Case Write-up for Nike

May 18

2012By Fred Sosa Nike Case Write-up

A) Positioning

1. Short Company History- Before there was the Swoosh, before there was Nike; there were two

visionary men who pioneered a revolution in athletic footwear that redefined the industry. Bill

Bowerman was a nationally respected track and field coach at the University of Oregon, who was

constantly seeking ways to give his athletes a competitive advantage. He experimented with

different track surfaces, re-hydration drinks and – most importantly – innovations in running

shoes. But the established footwear manufacturers of the 1950s ignored the ideas he tried to offer

them, so Bowerman began cobbling shoes for his runners. Phil Knight was a talented middle-

distance runner from Portland, who enrolled at Oregon in the fall of 1955 and competed for

Bowerman’s track program. Upon graduating from Oregon, Knight earned his MBA in finance

from Stanford University, where he wrote a paper that proposed quality running shoes could be

manufactured in Japan that would compete with more established German brands. But his letters

to manufacturers in Japan and Asia went unanswered, so Knight took a chance. He made a cold-

call on the Onitsuka Co. in Kobe, Japan, and persuaded the manufacturer of Tiger shoes to make

Knight a distributor of Tiger running shoes in the United States. When the first set of sample shoes

arrived, Knight sent several pairs to Bowerman, hoping to make a sale. Instead, Bowerman

stunned Knight by offering to become his partner, and to provide his footwear design ideas to

Tiger. (Nike)

2. Mission Statement- “IF YOU HAVE A BODY, YOU ARE AN ATHLETE” (Nike)

3. Stated Objectives- Our goal is to carry on his legacy of innovative thinking, whether to develop

products that help athletes of every level of ability reach their potential, or to create business

opportunities that set Nike apart from the competition and provide value for our shareholders.

4. Stated Strategies - The key for NIKE, Inc. in any market is to drive innovation at every level –

brand, product, retail, operations, events, and communications. That’s at the core of our growth

strategy. In May 2010, I stated a goal for NIKE, Inc. to deliver $27 billion of revenue in fiscal 2015.

I’m excited to tell you that we’re ahead of schedule, so we’re revising that number. When I look at

the strengths of our company and the opportunity we have going forward, I believe we can exceed

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that goal and reach $28-30 billion in revenue by fiscal 2015. Today we have seven distinct, high-

energy brands – each with a powerful connection to its consumers. Those connections give us the

insights we need to create amazing products and experiences. That’s the fundamental cycle that

continually drives growth. And while each brand has enormous potential in its own right, the real

power of NIKE, Inc. comes from making the overall value of our portfolio greater than the sum of

the parts. We define our portfolio as the NIKE, Inc. brands and everything that drives them: our

products, retail partners and executions, supply chain, strong balance sheet and a very focused

management team. We use the power of our portfolio to manage risk and attack our biggest

growth opportunities. It’s the source of our financial capital. It gives us the scale necessary to

drive down costs. It enables us to leverage our resources across multiple brands and categories.

And it all revolves around one thing: innovation. We innovate to serve the athlete. We innovate to

grow the company. And we innovate to inspire the world. (Mark Parker President & CFO of NIKE

Inc)

5. Revised mission statement -As the saying goes “If it aint broke don’t fix it”

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6. The Industry: Porter’s Five Forces -

7. Competitor Profile Matrix

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8. Strengths-Weaknesses-Opportunities-Threats (SWOT)

Strengths-

Brand

Loyalty

Top Management

Innovativeness

Weaknesses-

Ethics (labor practices)

Highly competitive market

Changing trends

Opportunities-

Research and Development

Niche

Threats-

cutback in consumer spending.

Consumers may be scanning the market for new and different footwear and apparel products

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9. External Factors Matrix

Opportunities Weight Rating ScoreResearch & Development

.35 4 1.4

Specialization in products for athletes (niche)

.30 4 1.2

Threats Weight Rating Scorecompetition .15 2 .30consumer changes .20 2 .40

Totals 1.00 3.3

10. Internal Factors Matrix

Internal Strengths Weight Rating ScoreBrand .2 4 .8Advertising campaign .2 4 .8Multi Brand .1 3 .3Product Design and Development

.2 4 .8

Internal Weaknesses Weight Rating ScoreEthics .15 1 .15Labor practices .1 1 .1Changing trends .05 2 .1

Totals 1.00 3.05

11. Ratio Analysis

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a) Financial and performance ratios: company, competitors, industry, sector

What can you conclude by looking at these numbers?

Quick ratio-greater than 1.0 so Nike is sufficiently able to meet their short-term liabilities.

Current ratio-is well above the industry showing ease of converting assets to cash to cover short-term obligations.

High inventory turnover ratio -Nike benefits from greater cash flows, reduced storage costs

Gross margin- (dollar of revenue that the company retains as gross profit) Nike has gross margins above industry

Return on equity-(how much profit a company generates with the money shareholders have invested.) Nike has a positive return

on equity

B) Strategy & Policy

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1. Internal-External Matrix

According to the I/E matrix the grow and build strategy is suggested. This means intensive and

aggressive tactical strategies. The strategies should focus on market penetration, market

development, and product development.

