strategies universally used and they are follows:
Integration
Generic
Intensive Typesof strategy
Defensive
Nike
uses
Generic
for
Diversification
the
growth
and
development
of
the
organization.
Generic strategies: Cost Leadership: This strategy emphasizes efficiency. By producing high volumes of standardized products, the firm hopes to take advantage of economies of scale and experience curve effects. The product is often a basic no-frills product that is produced at a relatively low cost and made available to a very large customer base. Maintaining this
strategy requires a continuous search for cost reductions in all aspects of the business. The associated distribution strategy is to obtain the most extensive distribution possible. Promotional strategy often involves trying to make a virtue out of low cost product features. To be successful, this strategy usually requires a considerable market share advantage or preferential access to raw materials, components, labour, or some other important input. Product Diversification: Product diversification involves modifying existing products in order to expand the market potential of a product. From changes in brands to changes in a product's target market, product diversification can obtain new clients for your product by leveraging an existing product's reputation and development platform to produce and sell a modified product. Successful product diversification requires accurate targeting and product differentiation to prevent eroding your current market and increase overall sales and profits.
Recommendations:
After
thoroughly
analyzing
Nike’s
organization,
business
practices, and position in the market, the following recommendations are given: Since the Nike product line has been experiencing a diminishing quality and brand image, that they spend more money, resources and advertising in order to try and increase it. They can also accomplish this by using a better product design, materials and manufacturing processes. The organization should make more efficient uses of its money. This could be accomplished by expanding their promotions to include entertainment and other non-sports venues, since the line between entertainment sports has become blurred. Currently, Nike is focusing most of their marketing efforts towards the sports footwear lines.
In order to increase sales, they
should expand this to include their casual footwear line as well. Since Nike’s strategy is differentiation, they need to continue to be on the cutting edge of the athletic footwear technology. Doing this will help them design new types of shoes and other products, giving them a diverse product line. One of the most important aspects of Nike’s business is becoming the use of the Internet to communicate with consumers. They are developing a new technology that will allow their customers to design their own shoes online.
In order to accomplish this, they
must enhance their website in order to make it more -friendly.
Currently, the site takes too long to and the basic design does nothing to comment their products. We also recommend that Nike increase their international efforts in order to maximize their product sales. Nike continues to be the technology and performance leader in athletic shoes. They must keep their strong competitive edge in order to prevent any potential threatening entrants.
Conclusion: The specific brand objective of Nike would be to build up its brand reputation, image and equity. A brand is not simply a collection of products and benefits, but also a storehouse of value stemming from awareness, loyalty, and association of quality and brand personality. A brand is a name, term, sign, symbol or design or a combination of them intended to identify the goods or services of one seller or group of sellers and to differentiate from those of competitors. In essence, a brand identifies the seller or maker. It can convey up to six levels of meaning: Attributes, Benefits, Values, Culture, Personality and . If a company treats a brand only as a name it misses the point. The branding challenge is to develop a deep set of positive associations for
the
brand.
The
motto
of
Nike
is
“Just
Do
It.”
Although these six meanings are noticeable in the Nike brand in the west and other parts of the world, they are yet to be cultivated in India. Nike has to ensure that their brand is built up on these pillars in India.
References: Webliography: www.nike.com www.nikebiz.com www.acaria.com www.wikipedia.com www.oppapers.com www.allfreeessays.com www.docter.com www.managementparadise.com
Search Engine: www.goole.com www.yahoo.com www.msn.com
Nike, Inc.
Type Public: (NYSE: NKE) Industry: Deg and Manufacturing: Sportswear, Sports equipment. Founded: 24 January, 1964. Founder(s): William J. "Bill" Bowerman, Philip H. Knight Headquarters: Washington County, Oregon, United States (Near Beaverton, Oregon) Area served: Worldwide Key people: Philip H. Knight (Chairman), Mark Parker (CEO) & (President) Products: Athletic shoes, Apparel, Sports equipment, Accessories Revenue : ▲ US$ 18.627 billion (2008) Operating income: ▲ US$ 2.199 billion (2007) Net income: ▲ US$ 1.883 billion (2008) Total assets: ▲ US$ 12.443 billion (2008) Total equity: ▲ US$ 7.825 billion (2008)
Employees: 30,200 (2008) Website: www.nike.com
History: The company initially operated as a distributor for Japanese shoe maker Onitsuka Tiger, making most sales at track meets out of Knight's automobile. The following is a history of Nike, Inc. from the beginning when it was known as Blue Ribbon Sports. 1955 1960 1962 1964 1965 1966 1968 1969
1971
Phil Knight and Bill Bowerman meet at University of Oregon in Eugene. Bowerman continues tinkering with new designs for athletic shoes. Knight receives a Master of Business istration from Stanford University and makes up a company named "Blue Ribbon Sports" (BRS). Knight’s first shipment of Tiger Shoe samples arrive in January. Jeff Johnson becomes BRS' first full-time employee (he switched over from selling Adidas football shoes). Jeff Johnson opens the first BRS retail outlet in Santa Monica, Calif. Knight & Bowerman convert their handshake agreement from 1964 into a formal written partnership on April 26. The first BRS West retail store is opened in Eugene, Oregon. Knight devotes himself full-time to BRS (he was an Assistant Professor of Business istration at Portland State University). Knight becomes Chairman of the Board and Chief Executive Officer of BRS and later Nike, Inc. Swoosh Design trademark is created by Carolyn Davidson for a fee of $35. Johnson dreams up the company's new brand name, NIKE, the Greek Goddess of victory. A soccer/football shoe is the first NIKE model to hit the retail market.
