Dustin Nadeau, Donatas Sumyla, David Deprey and Jaime Rodriguez

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Nike2003
Nike2003

• Dustin Nadeau, Donatas Sumyla, David Deprey and
  Jaime Rodriguez
• Bus 411, May 2006

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Case-Study Overview

• Internal
• History, Nike overview, Key Facts, Our Brands and
  Stock Information
• Nike Actual Proposed Vision and Mission
• Economic Performance
• Evolution of Financial Ratios
• Strengths and weaknesses
• Analysis IFE
• External
• Industry overview and comparison of financial
  ratios
• Manufacturing
• Opportunities and threats
• Analysis EFE
• Competitors
• Market Share
• Analysis CPM

• Analysis
• SWOT Matrix
• SPACE
• BCG
• IE matrix
• Grand Strategy Matrix
• QSPM
• Possible strategies Matrix Analysis
• Decisions
• Why our decision?
• Strategic implementation
• Actions
• Evaluation Procedure
• Current Update

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History

• 1962 Phillip Knight, a Stanford University
  business graduate and former member of the track
  team, arranges to import athletic shoes from
  Japan and sell them in the U.S.. Knight created
  Blue Ribbon Sports as a cover name for his
  small-scale shoe-selling operations
• 1964 William Bowerman becomes a partner by
  matching Knight's investment of 500.
• 1965 Hires a full time employee, and annual
  sales reach 2,000.
• 1966 Blue Ribbon Sports, also known as BRS,
  rents its first retail space employees can now
  stop selling shoes from their cars.
• 1969 It now has several stores and 20 employees
  sales are close to 300,000.
• 1971 Nike, capitalizing on the Greek goddess of
  victory. The first Nike product sold with the new
  symbol is a soccer shoe.
• 1970 1975 Steve Prefontaine was turned to the
  University of Oregon by Bill Bowerman and wore
  Nike products.

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History

• 1976 The popularity of jogging increases revenue
  to 14 million.
• 1978 The company changes its name to Nike.
• 1980 Nike goes public, offering 2 million shares
  of stock.
• 1990 Nike files suit against competitors for
  copying the patented designs of its shoes, and
  also engaged in a dispute with the U.S. Customs
  Service over import duties on its Air Jordan
  basketball shoes.
• 1997 Feb., Stocks reaches a high of 76 per
  share.
• 1998 Sept., Stocks tumbles to 31 per share.
• 2000 The National Football League declines to
  renew its exclusive apparel licensing arrangement
  with Nike.
• 2001 Nike opens its first Nike Goddess store, a
  unit targeting women, in Newport Beach, CA.
• 2003 Nike purchases Converse Inc. for 305
  million.

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Origin of the Name and the Swoosh

• Nike is the Ancient Greek goddess of victory
• It is one of the most recognized symbols in the
  world The Swoosh. Simple. Fluid. Fast.
  
• (Quote
  from Nikes website)

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Evolution of the Swoosh Logo
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Nike Overview

• Nikes principal business activity is the design,
  development and worldwide marketing of high
  quality footwear, apparel, equipment, and
  accessory product
• Distributed in over 160 countries around the
  world (Asia, Australia, Canada, Europe, Latin
  America, and the United States)
• Nike is the largest seller of athletic footwear
  and athletic apparel in the world.
• Fiscal year ended May 2003 Revenues of 10,697
  million (increase of 8.1 against 2002)
• Employees 26,000 worldwide.
• 650,000 in Nike contracted factories
  around the globe.
• Facilities in Oregon, Tennessee, North Carolina
  and The Netherlands.
• Also operates leased facilities for
• 14 Niketowns,
• Over 200 Nike Factory Stores,
• 12 NikeWomen stores
• Over 100 sales and administrative offices.

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Key facts (2003)

• Headquarters Beaverton, OR
• Index Membership SP 500 SP 1500
  Super Comp
• Sector Consumer Goods
• Industry Textile - Apparel Footwear
  Accessories
• Other Brands Cole Haan, Converse, Hurley,
  Bauer Hockey, Starter Apparel
• Market Cap 21.738 billion
• Ticker Symbol NKE
• Ranked 173 in the Annual ranking of America's
  largest corporations (Fortune 500 magazine)

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Our Brands
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• Cole Haan, based in Maine, sells dress and casual
  footwear and accessories for men and women under
  the brand names of Cole Haan, g Series, and
  Bragano.

