ASSIGNMENT ON

BY FAIZAN ASIM SENIOR-2-S

BACKGROUND

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Nike, origially known as Blue Ribbon Sports, was founded by University of Oregon track athlete Philip

Knight and his coach Bill Bowerman in January 1964. The company initially operatedas a distributor for

Japanese shoe maker Onitsuka Tiger, making most sales at track meets out of Knight's automobile.The

company's profits grew quickly, and in 1966, BRS opened its first retail store, located onPico Boulevard in

Santa Monica, California. By 1971, the relationship between BRS and OnitsukaTiger was nearing an end.

BRS prepared to launch its own line of footwear, which would bear thenewly designed Swoosh by Carolyn

Davidson. The Swoosh was first used by Nike in June 1971, andwas registered with the U.S. Patent and

Trademark Office on January 22, 1974.Today the OnitsukaTiger brand is owned by one of Nike's

competitors, ASICS.The first shoe to carry this design that was sold to the public was a soccer shoe

named"Nike,” which was released in the summer of 1971. In February 1972, BRS introduced its first line

of  Nike shoes, with the name Nike derived from the Greek goddess of victory. In 1978, BRS, Inc.officially

renamed itself to Nike, Inc. Beginning with Ilie Nastase; the first professional athlete tosign with BRS/Nike,

the sponsorship of athletes became a key marketing tool for the rapidly growingcompany.The company's first

self-designed product was based on Bowerman's "waffle" design. After the University of Oregon resurfaced

the track at Hayward Field, Bowerman began experimentingwith different potential outsoles that would grip

the new urethane track more effectively. His effortswere rewarded one Sunday morning when he poured

liquid urethane into his wife's waffle iron.Bowerman developed and refined the so-called 'waffle' sole which

would evolve into the now-iconicWaffle Trainer in 1974.

By 1980, Nike had reached a 50% market share in the United States athletic shoe market, andthe

company went public in December of that year. Its growth was due largely to 'word-of-foot'advertising (to

quote a Nike print ad from the late 1970s), rather than television ads. Nike's

firstnational television commercials ran in October 1982 during the broadcast of the New York Marathon.

The ads were created by Portland-based advertising agency Wieden+Kennedy, which hadformed several

months earlier in April 1982.Together, Nike and Wieden+Kennedy have created many indelible print and

television adsand the agency continues to be Nike's primary today. It was agency co-founder Dan Wieden

whocoined the now-famous slogan "Just Do It" for a 1988 Nike ad campaign, which was chosen by

Advertising Age

as one of the top five ad slogans of the 20th century, and the campaign has beenenshrined in the

Smithsonian Institution San Franciscan Walt Stack was featured in Nike's first "JustDo It" advertisement

that debuted on July 1, 1988.The "Just Do It" trademark was filed by Nike, Inc.on October 3, 1989 with

the description attributed to sports clothing, on which the mark was to beaffixed.Throughout the 1980s,

Nike expanded its product line to include many other sports andregions throughout the world. Nike is a

global sports shoe giant company. It is the largest seller of athletic footwear in theworld, holding the lion

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share of 33% of the global market. The company has production facilities inAsia, sales facilities in almost

200 countries, and customer service and other operational unitsworldwide

Challenges & Solutions

Challenges and Fixes

Nike has faced a number of challeges in its efforts to integrate sustainability within product design and

innovate a redefined future but it has led to us iterating, innovating and finding new ways to operate more

efficiently, effectively and creatively:

Uneven adoption of the Index and new vision.

Even though corporate leadership held all categories accountable for achieving Considered targets, there

was considerable variation in how quickly different groups have integrated the Considered Index and how

well they operationalized the tool. Some businesses have faced greater challenges. Some businesses had a

more entrenched resistance.  Since then, Nike has integrated sustainability principles into its innovation

processes, governance and portfolios to generate innovation that delivers products and services that

combine performance, innovation and sustainability.  Additionally, Nike has set a vision for what changes

are needed in innovation, with its people and culture and in the way it works in two areas– in product and

in manufacturing – that build on past achievements and on processes established to drive change.