1972
A Nike T-shirt to promote the shoe becomes the first apparel item. BRS launches the Nike brand at the U.S. Olympic Trials.
1977
Canada becomes BRS’ first foreign market. BRS starts Athletics West. Manufacturing factories are set up in Taiwan and Korea.
1978
Nike shoes are sold in Asia for the first time. BRS changes its corporate name to NIKE, Inc. The first children's shoes are introduced.
1979
Revenues = $71 million. Nike introduces the Tailwind, the first running shoe with the patented AIR-SOLE cushioning system. The NIKE Apparel line begins.
1980
Nike is the No. 1 running shoe with nearly 50 percent of the U.S. market revenues. World Headquarters are opened at 3900 S.W. Murray Blvd. in Beaverton, Oregon. Nike goes public with 2 million shares of common stock. The NIKE Sport R&D Lab opens in Exeter, New Hampshire.
1981 1984 1985 1986 1987 1988
NIKE shoes become the number-one seller in Canada Nike International Ltd. Is formed International sales take off, reaching $158 million. AIR JORDAN court shoes are introduced along with apparel. Nike charges into the sport of golf. The Air Pegasus, a NIKE classic in its 4th generation, sells its 5,000,000th pair. The “Just Do It” campaign is introduced.
1990
Revenues break $1 billion for the first time. "Bo Knows" commercials featuring Bo Jackson are tied to the Just Do It theme. Doors open to the NIKE World Campus.
1991 1992 1994
The first Niketown opens in Portland, Oregon. NIKE F.I.T. apparel is introduced. International revenues top $1 billion. NIKE launches P.L.A.Y., Participate in the Lives of America's Youth.
1989
1995 1996 1997
1998 1999 2000 2002 2003
P.L.A.Y. includes Reuse-a-Shoe, a program that diverts more than 1 million shoes from landfills to new court surfaces. Nike enters the sport ball and eyewear markets. In November, Niketown New York opens its 85,000 sq. ft. of innovative retail design & sports heritage. Nike sponsors WNBA and selected athletes in the American Basketball League. Nike designers approach the design of the first Nike running watch. Bauer Nike Hockey is formed. In December, Sydney organizers approach Nike to sponsor the Australian Team. Nike Air Presto, otherwise known as a “t-shirt for your feet,” is launched. Speed skaters wearing Nike Swift Skin suits set eight world records & earn gold medals in Salt Lake City. Nike completes the acquisition of Converse Inc. & its incredibly rich & storied heritage in September.
Background: Nike became a Goliath with sales running $9.2 billion a year by persuading consumers to pay hundreds of dollars for spruced-up tennis shoes. It took about a decade to climb from its beginnings, when Phil Knight, its founder and chairman, was peddling running shoes out of his car trunk, to leadership of the athletic shoe business. Along the way, Nike revolutionized the way corporations deal with athletes and professional teams, angered human rights activists with its low-wage manufacturing overseas, and stirred criticism of its outsized impact on popular culture. When Nike launched its apparel six years ago, critics scoffed – and then watched it grab that market, too. Since then, Nike’s stock has soared 18-fold, while its profits have grown rapidly. In several recent blockbuster quarters, earnings surged
more than 70% from a year earlier.
But that growth suddenly
evaporated, and sneaker and apparel sales stayed slack during much of 2002.
Sports equipment was projected to become Nike’s “third
engine,” powering the flagging sneaker and apparel sales.
Acquisitions: •
As of November 2008, Nike, Inc. owns four key subsidiaries: Cole Haan, Hurley International, Converse Inc. and Umbro.
•
Nike's first acquisition was the upscale footwear company Cole Haan in 1988.
•
In February 2002, Nike bought surf apparel company Hurley International from founder Bob Hurley.
•
In July 2003, Nike paid US$305 million to acquire Converse Inc., makers of the iconic Chuck Taylor All Stars.
•
On March 3, 2008, Nike acquired sports apparel supplier Umbro, known as the manufacturers of the England national football team's kits, in a deal said to be worth £285 million ($600 million).
