Professional Documents
Culture Documents
Nike Case
Nike Case
- 2009
Case Notes Prepared by: Dr. Mernoush Banton
Case Author: Randy Harris
A. Case Abstract
As the largest seller of athletic footwear and athletic apparel in the world (2, 3),
we create products for consumers and athletics (1) who enjoy having quality
products that are high performance and reliable such as shoes, apparel, and
technologically advanced equipment) (4). Our dedicated employees (9)
continuously work on developing new products, price, and product identity
through marketing and promotion (7). The company aims to lead in corporate
citizenship (8) through proactive programs that reflect caring for the world family
of Nike (6) and by ensuring continuous growth and profitability to our investors
and stakeholders (5).
1. Customer
2. Products or services
3. Markets
4. Technology
5. Concern for survival, profitability, growth
6. Philosophy
7. Self-concept
8. Concern for public image
9. Concern for employees
Opportunities
1. Younger consumers are less price sensitive and generally spend more on
casual and athletic footwear than older consumers
2. Most footwear companies have outsourced their production abroad in
order to maintain lower cost and R&D expenses
3. US footwear imports totaled 2.36 billion pairs in 2007, or roughly 7.9 pairs
per capita which is was up 0.4 percent from 2006
4. North American Free Trade Agreement (NAFTA) and the World Trade
Organization (WTO), both helped eliminate quotas and tariff barriers for
foreign footwear manufacturers to ship their goods
5. The Internet allows footwear companies to pursue a direct to consumer
sales channel
6. Sales of apparel, accessories, and footwear on the Internet has been
growing at a double digit pace, considerably faster than more traditional
sales models such as retail stores
7. Internet sales of apparel, accessories, and footwear could reach 18
percent of category sales by 2012
8. Companies that added a Web-based sales strategy are able to customize
footwear and other merchandise directly to the customer’s needs and
Threats
1. After the age of 40, the typical consumer is not willing to pay more than
$35 to $40 per pair for athletic footwear
2. Competition is strong among athletic footwear and apparel from off brand
companies
3. Fluctuation of foreign currency impacts the cost of importing goods to the
U.S.
4. Increase in unemployment has impacted the household income which
may result in spending less on brand name
5. Barrier to entry is low
6. Level of inventory is increasing in many retail stores due weak economy
Opportunities
1. Younger consumers are less price sensitive and 0.08 3 0.24
generally spend more on casual and athletic
footwear than older consumers
2. Most footwear companies have outsourced their 0.07 4 0.28
production abroad in order to maintain lower cost
and R&D expenses
3. US footwear imports totaled 2.36 billion pairs in 0.07 3 0.21
2007, or roughly 7.9 pairs per capita which is was up
0.4 percent from 2006
4. North American Free Trade Agreement (NAFTA) and 0.06 4 0.24
the World Trade Organization (WTO), both helped
eliminate quotas and tariff barriers for foreign
footwear manufacturers to ship their goods
5. The Internet allows footwear companies to pursue a 0.07 4 0.28
direct to consumer sales channel
6. Sales of apparel, accessories, and footwear on the 0.08 3 0.24
Internet has been growing at a double digit pace,
considerably faster than more traditional sales
models such as retail stores
7. Internet sales of apparel, accessories, and footwear 0.07 4 0.28
could reach 18 percent of category sales by 2012
8. Companies that added a Web-based sales strategy 0.06 3 0.18
are able to customize footwear and other
merchandise directly to the customer's needs and
Positioning Map
Nike
Adidas
Puma
Price (low) Price (High)
Customer Loyalty
(Low)
E. Internal Audit
Strengths
1. Nike is the dominant competitor for athletic footwear priced above $60 per
pair, holding better than a 50 percent market share for athletic footwear
priced $85 per pair or higher
2. Nike characterizes its organization as a collaborative matrix organization
3. The Jordan brand has a 10.8 percent share of the overall U.S. shoe
market, which makes it the second biggest brand in the country and more
than twice the size of Adidas’ share
4. Three out of every four pairs of basketball shoes sold in this country are
Jordan, while 86.5 percent of all basketball shoes sold over $100 are
Jordan
5. Nike’s 2009 revenues increased 2.9 percent to $19.1 billion
6. Inside the United States, Nike has three significant distribution and
customer service facilities
7. Nike estimates that they sell products to more than 25,000 retail accounts
in the United States and more than 27,000 retail accounts, including Nike-
owned stores and a mix of independent distributors and licensees outside
the United States
8. The company’s Internet Web site, www.nikebiz.com, allows customers to
design and purchase Nike products directly from the company
Weaknesses
Net Profit
Avg P/E Price/ Sales Price/ Book