Perfromance risks in the adoption of new materials.

There were a number of performance and aesthetic risks that Nike footwear faced in using EPMs such as

synthetic leather. There was a potential performance risk, for example, that using recycled content could

degrade physical properties like material durability, threatening Nike’s strict quality standards.  One of

the product creation directors in footwear described that with some EPM synthetic leather alternatives, the

options weren’t very attractive: “Leathers look boardy and dry, and the textiles aren’t very interesting.”

Today, rising input costs mean the need for innovation and technology has never been greater.  Through

innovative design, science, technology and process changes, our long term vision is to progressively

design out waste, eliminate hazardous chemicals and non-renewable energy consumption. Innovation also

allows us to design in new materials and new approaches to products.

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This vision has been built on years of assessing trends and materiality for Nike and the changes that are

impacting our business, our value chain, our consumers and the world. In 2007, we undertook an

assessment with SustainAbility some meta trends that have only become more relevant as we’ve shaped

and defined our strategy. These meta trends highlight the areas of our value chain and our business that

have the most potential for innovation. We use these filters in our work, our assessment of opportunity

and the way we approach reporting.

Added complexity.

In most cases, Considered made the design process more complex.  While designers liked to iteratively

find the right design, Considered required thinking about pattern efficiency much earlier in the process.  It

required more planning, often took longer, and it was often harder to find designs that both looked “cool”

and were efficient. “On most product decisions, it’s not lower in cost, better in performance, and more

sustainable,” explained one category product director.  “If it was that easy, that’d be great!  So usually on

every component of a shoe, there are tough decisions to be made.”  A designer within the Cleated

category noted, “We try to make designs look cool first, then run it by other filters like cost and

Considered.  We design in response to a lot of constraints, like price and performance requirements, and

goals like cool looks and feel.  More constraints makes the process harder and, maybe, slower.”  Different

from then, sustainable innovation is now increasingly at the core of the business.  To hedge against the

complexity, we needed to focus on identifying disruptive solutions in order to manage environmental

impact and business risk.  So, what does this mean in terms of the sustainability of our products? The

truth is, it’s a challenge to figure out how to measure that. Rather than working toward a certain

percentage of, say, recycled content in a finished product, we have worked to improve our base materials,

and we are now creating systems that allow us to better assess the impacts of the resulting products. That

said, we do already have some ways to measure our success. For example, over the past five years we

have achieved a 19 percent reduction in waste related to the production of footwear uppers. Considered

Design contributed to that gain, along with manufacturing process optimization and other best practices.

That’s the same as not producing 15 million pairs of shoe uppers over that time period. Our use of

Environmentally Preferred Materials (EPMs) – ones that have lower environmental impacts throughout

their lifecycles in terms of chemistry, water, energy use and waste – provides another strong indicator of

our progress. We also learned that addressing symptoms doesn’t embed change so it focuses in on the

earliest stages of the product life cycle.

Time

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Given the extremely fast pace of product development in response to consumer trends and ongoing

organizational change efforts, product creation employees didn’t have a lot of time for implementing

Considered.  We now recognize that integration is an imperative to address process changes so we

redefined reporting structures, design and sourcing processes and created materials to help us better

achieve superior products with lower environmental impact.

Higher Costs

The potential additional costs for developing greener Time

better achieve superior products with lower environmental impact.

Higher Costs footwear was another challenge facing Considered.  Alongside the increasing cost of

petroleum, adding EPMs made Considered design potentially even more expensive.  Large product

category teams had some success negotiating price reductions based on volume, but smaller categories

struggled to overcome margin pressures.  Because Nike is a growth copany, sustainability, today,

becomes increasingly important to our growth strategy. As we have learned over the years, sustainability

is not just a strategy for growth, but a competitive advantage.

Supply Chain Partners

Some contract manufacturers have been highly responsive to category requests for help implementing

Considered, but others, either because of their size, prior capital investments in less-efficient machinery,

management focus, or lack of technical capacity, were not able to nimbly and successfully execute the

Considered design requirements.