• Other subsidiaries previously owned and subsequently sold by Nike include Bauer Hockey and Starter.
Products: Nike produces a wide range of sports equipment. Their first products were track running shoes. They currently also make shoes, jerseys, shorts, base layers etc. for a wide range of sports including track & field, baseball, ice hockey, tennis, Association football, lacrosse, basketball and cricket. Nike Air Max is a line of shoes first released by Nike, Inc. in 1987. The most recent additions to their line
are the Nike 6.0, Nike NYX, and Nike SB shoes, designed for skateboarding. Nike has recently introduced cricket shoes, called Air Zoom Yorker, designed to be 30% lighter than their competitors'. In 2008, Nike introduced the Air Jordan XX3, a high performance basketball shoe designed with the environment in mind. Nike sells an assortment of products, including shoes and apparel for sports activities like association football, basketball, running, combat sports, tennis, American football, athletics, golf and cross training for men, women, and children. Nike also sells shoes for outdoor activities such as tennis, golf, skateboarding, association football, baseball, American football, cycling, volleyball, wrestling, cheerleading, aquatic activities, auto racing and other athletic and recreational uses. Nike is well known and popular in youth culture, chav culture and hip hop culture as they supply urban fashion clothing. Nike recently teamed up with Apple Inc. to produce the Nike+ product which monitors a runner's performance via a radio device in the shoe which links to the iPod nano. While the product generates useful statistics, it has been criticized by researchers who were able to identify s' RFID devices from 60 feet (18 m) away using small, concealable intelligence motes in a wireless sensor network. In 2004, they launched the SPARQ Training Program/Division. Some of Nike's newest shoes contain Flywire and Lunarlite Foam. These are materials used to reduce the weight of many types of shoes. In the video game Gran Turismo 4 there is a car by Nike called the NikeOne 2022, designed by Phil Frank.
A Nike brand athletic shoe
A pair of Nike Air Jordan I shoes
Top Products: 1. Nike
Trainer Manny Pacquiao SC 2010 Men’s Training Shoe-
2. Nike SFB Men’s Boot-
3. Nike Air Max+ 2009 Women’s Running Shoe-
4. Nike Air Max+ 2009 Men’s Running Shoe-
5. Nike LunarGlide+ Women’s Running Shoe-
6. Nike Air Force 1 07 LE Men’s Shoe-
7. Nike Zoom Kobe V Men’s Basketball Shoe-
8. Nike LunarGlide+ Men’s Running Shoe-
Other Products: 1. OREGON SERIES DIGITAL SUPER WA0024:
A durable outdoor
watch for runners and endurance athletes. Inspired from the design and construction of our Altimeter com watches. This is our larger version. • 100-hour chronograph, interval timer and data recall • 100m water resistance •
3 time alarms and 1 hydration alarm
• Battery hatch on back plate / Easy replacement
2. NIKE LUNA WOMEN’S DUFFEL BAG: Make your move with the
Nike Luna Women's Duffel Bag, an ideal travel companion boasting a sleek, retro look that will help keep you organized from the street to the studio. Full-zip main compartment. Exterior sleeve pocket at side Nike corporate logo screen-print at side.
• Dimensions: 9" H x 18" W x 9" •
Fabric: 100% Nylon Imported
3. NIKE WAFFEL STITCH (MLB RED SOX) WOMEN’S HOODIE:
Ultra lightweight, the Nike Waffle-Stitch (MLB Red Sox) Women's Hoodie is a modern take on a classic, offering an edgy way to cheer on your team. Hood with drawcord Open neck Kangaroo pocket Team logo left arm Rib cuffs Fabric: 60% cotton/40% polyester Machine wash Imported.
NIKE TIEMPO TEAM TRAINING FOOTBALL: 32 design, machine stitched polyurethane casing, 6 wing latex bladder.
4. NIKE BAUER VAPOR XXXX HOCKEY GLOVE: The glove that feels
like an extension of your hand gives you unparalleled flexibility thanks to a Segmented Back Roll, protecting you from every hit and every blast. Get a greater feel for the game with the Vapor XXXX Gloves.
Levels of Strategic Management at Nike: The products and services mentioned above reflect three types of major strategies employed by the organization at various levels. Namely they are:
1.
Corporate Level Strategy: Corporate level strategy occupies the highest level of strategic
decision-making and covers actions dealing with the objective of the firm, acquisition and allocation of resources and coordination of strategies of various SBUs for optimal performance. Nike has succeeded in competing in the footwear industry for as long as they have is because they remain flexible in a volatile market by using subcontracting relationships overseas in low labor-cost countries. Another reason why Nike has continued to be a strong competitor is based on their product differentiation. Although they started out by only producing and selling athletic shoes, their product line now consists of a wide range of clothing, equipment and accessories. They also design products for a variety of sports, ranging from running to golf to aquatic activities.