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• Nike Bauer Hockey, based in New Hampshire,
  manufactures and distributes hockey ice skates,
  apparel and equipment, as well as equipment for
  in-line skating, and street and roller hockey.

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• Hurley International, based in California,
  designs and distributes a line of action sports
  apparel for surfing, skateboarding and
  snowboarding, and youth lifestyle apparel and
  footwear.

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• Converse, based in Massachusetts, designs and
  distributes athletic and casual footwear,
  apparel, and accessories.

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Nike Stock (NKE) Information

• Stock Symbol NKE.
• Went public in December 1980 and is traded on the
  New York Stock Exchange.
• Price
• Dec 31st, 2003 68.46
• May 1st, 2006 82.21
• Shares Outstanding (July 2003) 263.7 mill

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Stock Price Performance
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Historical Stock Price Performance
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Vision Statement

• To bring inspiration and innovation to every
  athlete in the world
• ( If you have a body, you
• are an athlete
• Bill Bowerman, co-founder)

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Proposed Vision Statement

• Continue to bring inspiration  to present and
  future  athletes, while maintaining the
  company's standard of quality for its products.

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Mission Statement

• Nike is the "largest seller of athletic
  footwear and athletic apparel in the world.
  Performance and reliability of shoes, apparel,
  and equipment, new product development, price,
  product identity through marketing and promotion,
  and customer support and service are important
  aspects of competition in the athletic footwear,
  apparel, and equipment industry.  We believe we
  are competitive in all of these areas."
  The company aims to " lead in corporate
  citizenship through proactive programs that
  reflect caring for the world family of Nike, our
  teammates, our consumers, and those who provide
  services to Nike."

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Proposed Mission Statement

• To continue to offer quality products with
  increasing growth in the industry and expanding
  globally. Our mission has always been to provide
  a competitive edge by developing the most
  technological products. Keeping in mind fair
  labor practices in all our suppliers factories,
  while maintaining a competitive advantage, with
  the shareholders interests, and company profits
  in mind. We also believe our employees are one of
  our most important assets. To increase the
  responsibility towards the environment by
  evaluating the impact of day to day operation and
  attempts to change operations that have a
  negative impact.

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Economic PerformanceRevenues by Regions
(20012003)
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Evolution of Financial Ratios (1999-2003)
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Internal strengths and weaknesses

• STRENGTHS
• Strong brand recognition
• Internet sales
• Growing international presence
• Superior research and development department
• Strong financial returns
• Strong sense of culture in the working
  environment
• Great celebrity spokespersons
• Automatic replenishment system
• Successful experience being competitive
• Nike doesnt own any factories
• Successful marketing campaigns

• WEAKNESSES
• Lack of stores catering to the active females
• Poor employment practices at their international
  manufacturing sites giving a bad reputation
• Heavy dependency on footwear sales
• Issues with Footlocker

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IFE Matrix
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Industry Overview

• Athletic footwear manufactures captured nearly
  one-third of the total footwear market in the
  early 1970s.
• Over a span of more than 25 years, American
  consumers spent 300 billion on 7.5 billion pairs
  of athletic shoes.
• Reebok international Ltd. and Adidas became 3.5
  Billion companies, while Nike Inc. became the
  first ever 9.5 Billion company.
• By 1996 the number of establishments had dropped
  to about 52, with 12 factories closing since
  1995.
• China's imports increase by 6 percent to 1.26
  billion pairs in 2003 .
• Brazil's share increased 2.3 percent to 83.5
  million pairs in 2003.
• Vietnam's share jumped 91.9 percent to 23.5
  million pairs in 2003.
• The US markets continue to be dominated by
  imports from countries with low-cost labor.
• From 1997 to 2001, the value of industry
  shipments declined from 219.6 million to 106.5
  million.
• U.S. shoe manufacturing plants declined by 775
  between 1967 and 2001, the number of new plants
  opening dwindled to nearly zero.

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Key Ratios Overall Comparison (2006)
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Key Ratios Overall Comparison (2006)
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Key Ratios Overall Comparison (2006)
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Manufacturing Nationality of Contract Suppliers
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External Opportunities and Threats

• OPPORTUNITIES
• Customer use of companys products change from
  athletic purpose to a fashion item
• Development of international trade (GAAT and
  NAFTA)
• Generation Y children (born between 1979 and
  1994) will reach 60 million
• General demand for clothing/footwear for leisure
  activities continues to increase
• Growing e-commerces positive effect since one
  of companys competitive advantages is Internet
  sales
• Women demand for athletic footwear and clothing
  is increasing significantly

• THREATS
• Competitors which copy company's business model
  (high value branded product manufactured at a low
  cost)
• Reebok's strong presence with 204 factory direct
  stores
• Adidas-Salomon AG, top European competitor
• The impact of foreign currency fluctuation and
  interest rates, and political instability
• Labor and political unrest in the suppliers
  countries
• Cost orientated customers vs companys
  higher-end market.