Margin (%)
05/09 17.80 1.46 3.19 7.8
05/08 16.40 1.85 4.29 10.1
05/07 16.10 1.77 4.05 9.1
05/06 16.00 1.42 3.27 9.3
05/05 18.00 1.62 3.80 8.8
05/04 18.40 1.57 3.91 7.7
05/03 17.20 1.40 3.70 6.9
05/02 21.30 1.48 3.73 6.8
05/01 20.10 1.18 3.16 6.2
05/00 23.00 1.33 3.69 6.4
F. SWOT Strategies
Strengths Weaknesses
1. Nike is the dominant 1. Nike’s 2009 net income
competitor for athletic decreased 21 percent to
footwear priced above $1.48 billion
$60 per pair, holding 2. Almost all of Nike’s
better than a 50 percent footwear is
market share for athletic manufactured outside
footwear priced $85 per the United States by
pair or higher independent contractors
2. Nike characterizes its 3. In fiscal 2008, contract
organization as a manufacturers in China,
collaborative matrix Vietnam, Indonesia, and
organization Thailand manufactured
3. The Jordan brand has a 99 percent of Nike’s
10.8 percent share of footwear worldwide
the overall U.S. shoe 4. Because Nike competes
market, which makes it primarily in athletic
the second biggest footwear, apparel and
brand in the country and related sporting
more than twice the size equipment, its sales are
of Adidas’ share heavily concentrated in
4. Three out of every four the youth and young
pairs of basketball adult market
shoes sold in this 5. Accounts payable has
country are Jordan, increased by almost
while 86.5 percent of all $1.0 billion in 2009
basketball shoes sold 6. Negative publicity and
over $100 are Jordan boycotting of the Nike
5. Nike’s 2009 revenues products due to
increased 2.9 percent to outsourcing jobs
$19.1 billion overseas and the use of
6. Inside the United States, child labor in such
Nike has three factories
significant distribution
and customer service
FS
Conservative 7
Aggressive
CS IS
-7 -6 -5 -4 -3 -2 -1 1 2 3 4 5 6 7
-1
-2
-3
-4
-5
-6
Defensive -7 Competitive
ES
Financial Stability (FS) Average 3.8 Environmental Stability (ES) Average -4.6
Competitive Stability (CS) Average -2.2 Industry Stability (IS) Average 3.4
Strong
Weak
Competitive
Competitive
Position
Position
Quadrant IV
Quadrant III Slow Market Growth
1. Market development
2. Market penetration
3. Product development
4. Forward integration
5. Backward integration
6. Horizontal integration
7. Related diversification
High
3.0 to 3.99
IV IV VI
VII VIII IX
Low
1.0 to 1.99
J. QSPM
K. Recommendations
Acquire a company who manufactures and sells less expensive products than Nike. The
company should have established distribution and retail shelf space with non-competing
product lines. It would be ideal if the company is a U.S. based corporation with domestic
manufacturing facilities.
L. EPS/EBIT Analysis
M. Epilogue
Nike unveiled its supercharged Nike Elite Series football boots providing new
levels of performance. Nike’s Mercurial Vapor SuperFly II, CTR360 Maestri,
Total90 Laser III and Tiempo Legend III all feature new performance upper to
improve on-field visibility and a reengineered outsole to deliver lightweight
performance for every style of player. Nike designers have reduced the weight
of each boot so players can perform at their best. Lightweight construction,
intricate engineering, carbon-enforced strength and high contrast colors
distinguish the boots. The high contrast colors (Metallic Mach Purple and Total
Orange) are engineered together for enhanced visibility. For a footballer this
unique combination is designed to increase visual performance enabling them to
quickly spot their teammates and execute a game-changing pass. “At Nike, we
have a relentless focus on product innovation to give athletes a real competitive
edge and deliver the best products in the world,” said Andrew Caine, Nike Design
Director for Football Footwear. “The Nike Elite Series delivers lightweight and
highly engineered boots for the leading players in the world to perform on the
biggest stage this summer.” (finance.yahoo.com)
Jordan Brand, a division of NIKE, Inc., announced that the top 10 ranked ESPNU
100 players – No. 1 Harrison Barnes (Ames, IA/North Carolina), No. 2 Jared
Sullinger (Columbus, OH/Ohio State), No. 3 Brandon Knight (Coral Springs,
FL/Undecided), No. 4 Kyrie Irving (West Orange, NJ/Duke), No. 5 Tobias Harris
(Dix Hills, NY/Tennessee), No. 6 Will Barton (Baltimore, MD/Memphis), No. 7
Josh Selby (Baltimore, MD/Undecided), No. 8 C.J. Leslie (Holly Springs,
NC/Undecided), No. 9 Perry Jones (Duncanville, TX/Baylor) and No. 10 Tristan
Thompson (Brampton, ONT/Texas) – will headline the nation’s best high school
senior basketball players at the 2010 Jordan Brand Classic, presented by Foot
Locker, at Madison Square Garden in New York City on Saturday, April 17 at 8:00
p.m. EST. This year’s event will once again be televised nationally live on
ESPN2. The Jordan Brand Classic will also continue to include a Regional
Game, showcasing the top prep players from the New York City metropolitan
area in a City vs. Suburbs showdown. In its third year of the event, an
International Game will feature 16 of the top 17-and-under players from around
the world.