2. Space Matrix

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Financial Strength (FS) Values: +1 (worst) to +6 (best)

Return on investment 6

Leverage 4

Liquidity 5

Cash flow 4

Brand Image 4

Control over supplier 4

Average= 4.5

Total X axis score=1.67

Competitive Advantage CA Values: -1 (best) to - 6 (worst)

Market share -2

Product quality -1

Product life cycle -4

Customer loyalty -2

Technological know-how -2

Control over suppliers & distributors -6

Average=-2.83

Industry Strength (IS) Values: +1 (worst) to

+6 (best)

Growth potential 4

Profit potential 4

Financial stability 5

Technological know-how 4

Resource utilization 4

Ease of entry into market 4

Average= 4.16

Total Y axis score=1.16

Environmental Stability (ES) Values: -1 (best) to -6 (worst)

Technological changes -3 Risk involved in business-4

Price elasticity of demand--demand variability-5

Rate of inflation-3

Price range of competing products-3

Av erage=-3.0

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Internal Strategic Position External Strategic Position

According to the graph above Nike Falls into the Aggressive Quadrant which means it should

focus on market penetration, market development, product development and diversification

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3. Grand Strategy Matrix

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SLOW

4. SWOT Matrix

Strengths – S

Brand

Loyalty

Top Management

Innovativeness

Weaknesses – W

Highly competitive market

Ethics (labor practices)

Changing trends

Opportunities – O Emerging markets

Specialization

Research and Development

SO StrategiesTake advantage of emerging specialty

market

Keep producing quality products

Keep being innovative

WO Strategies

Stand out-Create a specialized product

Product Development

Threats – TCompetition

Changes in economic conditions

Cutback in consumer spending.

Consumers may be scanning the market for new and different

footwear and apparel products

ST StrategiesUse Brand Loyalty to further yourself

from the competition

Create Something different that sets you apart from competitors

WT Strategies

Keep providing affordable footwear at different price ranges

Stay on top of current trends and technological advances

5. Quantitative Strategic Planning Matrix

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AS = Attractiveness Score; TAS = Total Attractiveness Score

1=Not Attractive 2=Somewhat Attractive 3=Reasonably Attractive 4=Highly Attractive

According to the QSPM we can come to the conclusion that Research & Development is a better

option. This is given by the TAS Scores.

C)Conclusion

1. Impact of globalization on the firm- Being that Nike is well known overseas it would have a

very small effect on the firm.

2. Ethical Issues? “Green” Issues? Nike has had many ethical issues when It comes to child labor

practices and this is something that has not affected them too much in terms of still being

financially successful, but it could potentially be a very bad situation if it doesn’t improve.

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3. How does the company compete? Nike holds a huge share of the market and is a much larger

company and it is considered one of the main competitors for every other shoe company, so

to answer your question, Nike competes very well.

4. What recommendations or changes would you make? My recommendation to Nike would be

to keep being innovative and keep trying to push forward, besides that Nike really has the

hang of things.

5. Compare your recommendations to strategies planned by the company

My recommendations are exactly along the lines of what the company is already doing.

6. Business lessons learned...What is your take-away from this case?

My take away from this case is that Nike knows what is doing and if it continues to do what it

is already doing then it will continue to prosper

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Works CitedMark Parker President & CFO of NIKE Inc. (n.d.). http://investors.nikeinc.com/Theme/Nike/files/doc_financials/AnnualReports/2011/index.html#mark_parker_letter. Retrieved from http://investors.nikeinc.com/Theme/Nike/files/doc_financials/AnnualReports/2011/index.html#mark_parker_letter: http://investors.nikeinc.com/Theme/Nike/files/doc_financials/AnnualReports/2011/index.html#mark_parker_letter

Nike. (n.d.). http://nikeinc.com/pages/about-nike-inc. Retrieved from http://nikeinc.com/pages/about-nike-inc: http://nikeinc.com/pages/about-nike-inc

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Executive Summary

Nike, the true Cinderella story of the Footwear industry, It all started with two guys that

took a chance on something that could have easily flopped but it didn’t and here Nike stands

today as one of the biggest Athletic Footwear companies in the market, Who would have known?

The main difference between the Nike of today and the Nike of the past is its financial resources.

Nike is now in a position where it can invest money into these huge advertising and marketing

campaigns and have its own production factories and even its own “Nike Town’s”.

The athletic footwear industry is a challenging and saturated market. With Intense

competition, fashion trends, and price conscious consumers In order to have an edge over the

leaders, companies must be able to compete at all levels such as reasonable pricing, efficient

production, and high product quality. As stated in the strategies “The key for NIKE, Inc. in any

market is to drive innovation at every level – brand, product, retail, operations, events, and

communications.” This is what makes them leaders of the industry understanding that you have

to constantly reinvent yourself and be unique in everything you do to be successful in this

industry. Even though Nike faces the problem of changing consumer trends (as all companies in

this industry face) it can easily overcome this because of its innovativeness. In terms of changes

I think the only thing Nike should “just do” is what it already is doing and it will have no

problem staying at the top.

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