Because we now know that early intervention is key, educating factories on why a stable, competitive,

well compensated workforce makes good business sense.  Nike focuses on training, incentivizing and

holding contract manufacturers accountable to its Nike standards and continues to raise the bar with each

iteration of the Indexes.  Nike’s new rating system, the Manufacturing Index, looks comprehensively at a

contract manufacturer’s total performance and includes a deeper look at how a factory approaches

sustainability. This Index elevates labor and environmental performance alongside traditional supply

chain measures of quality, cost and on-time delivery.

Consumers

Considered faced several challenges with consumers. For one, many consumers were skeptical that a

running shoe made from EPMs would in fact perform as well as a shoe that was not. For example, one

focus group initially was very receptive to a Considered running shoe, but after being told it was

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unusually “green” started viewing it as a lower performance product.  Today, Nike is meeting consumer

demands through performance, innovation and sustainability which drive superior product.   The Flyknit

technology is a good example of where performance meets sustainability.  Nike Flyknit, which uses

precisely engineered yarn and fabric variations to create a featherweight, formfitting and virtually

seamless upper.  It’s a new way to knit the multiple pieces of a shoe upper out of what is essentially a

single thread.  It’s great for the athlete because it is lighter and offers a more custom fit.  It’s good for the

planet because it drastically reduces waste from the upper production process.  And shareholders stand to

benefit from the reduced cost of production and potential for increased margins over time as the the

innovation grows to full scale.  It’s a nascent technology that holds tremendous opportunity.

PESTLE Analysis of Nike

The focus should be on the macro environmental factors of Nike, as it is an international organization, so

consists of political, economics, society, and technology.

Political Analysis

It is the responsibility of government to create such economic policies, which will have a great effect on

the growth of business. In this context, Nike, has been aided greatly by the US policies, hence providing

them with the opportunity to modernize their products (Cooter, et. al., 1988). And this support by the US

government and also low interest rates, the international competitiveness of the tax system and stable

currency conditions, help a lot in the formation of the foundation, which might have been sensitive to the

growth of the Nike.

Economic Analysis

Like for many other organizations as well companies, the biggest threat economically would be the

economic recession. The recession always have adverse effects on the growth and advancement of Nike.

As it is known that the US economy is facing a huge downturn, so in this context the purchase by the

consumers are also decreasing down (Keller, 2002). Besides US, Asia’s economies downfall too has its

effects on the Nike, as many of its products are being manufactures in the Asia as well. And consequently

the voices of labor work and martial’s are also increasing rapidly.

Society Analysis

Since people are getting health conscious day by day, so I order to remain fit, many of them join the

fitness clubs. And joining fitness clubs mean more demand of the Nike products like shoes, etc. Nike has

always been the first choice of people when it comes to buy something sport/fitness related. On the other

hand Nike has failed to address the problems like that of the condition of labor and factory at different

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locations of the production in Asia (Clancy, et. al., 2000). This has its negative effects on the Nike ad its

sale.

Technology Analysis

Nike very efficiently applies all the marketing and technology tactics. It, mainly applies, marketing

information systems to the economics of innovation, differentiation, segmentation etc.

So, in short with all these, Nike has been able to maintain its name in the market and it’s positing as well

and works effectively on its production and marketing to boost up its sale.

Legal Analysis

Being a multinational, Nike has always maintained the business ethics. It has always paid all due

importance to remaining environment friendly. Legal issues have been handled by Nike as per the

surrounding they have been operating in. Whenever any company enters a new country, it has to worry

about the existing laws and practices. Same is true for Nike. Whenever Nike has entered a new region or

country, the local trade and other laws have marked an impact over the way things are done at Nike. Nike

however has always believed in staying away from problems. Every time they have entered a new

country, they have done so after checking the local laws in detail. If in case the regional laws are totally

against what Nike can offer, they have opted to stay out of trouble. For example, the government policies

with regard to foreign investment and franchise business are different in the developed world and the

under developed world. Nike has always paid attention to this issue. In case the government is too

friendly or too strict with them, they have preferred to take one step at a time.