Successful differentiation allows a Nike to: • Command a price for its product, and/or • Increase unit sales, and/or • Gain buyer loyalty to its brand. 2.
Business Level Strategy: As their business level strategy it has focused on Differentiation
strategy ever since it started. Nike has always made successful attempts to distinguish their products or services from other in the industry. Nike mines consumer insights and uses research and development to design performance athletic products. Nike has contract with manufacturers to make and ship products to their owned and partner retailers around the world. Nike creates demand for product through marketing and advertising, their presence in sports and their relationships with athletes (sports marketing). For Nike to be successful, the world of sport must be successful. To build their business, they have to fuel and respond to consumer interest around the world and continually appeal to changing demographics and new markets in a deeply competitive industry. Nike also stimulates growth through smart, effective investments in people, research and development resources and a well-managed supply chain. They increase shareholder returns by effectively managing their operating costs in proportion to their growth rates.
3.
Functional Level Strategy:
Functional
Level
Strategy
includes
Sales
and
marketing
department of the organization. It is directed at improving the effectiveness of operations within the company. NIKE is employing this strategy within its manufacturing, marketing, product development, and customer service processes. Thus, in order to improve its customer services, Nike strives to represent the highest service standard within its industry, and tries to build loyal customer relationships around the world.
Key Steps towards Strategic Planning:
The preparation of a strategic plan is a multi step process covering Vision, Mission, Objectives, Values, Goals, Strategies and Programmes. VISION MISSION OB J E C TIVE S GOA L S S TR ATE GIE S VA L UE S P R OGR A MME S
1.Vision: “Innovate for better world” Unleashing potential through sport. In the last two years, Nike has invested $100 million worldwide in community-based sports initiatives. By 2011, NIKE is expected to invest another $315 million. These investments will be used to give excluded youth around the world the chance to play because as access to sport can enhance their lives. Nike will provide products, resurface playing fields, community-based programs, and help young people create their own communities. This is all will be the NIKE “Let Me Play commitment.”
2.Mission: “To bring inspiration and innovation to every athlete in the world. If you have a body, you are an athlete.”
Nike works toward succeeding this mission, by bringing sport to everyone, athlete and non-athletes, as “the world's #1 shoemaker” doing “more dominating than assisting, to capture more than 20% of the US athletic shoe market.” Nike’s mission is recognized in the way products are marketed, and in the social responsibility Nike feels to the world. With their mission statement, Nike addresses the individuals of the world with regards to sports. Nike’s social involvements and corporate responsibility are seen “as a catalyst for growth and innovation.” Nike uses the “power of our brand, the energy and ion of our people, and the scale of our business to create meaningful change.”
3.Objectives: Provide an environment which develops people to maximize their
contribution to NIKE. Identify focused consumer segment opportunities. Provide quality and innovative services and products internally and
externally. Establish
and nurture relevant emotional ties with consumer
segments. Maximize profits.
4.Goals: Goals state general targets to be accomplished. Goals are the target. The goals of Nike are as follows: To increase sales of international market.
To increase sales in the U.S. apparel business.
To view sustainability (of the environment) as a source of innovation & growth for the company, not just as a responsibility. To use sports as a tool for youth inclusion.
5.Strategies: The rules & guidelines by which mission, vision, objectives, goals etc. may be achieved are called as strategies. Strategies can cover the business growth & relates to primary matters in key functional areas.
6.Values: Nike main three core values of the company are honesty, competitiveness, and teamwork. Despite its size, Nike operates with a minimum of hierarchy. As a result, there is a lot of collaboration and consensus decision-making. Commonly held values are imperative in such a matrix organization.
7.Programmes: The final elements are the programmes which set out the implementing plans for its key strategies. These should cover resources, objectives, time scales, deadlines, budgets & performance target.
Keys towards business strategies:
SWOT analysis sizes up a firm’s resource strengths and weaknesses and its external opportunities and threats to provide a good overview of whether a firm’s business position is fundamentally healthy or unhealthy. This will provide a clear view of Nike’s resource capabilities and deficiencies, its market opportunities, and the external threats to the company’s future well being and provide a starting point for the recommendations to Nike’s strategic market strategy.
Strengths:
• Nike is a globally recognized for being the number one sportswear brand in the World. • Nike has no factories; rather it uses contract factories to get the work done which makes it quite a lean organization. It has contracts with above 700 shops globally in about 45 different countries. •
Nike is quite strong regarding its research & development; quite evident regarding its evolving and innovative product range.
•
It belongs to Fortune 500 companies which 2007 total revenue exceeded 18 billion USD.
•
It employs more than 30,000 people worldwide.
•
Owns strong marketing strategy under Nike brand that assumes the involvement of world top-class athletes and sportsmen in Nike’s ‘Just do it’ advertising campaigns.
