Case 2: Nike, Inc.

– 2009
Case Notes Prepared by: Dr. Mernoush Banton
Case Author: Randy Harris

A. Case Abstract

Nike, Inc. (www.nike.com) is a comprehensive strategic management case that

includes the company’s fiscal May 31st, 2009 financial statements, competitor
information and more. The case time setting is the year 2009. Sufficient internal and
external data are provided to enable students to evaluate current strategies and
recommend a three-year strategic plan for the company. Headquartered in
Beaverton in the U.S. state of Oregon, Nike is traded on the New York Stock
Exchange under ticker symbol NKE.

B. Vision Statement (Actual)

“Bring inspiration and innovation to every athlete in the world.”

C. Mission Statement (Actual)

“To be the leading sports brand in the world.”

Mission Statement (Proposed)

As the largest seller of athletic footwear and athletic apparel in the world (2, 3), we
create products for consumers and athletes (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

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 D. External Audit

CPM – Competitive Profile Matrix

  Nike Adidas Puma

Critical Success Weighted Weighted Weighted
Factors Weight Rating Score Rating Score Rating Score
Price competitiveness 0.10 3 0.30 2 0.20 1 0.10
Global Expansion 0.07 4 0.28 3 0.21 2 0.14
Organizational Structure 0.04 3 0.12 1 0.04 1 0.04
Technology 0.09 3 0.27 1 0.09 2 0.18
Product Safety 0.15 2 0.30 3 0.45 4 0.60
Customer Loyalty 0.09 4 0.36 3 0.27 2 0.18
Market Share 0.09 4 0.36 3 0.27 2 0.18
Advertising 0.12 4 0.48 3 0.36 2 0.24
Product Quality 0.12 3 0.36 2 0.24 1 0.12
Product Image 0.07 4 0.28 3 0.21 2 0.14
Financial Position 0.06 4 0.24 3 0.18 2 0.12
Total 1.00   3.35   2.52   2.04

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. U.S. footwear imports totaled 2.36 billion pairs in 2007, or roughly 7.9 pairs
per capita which 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 taste,
are able to achieve considerably better pricing, as well as “deepening” the
emotional bond consumers have with the brand

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 Threats

1. After the age of 40, the typical consumer is not willing to pay more than
US$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 to weak economy

External Factor Evaluation (EFE) Matrix

Key External Factors Weight Rating Weighted

Score

Opportunities      
Younger consumers are less price sensitive and 0.03 4 0.12
generally spend more on casual and athletic
footwear than older consumers
1.
U.S. footwear imports totaled 2.36 billion pairs in 0.02 3 0.06
2007, or roughly 7.9 pairs per capita which was
up 0.4 percent from 2006
2.
North American Free Trade Agreement (NAFTA) 0.02 3 0.06
and the World Trade Organization (WTO), both
helped eliminate quotas and tariff barriers for
foreign footwear manufacturers to ship their
goods
3.
The Internet allows footwear companies to 0.03 4 0.12
pursue a direct to consumer sales channel
4.
Sales of apparel, accessories, and footwear on 0.04 4 0.16
the Internet has been growing at a double-digit
pace, considerably faster than more traditional
sales models such as retail stores
5.
Internet sales of apparel, accessories, and 0.04 4 0.16
footwear could reach 18 percent of category
sales by 2012
6.
Companies that added a web-based sales 0.02 3 0.06
strategy are able to customize footwear and

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 other merchandise directly to the customer’s
needs and taste, are able to achieve considerably
better pricing, as well as “deepening” the
emotional bond consumers have with the brand
Most footwear companies have outsourced their 0.02 3 0.06
production abroad in order to maintain lower cost
and R&D expenses
7.
Threats  
After the age of 40, the typical consumer is not 0.01 1 0.01
willing to pay more than US$35 to $40 per pair
for athletic footwear
1.
Competition is strong among athletic footwear 0.02 2 0.04
and apparel from off brand companies
2.
Fluctuation of foreign currency impacts the cost 0.02 2 0.04
of importing goods to the U.S.
3.
Increase in unemployment has impacted the 0.02 2 0.04
household income which may result in spending
less on brand name
4.
Barrier to entry is low 0.01 1 0.01
5.

Level of inventory is increasing in many retail 0.03 2 0.06

stores due to weak economy
6.
Total 1.00  

E. Internal Audit

Strengths and Weaknesses

1. Nike is the dominant competitor for athletic footwear priced above US$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 the United States are
Jordan, while 86.5 percent of all basketball shoes sold over US$100 are
Jordan
5. Nike’s 2009 revenues increased 2.9 percent to US$19.1 billion

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 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 website, www.nikebiz.com, allows customers to design and
purchase Nike products directly from the company
9. Nike has five wholly-owned subsidiaries: Cole Haan, Converse, Hurley
International, NIKE Golf, and Umbro Ltd

1. Nike’s 2009 net income decreased 21 percent to US$1.48 billion

2. Almost all of Nike’s footwear is manufactured outside the United States by
independent contractors
3. In fiscal 2008, contract manufacturers in China, Vietnam, Indonesia, and
Thailand manufactured 99 percent of Nike’s footwear worldwide
4. Because Nike competes primarily in athletic footwear, apparel and related
sporting equipment, its sales are heavily concentrated in the youth and young
adult market
5. Accounts payable has increased by almost US$1.0 billion in 2009
6. Negative publicity and boycotting of the Nike products due to outsourcing jobs
overseas and the use of child labor in such factories

Internal Factor Evaluation (IFE) Matrix

Key Internal Factors Weight Rating Weighted

Score

Strengths      
Nike is the dominant competitor for athletic 0.03 4 0.12
footwear priced above US$60 per pair,
holding better than a 50 percent market
share for athletic footwear priced $85 per
pair or higher
1.
Nike characterizes its organization as a 0.02 3 0.06
collaborative matrix organization
2.
The Jordan brand has a 10.8 percent share 0.04 4 0.16
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
3.
Three out of every four pairs of basketball 0.04 4 0.16
shoes sold in the United States are Jordan,
while 86.5 percent of all basketball shoes
sold over US$100 are Jordan

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4.
Nike’s 2009 revenues increased 2.9 percent 0.04 4 0.16
to US$19.1 billion
5.
Inside the United States, Nike has three 0.03 3 0.09
significant distribution and customer service
facilities
6.
Nike estimates that they sell products to 0.03 3 0.09
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
7.
The company’s website, www.nikebiz.com, 0.04 3 0.12
allows customers to design and purchase
Nike products directly from the company
8.
Nike has five wholly-owned subsidiaries: 0.03 3 0.09
Cole Haan, Converse, Hurley International,
NIKE Golf, and Umbro Ltd
9.
Weaknesses  
Nike’s 2009 net income decreased 21 0.02 2 0.04
percent to US$1.48 billion
1.
Almost all of Nike’s footwear is manufactured 0.01 1 0.01
outside the United States by independent
contractors
2.
In fiscal 2008, contract manufacturers in 0.02 2 0.04
China, Vietnam, Indonesia, and Thailand
manufactured 99 percent of Nike’s footwear
worldwide
3.
Because Nike competes primarily in athletic 0.02 2 0.04
footwear, apparel and related sporting
equipment, its sales are heavily
concentrated in the youth and young adult
market
4.
Accounts payable has increased by almost 0.01 1 0.01
US$1.0 billion in 2009
5.
Negative publicity and boycotting of the Nike 0.02 2 0.02
products due to outsourcing jobs overseas
and the use of child labor in such factories
6.
Total 1.00  

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Copyright © 2011 Pearson Education Limited