Environmental Analysis

The study of environment not only includes our overall environment of the earth but also the micro and

macro environment surrounding a business. Nike has proved itself responsible in all three cases. As far as

the global environment is concerned, Nike is ISO certified from global environment, pollution and carbon

foot prints tracing point of view. Nike is a strong believer of green environment and as per requirement

they have brought changes in the way things work and the processes to ensure that environmental factor

has been taken care of. The objectives behind them are fulfilling customer’s expectations, contributing in

creating an environmental friendly atmosphere, motivational boost in employees and being on top of

legislation. A positive attitude has been indicated in a study towards social and environmental

responsibility on part of companies around the world. Nike has proved it time and again that it is a

responsible organization.

Porter’s Five Forces of Competition Framework

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According to Grant (2005), there are many features of an industry in which a company competes that

determines the level of competition it will face and the profits it will get. The most famous classification

was done by Michael Porter, known as Porters Five Forces framework which can help a company

determine its potential profits by looking at five sources of competitive pressure. The five sources of

competition are 1) competition from entrants 2) competition from substitutes 3) competition from

established rivals 4) bargaining power of suppliers and 5) bargaining power of buyers.

Threat of entry/Barriers to entry

The threat of entry is highest in the apparel market due to the relatively lower costs of manufacturing

apparel compared to the footwear market where the biggest threat posed is basically from current rivals

already established in the market e.g Adidas and Puma, who although behind in market share, are

currently implementing strategies that are helping them close the gap on Nike. Adidas has especially been

gaining ground on Nike boosted by its strong presence in sponsoring the European soccer tournament

where it sponsored eventual winners Spain (Torry 2012).

According to Marketing Weekly News (2012), Adidas is also planning on moving into the more fashion-

aligned market of teenagers which could see it improve global market share. NEO, a fast fashion adidas

sub-brand aimed at teenagers is Adidas’ attempts to enter new apparel segments that will even pit it

against the likes of H&M and Zara in an effort to gain market share and squeeze more profits out of

mature industries.

Another threat of entry is posed by Under Armour Inc. an established company in the athletic sportswear

in the USA which in 2009 decided to enter the U.S athletic footwear market creating competition in a

market which had been dominated by a few players like Nike and Adidas. Recently the US sports brand

has started entering markets which have been traditionally fought over by Nike and Adidas. For example,

Under Armour is using its sponsorship of Tottenham Hotspur in an "aggressive" digital marketing drive

which it views as part of a wider strategy to steal market share from Nike and Adidas in the apparel

category in Europe. This is the firms first foray into professional football, which have been areas where

Nike and Adidas traditionally dominated and performed well in but are now having to brace for new

competition from Under Armour (Sebastian 2012).

Threat of substitutes

Substitutes in the footwear category can include any other types of shoes that consumers can choose to

serve similar purposes. Substitutes here therefore include the likes of sandals, which can act as

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substitutes, even though they may not fulfill exact same purpose.  It is difficult to think of other

substitutes that can fulfill the same purpose as athletic shoes from the footwear industry since this an

industry that has something very specific to offer to a targeted market. This means that it is not meant to

appeal to the general population and everybody. Thus consumers who are looking for shoes to run in will

not look for boots as substitutes simply because boots are cheaper substitutes. This is due to the

specialization of running shoes that makes substitutes hard to come by.

But while athletic footwear has little substitutes, sportswear apparel can have substitutes that include

normal everyday clothing which can be used for athletic purposes if necessary. For example, some

consumers may choose to wear tight fitting t shirts to exercise in instead of using Nikes sportswear,

making normal clothing from high street brands substitutes.