•
It leads its international business operations through acquisitions and re-branding: Converse Inc, 2003; Starter athletic clothing, 2004; Umbro, 2008.
•
Nike’s brand is used to manufacture and promote a wide variety of products for all types of sport-oriented and leisure activities.
•
It manages the US premier training program SPARQ Training Program.
•
Nike applies lunarlite foam and flywire materials to reduce the weight of manufactured shoes.
Weaknesses:
• The Nike organization does have a wide and diverse range of sports products but the income of the business is still heavily dependent upon the footwear market. •
The retail sector is very sensitive to price.
•
Nike unwilling to disclose information concerning its partnering companies, which caused harsh criticism from Corp Watch and other companies.
•
Nike has violated overtime laws minimum wage rates and in Vietnam, 1996.
•
It provides poor working conditions, and tends to exploit cheap workforce overseas, especially in free trade zones.
•
In 1990s, Nike was reported to apply child labour in Pakistan and Cambodia to produce soccer balls.
• Contracts overseas companies that apply non-transparent and inadequate labour regulations, involving child labour. •
Positioned as a permanent subject of criticism by anti-globalization groups.
• Forced Labour applications in partnering apparel factories in Malaysia, involving forced Labour and poor living conditions.
Opportunities: •
Nike
has
many
opportunities
in
the
product
development
department. •
There is also the opportunity to develop products other than shoes such as sportswear, jewelry, clothing, etc.
•
The business could also be developed more extensively in international markets and thereby build upon its strong global brand recognition.
•
Producing sportswear products from manufacturing waste.
•
Extension of eco-friendly projects like ‘Reuse-A-Shoe Program’ aimed at further recycling.
•
Emphasis on corporate marketing strategy through the promotion of corporate brand and sponsorship agreements.
•
There are many international regions that still need tapping and there is need for sportswear and with Nike’s strong global brand recognition, it can initiate in many markets that have the disposable income to spend on high value sports goods.
Threats: •
Nike is vulnerable to the international nature of trade.
•
The market for sports shoes and clothing is very competitive.
•
The weaknesses section, the retail sector has become very price competitive.
•
Textile industry adversely affects the environment, and therefore the company is permanently striving to maintain its eco-friendly reputation.
• A recession may lead to job shortages in most of Nike’s worldwide branches. • The organization has experienced many adverse publicity s due to its widespread advertising.
Strategic Management Process of Nike: Strategic Management process is a systematic approach to a major
and
increasingly
important
responsibility
of
general
management to position and relate the firm to its environment in such a way which will assure its continued success and make it secure from surprises. The Strategic Management process of Nike consists of 5 phases which can be diagrammatically represented as follow:
ANALYSIS
GOAL SETTING
STRATEGY FORMULATION
STRATEGIC MANAGEMENT
STRATEGY MONITORING
STRATEGY IMPLEMENTATION
Phase I- Analysis: This is the first phase of Strategic Management process in Nike. Analysis is the process of breaking a complex topic into smaller parts to gain a better understanding of it. Different types of analysis which are done in Nike are Financial statement analysis, Fundamental analysis, Technical analysis, Business analysis, Price analysis, Market analysis etc. For e.g. If Nike faces sales problem then the company may go Price analysis, which involves the breakdown of a price to unit figure.
Phase II- Strategy Formulation: This phase is also called as Strategic Planning phase at Nike. This phase is done by the top level management or at the corporate level stage of Nike. In Nike, this phase includes the following steps:
Step 1: Framing Mission and Objectives: This is the first step in Strategy formation of Nike. The Mission statement of the company is “To bring inspiration and innovation to every athlete in the world. If you have a body, you are an athlete.” The objective of the company is to “Provide an environment which develops people to maximize their contribution to NIKE.”
Step 2: Analysis of Internal environment: Analysis
of
internal
environment
includes
Strengths
and
Weakness of the company. To list few of them, Strengths of Nike are as follows:
•
It belongs to Fortune 500 companies which 2007 total revenue exceeded 18 billion USD.
•
Nike applies lunarlite foam and flywire materials to reduce the weight of manufactured shoes.
• Nike is a globally recognized for being the number one sportswear brand in the World. Weaknesses of Nike are as follows: •
The retail sector is very sensitive to price.
•
It provides poor working conditions, and tends to exploit cheap workforce overseas, especially in free trade zones.
• The Nike organization does have a wide and diverse range of sports products but the income of the business is still heavily dependent upon the footwear market.
Step 3: Analysis of External environment: External environment includes Opportunities and Threats for Nike. Opportunities for Nike in the Market are as follows: •
Extension of eco-friendly projects like ‘Reuse-A-Shoe Program’ aimed at further recycling.
•
The business could also be developed more extensively in international markets and thereby build upon its strong global brand recognition.