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EFE Matrix
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Athletic Shoe Market Share (2000)
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Competitive Profile Matrix (CPM)
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SWOT Analysis
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SPACE Matrix
Y axis - Financial Strength 4
- Environmental Stability - 1
gt Y coordinate 3 STRATEGY AGRESSIVE
X axis - Competitive Advantage - 2 gt
X coordinate 3 - Industry Strength
5
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Business Structure

• Operating Segments
• Footwear
• Apparel
• Equipment

• Operating Regions
• US
• Europe, Middle East and Africa (EMEA)
• Asia Pacific
• Americas

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BCG Matrix
Question marks
Stars
Dogs
Cash-Cow
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IE Matrix
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The Grand Strategy Matrix

• Potential Strategies
• - Market Development
• - Market Penetration
• - Product Development
• - Backward Integration
• - Forward Integration
• - Concentric Diversification

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Matrix Analysis
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QSPM
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Decisions

• Primary Focus on finding the most promising
  customers (kids and women) and introduce more
  products or improve current ones to satisfy
  potential increase in demand
• Alternative
• Keep expanding into current and future foreign
  markets by being aggressive and the worldwide
  leader of the footwear industry
• Accelerate funding for numerous marketing
  campaigns in order to get to specific markets or
  customer groups
• Focus on improving working conditions and human
  rights at international manufacturer centers and
  at the same time increasing their productivity
• Implement product diversification with companys
  newest technologies so resulting increased
  earnings could be reinvested into RD plans

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Why this strategy?

• U.S. Women Prefer fashion, not footwear, they
  prefer clothing, we must create a shopping style
  based in athletic shopping.
• U.S. Kids E-commerce, influenced by innovation
  and design, not only comfort or sports
• We need to consolidate US sales compared to
  international sales and international competitors
• Difficult to expand towards other sports or
  population segments

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Implementation

• Actions
• Women
• Open 25 specific stores specialized only for
  women
• Increase RD expenses by 7 in women products
• Increase Marketing expenses by 10, designing a
  specific campaign for women using female
  endorsements
• Create a new logo for women market which would be
  associated with fashion trends and introduce new
  products
• Kids
• Increase RD expenses by 7 in kids products
• Increase Marketing expenses by 10, designing a
  specific campaign for kids
• Introduce more soccer and basketball products
  targeting potential youth market
• Research in international market to find out what
  are the new trends related with women and kids
  products (Long-term)

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Showing Cost EPS-EBIT Analysis
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Evaluations

• Nike annual financial reports
• Sales and profits reports (on-line and off-line)
  based on Women stores and Kids products
• Frequent management meetings between VP Global
  Brand Management (US), VP Global Footwear, VP
  Global Apparel, and VP Subsidiaries and New
  Business Development
• Evaluation reports

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Update 2004-2006

• 2004 Nike introduces Swift technology.
• Nike Swift increases track times by up to 1.13.
• Football (soccer) wear becomes 1 in Europe.
• Nike SHOX footwear introduced in other footwear
  types and continues to boom.
• 2005 Profits recover, growing nearly 30 to
  reach 1.2 billion on unprecedented revenue of
  13.7 billion.
• Nike has 8 NikeWomen stores in key cities in the
  U.S..
• Nike Pro Apparel introduced into NFL and MLB.
• Greatly expands SHOX running footwear
• August Main competitors have joined with the
  recent announced acquisition of Reebok by Adidas
• 2006 Nike Pro Apparel expands into NBA.
• Nike uses Rihanna to help infiltrate the womens
  market.
• Nike expands womens product line and website.
• Introduced Nike Consider to be more
  environmental conscious.
• Introduced new footwear and apparel line Pre
  dedicated to Steve Prefontaine

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References

• http//finance.yahoo.com
• Nike Annual Reports (2003 2005)
• Annual ranking of America's largest corporations,
  Magazine Fortune 500 (2005) cnn.money.com
• www.nikebiz.com (Investor Relations)
• www.bigcharts.com
• www.businessweek.com
• Strategic Management Concepts and Cases Fred R.
  David, 10th Ed.

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Thank you!

• Questions?
• Comments?