Rivalry between firms (Industry structure)

Adidas:  Although Adidas is currently not able to outcompete Nike in terms of sales and market share, it

has been outperforming Nike and gaining market share since 2006 while Nike has been losing market

share since 1998 when it still had more than 47 percent of the market, which has been cut back to 32

percent (MSN money 2011). Adidas is also still the second biggest competitor to Nike competing for

market share and has plans in the pipeline that it is trying to implement in order to grow. One of them is

heavy sponsorship of football tournaments all over the globe since football has the highest fan support

with more than 2billion people who follow it, with Basketball behind it with 1.2 billion followers. One

such plan has been paying off when Spain, the team it sponsored at the 2012 Euro championships, won

the tournament in style (Torry 2012).

Puma: Puma is another rival to Nike that has been having a bad time with financial figures not going

according to expectation. Although the firm has been sponsoring some very famous names (it sponsored

the Italian football team who reached the final of Euro 2012), while Usain Bolt wore the firm’s kit when

he competed in the 100m at the London 2012 Olympic Games, Puma has served up a profit warning. It

said that net earnings for the first quarter of 2012 were expected to be 13 percent below the 115m Euros

reported during the same period last year. Puma is also expect to take a EURO 100m restructuring charge

showing that the firm is doing not as well as expected so Nike has little worry from this rival. According

to the Financial Times (2012), the main problem with Puma does not lie on the sporting field but in the

stands. Puma's recovery over the past decade was driven mainly by its popularity with fashion-conscious

youngsters. So it is not helping Puma that many youth are unemployed in the Eurozone. Puma generates

more than 45 per cent of sales from Europe, the Middle East and Africa, so the fall in spending power has

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been hurting it badly, as does rising competition in the sports lifestyle market. The company is also hurt

by its dependence on shoes, which account for about half of sales.

Under Armour: As stated previously, Under Armour has been the one company that has gained the most

from any slip ups from both Nike, Adidas and Puma as it has been going strong for the last few years.

Power of Suppliers

The footwear market is one of those industry categories where the demand is always there. Retailers have

to buy whatever the big brands like Nike make whether they like it or not therefore this also means that

suppliers like Nike and Adidas have a lot of power compared to other industries. One of the biggest

factors that contribute to this is the fact shoes such as Nikes are made very cheaply but sold at very

expensive prices making them very desirable for retailers, which gives suppliers like Nike power. It is one

of reasons why Nike has always been famous for sweatshop prices (Forbes 2012)

Power of Buyers

Highly Competitive market due to market saturation and slowdown in the sales industry worldwide,

buyers more intellectual, have specific wants and needs and know where to get discounts and deals. As

seen with the problems in the Eurozone experiencing high rates of unemployment as seen with the

problems with Puma, many consumers have more discretion to choose what to buy and what not to buy as

the world economies suffer.

Conclusion

Now that we have looked at Nike and the competitive pressures it faces in the industry as it tries to make

profits and stay competitive, it is upto the company to find ways around some of these pressures, fully

analysing what is driving the industry in general. Michael Porter did offer some suggestions to companies

trying to sustain a competitive advantage with three strategies which were focus, cost leadership or

differentiation (Grant 2005). So depending on which strategy Nike chooses, it could choose to innovate

better shoes by investing in R&D, focus on marketing or simply reduce prices to become the lost cost

leader in its industry like Walmart.

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Nike Value Chain

Companies often use the term “value chain” to refer to the actors and stages needed to bring their product

or service to market and ultimately to its end of life. At Nike we use this term too, though we also find the

“chain” metaphor a bit linear and limiting for something that is actually interconnected in multiple ways,

like an ecosystem or a web.

The connections in this chain drive our decision making. For example, the quality of our planning shapes

the choices we make for manufacturing. Efficient manufacturers create little to no scrap and turn what

remains back into material inputs for new products. Nearly 85 percent of our footwear manufacturing

waste is now diverted from landfill or incineration through recycling and other efforts. Also, insights we

gain in the use phase impact how we design our products. Our design decisions, in turn, determine

whether a product can be recycled at the end of its life. Design choices can also eliminate the need for

toxics in the manufacturing process, and our ability to get toxics out of products determines whether

materials can be recycled in a closed loop. Working with the right manufacturers means better insight and

control of quality and in performance for the environment and their workers. Choosing the right partners

for moving our products around improves our ability to gather and track data on transportation emissions

and to get products where they need to be at the right time. Each choice has financial, environmental and

social impacts that are intertwined and mutually dependent.