Threats are as follows: •
The market for sports shoes and clothing is very competitive.
• A recession may lead to job shortages in most of Nike’s worldwide branches.
Step 4: Gap analysis:
The Management of Nike conducts Gap analysis i.e. they compare and analyze its present performance level and the desire future performance level.
Step 5: Framing Alternative Strategies: As we talk about Nike, they are giving a lot of attention and time to make the new ment strategy of the company. There are three main types of strategies i.e. corporate, business and functional.
Step 6: Choice of strategies: As Nike is considered they have a powerful ment strategy. They implement their strategy in a beneficial and proper way. New commercials on television are the examples of the implementation of their strategy. Big board’s which they have on the road sides are another example of the implementation of their strategy. So the company chooses or selects the best strategy depending upon the situation.
Phase III- Strategy Implementation: This phase is carried out by the Middle level management or at the functional level stage at Nike. This phase in Nike includes the following steps:
Step 1: Formulation of plans, programmes and projects: This is the first step in Strategy implementation stage of Nike. This refers to formulating new plans, programmes and projects of Nike.
Step 2: Project Implementation: The Project Implementation step of Nike includes the following stages: Conception phase, Definition phase, Planning and organizing phase, Implementation phase and Clean up phase.
Step 3: Procedure Implementation: For implementing the strategy Nike needs to be aware of the various
government
regulations
FEMA
regulations
and
foreign
collaboration etc.
Step 4: Resource Allocation: This step deals with various resources available with Nike such as: • Physical Resources: Companies Assets • Financial resources: Capital of the company. • Human Resources: Employees of the Company.
Step 5: Structural Implementation: Every
company
must
have
its
organization
structure
to
implement strategies. Nike follows Functional structure to carry framework and implement strategies.
Step 6: Functional Implementation: It deals with functional plans and policies of Nike. The functional managers belong to various departments or areas such as Marketing, Finance, Human resources, Operations & other in case of Nike.
Step 7: Behavioral Implementation: It deals with issues of leadership, corporate culture, personal value, business ethics and corporate responsibilities for Nike.
Phase IV- Strategy Evaluation/Strategy Monitoring: Evaluation of strategy is that phase of Strategic management process of Nike in which managers try to assure that the strategic choice is properly implemented and it is meeting the objectives. This phase in Nike includes the following steps:
Step 1: Setting of standards: The standards are established in of quality, quantity, cost and time for Nike to achieve the objectives of the firm.
Step 2: Measurement of performance: The next step is to measure the actual performance. For this managers of various departments asks for performance reports from the employees and the performance is measured in both quantitative and qualitative .
Step 3: Comparison of actual performance with standards: Actual performance is compared with the desired standards of Nike. Such comparisons are required by the company to find out deviations.
Step 4: Find out the deviations:
After comparison, the managers notice the deviations. For e.g. Nike Dunk sales target was 1000 units and the actual sales were only 900 units than the deviations are to the extent of 100 units.
Step 5: Analyzing Deviations: The managers analyzes the deviations and reports to the higher authorities or the top level management saying that deviations were due to poor promotion, faulty pricing etc.
Step 6: Taking Corrective measures: This is the last step in Strategy Evaluation phase of Nike. At this stage the managers of various departments takes corrective steps to correct the deviations.
Phase V- Goal Setting: This is the last phase of Strategic Management process of Nike. Goal Setting involves establishing specific, measurable and timetargeted objectives of the company. At this stage Nike has finally achieved its corporate objectives and goals of establishing themselves as number one sportswear brand in the world. Thus to conclude the Strategic management process of Nike which is build over 19 steps with 5 phases. This process is a lengthy and an ongoing process. It helps Nike to continue, achieve success and make it secure from surprises.
BCG MATRIX:
Companies that are large enough to be organized into Strategic business units face the challenge of allocating resources among those units. In the early 1970's the Boston Consulting Group developed a model for managing a portfolio of different business units (or major product lines). One popular method for analyzing corporate business portfolios is the BCG growth share matrix. We can analyze Nike’s different products like sport balls, timepieces, eyewear, skates, bats, athletic shoes, & apparel, other equipment designed for sports activities with the help of BCG Matrix.
Question marks:
Question marks are new lines of business with a low market share in an expanding market that the corporation believes can be grown into stars. To make question marks into stars, corporations must make significant cash outlays; this requires profit from their other lines of business. This commitment of resources is, of course, not without risk because question marks can become dogs. Question marks use growth strategies to get to profitability fast. Nike has decided to market a tailored line of sporting apparel to compete more directly with under amours high performance sweat resistant line of fitting clothing’s. Nike needs to closely monitor sales of these products to determine whether it has a star or a dog on its hand.