These are just a few examples of the interconnections. We invite you to explore Nike’s value chain

through the graphic below and online where you will find additional detail about impacts and relevant

stories. This value chain outlines each phase, where the greatest impacts occur, and some of the key tools

we are using to increase efficiencies, reduce impacts and improve working conditions throughout the

system.

The marketing mix or the 4 Ps of Marketing are Product, Price, Place (distribution), andPromotion. Nike's

4Ps are the following:

PRODUCTS:

Nike produces a wide range of sports equipment. Their first products were track runningshoes. They

currently also make shoes, jerseys, shorts, baselayers etc. for a wide range of sportsincluding track &

field, baseball, ice hockey, tennis, Association football, lacrosse, basketballand cricket. Nike Air Max is

a line of shoes first released by Nike, Inc. in 1987. The most recentadditions to their line are the Nike 6.0,

Nike NYX, and Nike SB shoes, designed for

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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 likeassociation 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 suchas tennis, golf,skateboarding,association football, baseball, American football,

cycling,volleyball, wrestling, cheerleading, aquatic activities, auto racing, and other athletic

andrecreational uses. Nike is well known and popular in youth culture,chavculture and hip hopculture as

they supply urban fashion clothing. Nike recently teamed up withApple Inc.to produce the Nike+ product

which monitors a runner's performancevia a radio device in the shoewhich links to the iPod nano. While

the product generates useful statistics, it has been criticized by researchers who were able to identify

users' RFID devices from 60 feet (18 m) away usingsmall, concealable intelligence motes in a wireless

sensor network.In 2004, they launched the SPARQ Training Program/Division.Some of Nike's newest

shoes containFlywireand Lunarlite Foam. These are materialsused to reduce the weight of many types of

shoes. They also sell small amounts of plastic products to other manufacturers through Nike IHM Inc.

Bauer Nike Hockey Inc. manufacturesand distribute ice skates, skate blades, in-roller skates, protective

gear, hockey sticks and hockey jerseys and accessories.

PRICE:

The type of good that will be marketed is going to affect the price of a product.

Nike usesvertical integration in pricing wherein they own participants at differing channel levels

or engage in more than one channel level operations. This is also an attempt to control costs andinfluence

pricing practices.

Nike’s pricing is designed to be competitive to the other fashionshoe retailers. The pricing is based on the

basis of premium segment as target customers. Nike as a brand commands high premiums. Nike’s pricing

strategy makes use of vertical

integration in pricing wherein they own participants at differing channel levels or take part inmore than

one channel level operations. This can control costs and influence product pricing.

PLACE:

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Nike shoes are carried by multi-brand stores and the exclusive Nike stores across the globe. Nike sells its

product to about 20,000 retail accounts in the U.S. and in almost 200 countriesaround the world. In the

international markets, Nike sells its products through independentdistributors, licensees, and subsidiaries.

Independent distributors need not adapt to local pressures because the 4Ps of marketing are managed by

distributors.

Nike has contracted withmore than 700 shops around the world and has offices located in 45 countries

outside the UnitedStates. Most of the factories are located in Asia, including Indonesia, China, Taiwan,

India, Thailand,Vietnam, Pakistan, Philippines, and Malaysia. Nike is hesitant to disclose information

about thecontract companies it works with. However, due to harsh criticism from some organizations

likeCorpWatch, Nike has disclosed information about its contract factories in its Corporate

GovernanceReport.

PROMOTION:

Promotion is largely dependent on finding accessible store locations. It also avails of  targeted advertising

in the newspaper and creating strategic alliances. Nike has been one of thetop retail industries for quite a

long time. This is because they sell quality products, customer loyalty, but most of all, its great marketing

techniques. Nike has a number of famous athletes tocreate a great deal of attention to their products. Nike

has signed the top athletes in manydifferent sports such as the Brazilian Soccer Team (especially

Ronaldino, Renaldo, and RobertoCarlos), Lebron James, and Jermane O'Neal for basketball, Lance

Armstrong for cycling, andTiger Woods for Golf. Sponsoring of events is another great promotional

technique for Nike. It brings attention Nike's products. Web sites are a great promotional tool as they

cover theseevents. Such events include Hoop it up and The Golden West Invitational. Nike also

personalizeswebsites. They make the websites exclusively for a sport such as

nikebasketball.com,nikefootball.com, and nikegolf.com. Nike is positioned as a premium-brand, selling

well-designed and expensive products. Nike lures customers with a marketing strategy centering on a

brand image which is attained bydistinctive logo and the advertising slogan: "Just do it.”

CORE AND FOCUS STRATEGY

Nike has “done it” again and again. Its marketing strategy has catapulted the company to its lofty perch

atop the sports gear, apparel and footwear marketplace. In fact, according to D&B site  Hoovers, Nike is

the world’s #1 shoe and apparel company.

What is the basis of Nike’s winning strategy?

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The three biggest weapons Nike uses in its marketing arsenal are the…

1. Nike Swoosh logo, which appears on the uniforms and athletic gear of athletes. This logo is

strategically placed so that it visually prominent as athletes perform and as their performances are

carried on TV broadcasts, instant replays, videos, magazines and newspapers

2. Focus on hero athletes, such as basketball legend Michael Jordan.

3. Creation of ads that become news stories so that the news media ends up promoting the ad messages

for free and creating large viral pyramids that leverage the Nike brand and message content.

This basic strategy has paid off for Nike. It has brought it great riches and market leadership.

All is not rosy in Nikeland

In the past few years, however, the “hero athlete” component has come under fire as a result of the bad

behavior of some of its “heroes” most notably Michael Vick, Tiger Woods, Kobe Bryant, Marion

Jones, Alex Rodriquez, and most recently, Lance Armstrong, and Oscar Pistorius. In an effort to contain

the damage, Nike has distanced itself from Lance Armstrong, and just suspended its contract with

Pistorius pending further investigation of the murder charges against him. Since Tiger and Kobe never

cheated in their sports or killed anyone, Nike has stood by them with little negative repercussions for the

Company. Time and good performance has also helped to dampen the negative feelings toward Kobe and

Tiger with a large assist from Nike’s advertising. Right after the Tiger Woods scandal broke, Nike created

a famous commercial that featured his father talking to him from the grave. Nike also stood by Marion

Jones and Alex Rodriquez after deciding that their offenses do not rise to the same level as Armstrong

and Pistorius. Nike initially dropped Michael Vick after the dogfighting scandal, but it has teamed

up with Vick again since his rehabilitation and return to football and his winning ways.

Nike's Firm Performance and Competitive Advantage

On Dec. 20, 2011, Nike released their financial results for the second fiscal quarter of 2012 and let's just

say that their performance continues to "Just Do It".  Reported highlights from their second quarter

financials are that revenues are up 18 percent to $5.7 billion (up 16 percent if you exclude their currency

changes), diluted earnings per share are up 6 percent to $1.00, worldwide futures orders are up 13 percent,

and inventories are up 35 percent.  Obviously the rising inventory levels are a slight cause for concern,

but besides that Nike continues to set the bar in the sports apparel industry.  “Our strong second quarter

results demonstrate that the NIKE, Inc. portfolio is a powerful engine for growth,” said Mark Parker,

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President and CEO, NIKE, Inc. “We’re able to accomplish this by staying focused on what we do best –

deliver innovative products and experiences that serve athletes, inspire consumers and reward our

shareholders. Going forward we’ll continue to use the unique power of our portfolio to drive growth,

manage risk and connect with consumers.”