Stars: Stars are emerging business with a rapidly growing market share. Corporations typically plow profits back into the stars products, in the hope that a star will eventually gain enough market shares to become a cash cow. Stars often use growth strategies. Nike developed a star by hiring Tiger Woods to represent its new line of golf clubs. Nikes golf line has since done very well, finding a direct link between Tiger’s wins & increased sales volume. The Nike+ technology used to monitor a runner’s distance & calories burned has been a pleasant star by Nike expects the market for Nike+ to grow rapidly.
Cash Cows:
Cash cows generate lot of revenue. They may exhibit low growth, but they have high market share e.g. Air Jordan sneakers. Cash cows typically use stability strategies (why put a sure thing at risk?).
Dogs: Dogs give low return in a low growth market, & to add insult to injury, they have low market share – nothing is going right with a dogs. Therefore, corporations often divest or liquidate their dogs at some point when they determine the dogs is a hopeless case; for e.g. the World Wrestling Federation folded the XFL in 2001. Dogs require turnaround & retrenchment strategies. The business portfolio analysis helps corporate level managers figure out how to allocate cash & other resource among the organization’s business lines (as well as which corporate strategies to use). Managers use profits from cash cows to fund question marks & sometimes stars. Any cash from dogs is also given to question marks & stars, as well as any resources from their sale.
GE Growth Matrix:
The GE Matrix is a model to perform business portfolio analysis on the Strategic Business Units of a corporation. The General Electronics of USA with the of consulting firm Mckinsey and Co. developed a more complicated matrix as a technique of portfolio analysis. The GE Business Screen introduces a three by three matrix, which
now
includes
a
medium
category.
It
utilizes
industry
attractiveness as a more inclusive measure than BCG's market growth and substitute’s competitive position for the original's market share. The GE Business Screen introduces a three by three matrix, which
now
includes
a
medium
category.
It
utilizes
industry
attractiveness as a more inclusive measure than BCG's market growth and substitute’s competitive position for the original's market share. A large corporation may have many SBU's, which essentially operate under the same strategic umbrella, but are distinctive and individual.
Growth/share is replaced by competitive position and market attractiveness. The point is that successful SBU's will go and do well in attractive markets because they add value that customers will pay for. So weak companies do badly for the opposite reasons. To help break down decision-making further, then consider a number of sub-criteria: For market attractiveness: Size of market. Market rate of growth. The nature of competition and its diversity. Profit margin. Impact of technology, the law, and energy efficiency. Environmental impact. For competitive position: Market share. Management profile. R & D. Quality of products and services. Branding and promotions success. Place (or distribution). Efficiency. Cost reduction. At this stage the marketing manager adapts the list above to the needs of his strategy. The GE matrix has 5 steps:
One - Identify your products, brands, experiences, solutions, or SBU's. Two - Answer the question, what makes this market so attractive?
Three - Decide on the factors that position the business on the GE matrix. Four - Determine the best ways to measure attractiveness and
business position. Five - Finally rank each SBU as either low, medium or high for
business strength, or low, medium and high in relation to market attractiveness. Now follow the usual words of caution that go with all boxes, models and matrices. Yes the GE matrix is superior to the Boston Matrix since it uses several dimensions, as opposed to BCG's two. However, problems or limitations include: There is no research to prove that there is a relationship between market attractiveness and business position. The interrelationships between SBU’s, products, brands, experiences or solutions are not taken into . This approach does require extensive data gathering. Scoring is personal and subjective. There is no hard and fast rule on how to weight elements. The GE matrix offers a broad strategy and does not indicate how best to implement it.
7’S Mckinsey’s Matrix: Mckinsey developed a new framework to better represent the challenges of Services Marketing and for analysis and improving organizations effectiveness i.e. the 7S model which can be shown with the help of the following diagram:
With the help of the above diagram, 7S Mckinsey Matrix for Nike can be explained as follows:
Strategy: Diversify business portfolio with new acquisitions.
Structure: Matrix-structure. Balances creative with structure and discipline.
Systems:
Encourages work ethics. State of the art computer systems.
Shared Values: Balance of individualistic atmosphere and structure of matrix. Calculated risk taking.
Staff: Mix of new hires and promotions. • Promotions = consistency/company knowledge. • New-hire employees = business minded. Socializing.
Skills: Financially disciplined.
Style: Empowerment of top management. In combination of the 3 hard “S” and 4 soft “S” it provides effective framework for analyzing Nike and its activities. In case of Nike this 7S can be used to explore the extent to which the company is working coherently towards a distinctive and motivating place in minds of consumers.