Nike is accomplishing this growth due to both their temporary competitive advantages, such as their

current distribution channels and satisfaction level with consumers, but in most part its due to

their sustained competitive advantages.  Nike's brand is one of the most recognized around the globe

(BuisnessWeek named it the 31st ranked brand in the world), it's research and development department

continues to innovate (most recently continuing to expand on their Apple platformedNike+ line of athletic

electronics by introducing the physical activity-monitoring wristband, the Nike+ FuelBand), and their

incredibly effective marketing (the "Just Do It" campaign to their  sponsorships with some of the top

athletes in the world: Tiger Woods, LeBron James, Lance Armstrong, and Cristiano Ronaldo to name a

few).  The gap between Nike's $2.23 billion in net income and their closest, publicly traded competitor

Adidas's $854.56 million is so staggering that it's hard to imagine Nike being unseated by anyone in the

near future.

STAKEHOLDERS

Our stakeholders help us to prioritize key issues and develop our corporate responsibility policies. We

engage with stakeholders because we learned early on in our corporate responsibility journey the

importance of engaging and listening. We see engagement with multiple stakeholders as a key enabler of

both risk mitigation and innovation.

Nike engages with a broad range of stakeholders on an ongoing basis, including individuals in civil

society organizations, industry and government, as well as consumers and shareholders. We do this

informally, through participation and/or membership in networks and organizations and as a structured

part of our outreach strategies on issues and challenges. We also do this through formal partnership work

covered by area throughout this report.

We believe that developing and refining the skill of listening is critical to a company’s success. This has

been true for Nike’s history of listening to and innovating for athletes to deliver performance products,

and it is how we approach our corporate responsibility efforts.

Good Job Faizan Like Always

Plan for Growth

Nike is a growth company. But we want to deliver growth in the right way. We seek growth that is:

Sustainable

Profitable

Capital efficient

Brand enhancing

Like many other businesses, Nike faced some significant headwinds in FY10 and FY11. Around the

world, unemployment was high, especially among youth; and governments wrestled with high debt

levels. Rising costs for energy and labor sparked inflationary pressures. In turn, higher costs for materials,

labor and freight were evident in our margins.

While the headwinds we faced were shared across our industry, the competitive advantages we have are

unique to the Nike portfolio. In spite of ongoing macroeconomic challenges, we are well positioned to

leverage our strengths – including scale, operational capabilities and pricing power – to help mitigate the

risks beyond our control and capitalize on opportunities to grow the company.

Integrating Sustainability Into Our Game Plan

At Nike, one way we seek to deliver shareholder value is through sustainable growth. To us, sustainable

growth means our long-term vision to deliver profitable growth decoupled from constrained natural

resources, even as we work to deliver value to our shareholders in the near term. Meeting these two

objectives requires a careful balance – one our stakeholders expect of us – and it remains our

commitment. We attempt to strike this balance by leveraging our significant competitive advantages,

including our authentic, emotional connections with consumers; innovative product and retail experiences

that lead the industry; and a strong NIKE, Inc. portfolio that gives us tremendous opportunities for growth

and profitability.

As we set aggressive goals in all areas of our business – financial, social and environmental – we are

committed to sharing these goals and to reporting on our performance to consumers, the investment

community and others interested in our commitments and progress, including the wider sports and apparel

industry, community groups and academia. Over the past 15 years, we have moved from approaching

sustainability as a risk management issue to viewing it as an innovation opportunity and a competitive

advantage to be integrated into every aspect of our business.

Good Job Faizan Like Always

A more holistic sustainability strategy that is fully integrated into the business enables Nike to create

value, not just through risk mitigation, but also through top-line growth, cost avoidance and better access

to capital. As an example, our next portfolio of sustainability targets is designed to improve Nike’s

environmental and social impacts for us and across our value chain, while also avoiding costs across the

value chain by reducing waste, energy and water expenditures.

In FY10, to help us further accomplish this transition, we launched a new business unit called Sustainable

Business & Innovation, as well as a new business sub-unit called Sustainable Manufacturing & Sourcing.

And in FY11, we launched Nike Better World, an online platform to engage consumers in our

sustainability vision and our efforts to balance people, profit and planet.

Good Job Faizan Like Always