Organization Structure of Nike: There are 4 types of organization structure and they are as follows:
Functional Structure
Divisional Structure
Types of organizational structure
Strategic Business Unit Structure
Matrix Structure
Of the above four, Nike has a matrix structure; it is a combination between the functional and the divisional structure. Nike consists of 5 departments: HR, Marketing & Sale, ing, Production, and Design & Development that cooperate with each other’s very well. Nike does not manufacture its own products; Nike signed contracts with the factories to produce their products. In Vietnam, Nike signed contract with 12 factories to produce for them and to control the production process, Nike has many production teams and each team is
responsible for 1 factory. Each production team include of a team leader, quality staff, quantity staff, technical staff and scheduling staff. With over 21,000 employees worldwide, the company was organized into departments by both geographic divisions and product categories, which created overlapping management responsibilities and a fluid leadership structure. For example, a footwear manager in Europe answered to both the Vice President of Footwear and the Vice President of Europe. However, there was no formal communication link between the regional vice presidents (those in the United States, Europe, Asia-Pacific, and Latin America) and the product vice presidents (footwear, apparel, equipment). In the case of the World Shoe Project, Hartge operated under the supervision of Jerry Karver, Divisional Vice President of Footwear, and the guidance of Dan Loeb, General Manager of Nike China. Exhibit 1 shows how the World Shoe Project fitted into Nike’s organizational structure.
Exhibit 1:
Positioning of World Shoes within Nike’s Organizational Structure
CEO Phil Knight
President Tom Clarke
Footwear United States Europe Asia Pacific
Apparel
Equipmen t
WORLD SHOE PROJECT
Latin America
Types of Strategies used by Nike:
Finance
Strategy refers to a plan of action designed to achieve a particular goal. There are only 5 types of Strategies universally used and they are follows:
Integration
Generic
Intensive Typesof strategy
Defensive
Nike
uses
Generic
for
Diversification
the
growth
and
development
of
the
organization.
Generic strategies: Cost Leadership: This strategy emphasizes efficiency. By producing high volumes of standardized products, the firm hopes to take advantage of economies of scale and experience curve effects. The product is often a basic no-frills product that is produced at a relatively low cost and made available to a very large customer base. Maintaining this
strategy requires a continuous search for cost reductions in all aspects of the business. The associated distribution strategy is to obtain the most extensive distribution possible. Promotional strategy often involves trying to make a virtue out of low cost product features. To be successful, this strategy usually requires a considerable market share advantage or preferential access to raw materials, components, labour, or some other important input. Product Diversification: Product diversification involves modifying existing products in order to expand the market potential of a product. From changes in brands to changes in a product's target market, product diversification can obtain new clients for your product by leveraging an existing product's reputation and development platform to produce and sell a modified product. Successful product diversification requires accurate targeting and product differentiation to prevent eroding your current market and increase overall sales and profits.
Recommendations:
After
thoroughly
analyzing
Nike’s
organization,
business
practices, and position in the market, the following recommendations are given: Since the Nike product line has been experiencing a diminishing quality and brand image, that they spend more money, resources and advertising in order to try and increase it. They can also accomplish this by using a better product design, materials and manufacturing processes. The organization should make more efficient uses of its money. This could be accomplished by expanding their promotions to include entertainment and other non-sports venues, since the line between entertainment sports has become blurred. Currently, Nike is focusing most of their marketing efforts towards the sports footwear lines.
In order to increase sales, they
should expand this to include their casual footwear line as well. Since Nike’s strategy is differentiation, they need to continue to be on the cutting edge of the athletic footwear technology. Doing this will help them design new types of shoes and other products, giving them a diverse product line. One of the most important aspects of Nike’s business is becoming the use of the Internet to communicate with consumers. They are developing a new technology that will allow their customers to design their own shoes online.
In order to accomplish this, they
must enhance their website in order to make it more -friendly.
Currently, the site takes too long to and the basic design does nothing to comment their products. We also recommend that Nike increase their international efforts in order to maximize their product sales. Nike continues to be the technology and performance leader in athletic shoes. They must keep their strong competitive edge in order to prevent any potential threatening entrants.
Conclusion: The specific brand objective of Nike would be to build up its brand reputation, image and equity. A brand is not simply a collection of products and benefits, but also a storehouse of value stemming from awareness, loyalty, and association of quality and brand personality. A brand is a name, term, sign, symbol or design or a combination of them intended to identify the goods or services of one seller or group of sellers and to differentiate from those of competitors. In essence, a brand identifies the seller or maker. It can convey up to six levels of meaning: Attributes, Benefits, Values, Culture, Personality and . If a company treats a brand only as a name it misses the point. The branding challenge is to develop a deep set of positive associations for
the
brand.
The
motto
of
Nike
is
“Just
Do
It.”
Although these six meanings are noticeable in the Nike brand in the west and other parts of the world, they are yet to be cultivated in India. Nike has to ensure that their brand is built up on these pillars in India.
References: Webliography: www.nike.com www.nikebiz.com www.acaria.com www.wikipedia.com www.oppapers.com www.allfreeessays.com www.docter.com www.managementparadise.com
Search Engine: www.goole.com www.yahoo.com www.msn.com
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